SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended ~~June~~September 30, 2016

¨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. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer ¨o	Accelerated filer ¨o

Non-accelerated filer ¨o	Smaller reporting company þ

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

Yes¨o Noþ

APPLICABLE ONLY TO CORPORATE ISSUERS

As of ~~August 15,~~November 14, 2016, the registrant had outstanding ~~9,497,534~~9,497,860 shares of common stock, no$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		16

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

CURRENT ASSETS
Cash	$	8,587,343	$	7,847,669	$	7,895,897	$	7,847,669
Loans receivable (less allowance for losses of $893,000 and $1,177,000, respectively)		4,425,247		4,884,438
Accounts receivable (less allowance for losses of $176,000 and $272,000, respectively)		1,517,938		1,963,192
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		7,237,559		7,617,850		8,856,267		7,617,850
Prepaid expenses and other		1,647,890		2,589,749		2,805,092		2,589,749
TOTAL CURRENT ASSETS		23,415,977		24,902,898		26,229,229		24,902,898

PROPERTY AND EQUIPMENT, net		9,415,746		8,561,321		9,314,175		8,561,321

GOODWILL		13,355,592		13,355,591		13,355,592		13,355,591

INTANGIBLE ASSETS, net		7,818,158		8,018,616		7,677,512		8,018,616

OTHER		752,579		783,907		877,494		783,907

TOTAL ASSETS	$	54,758,052	$	55,622,333	$	57,454,002	$	55,622,333

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Accounts payable	$	2,363,765	$	4,577,118	$	3,836,177	$	4,577,118
Accrued expenses and other liabilities		6,004,779		6,232,267		5,486,943		6,232,267
Income taxes payable		457,678		1,135,031		151,869		1,135,031
Note payable – short-term						84,009		-
Current portion long-term debt		1,100,000		4,900,008		1,100,000		4,900,008
Current portion capital lease obligations		68,591		23,860		60,464		23,860
Deferred revenue and other		1,405,395		1,796,338		1,226,142		1,796,338
TOTAL CURRENT LIABILITIES		11,400,208		18,664,622		11,945,604		18,664,622

LONG-TERM LIABILITIES
Notes payable, net of current portion		5,513,123		3,096,452		6,776,829		3,096,452
Capital lease obligations, net of current portion		119,392		33,347		106,167		33,347
Deferred income taxes		4,202,000		3,889,000		4,521,000		3,889,000
Other		102,472		80,403		120,539		80,403
TOTAL LONG-TERM LIABILITIES		9,936,987		7,099,202		11,524,535		7,099,202

TOTAL LIABILITIES		21,337,195		25,763,824		23,470,139		25,763,824

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

EQUITY

WESTERN SHAREHOLDERS’ EQUITY
Common stock, no par value, 12,500,000 shares authorized, 9,497,534 issued and outstanding.		-		-
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		-
Additional paid-in capital		28,969,559		28,934,392		28,982,705		28,934,392
Retained earnings		4,416,481		898,038		4,959,387		898,038
TOTAL WESTERN SHAREHOLDERS’ EQUITY		33,386,040		29,832,430		33,943,042		29,832,430

NONCONTROLLING INTERESTS		34,817		26,079		40,821		26,079

TOTAL EQUITY		33,420,857		29,858,509		33,983,863		29,858,509

TOTAL LIABILITIES AND EQUITY	$	54,758,052	$	55,622,333	$	57,454,002	$	55,622,333

See notes to condensed consolidated financial statements

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three months ended						Six months ended						Three months ended						Nine months ended
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015			September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
REVENUES
Sales and associated fees	$	19,064,101		$	6,129,520		$	39,079,643		$	13,635,268		$	13,066,705		$	13,403,791		$	52,146,348		$	27,039,059
Financing fees and interest		2,340,968			2,556,202			4,825,188			5,141,596			2,562,569			2,865,842			7,387,757			8,007,438
Royalty and franchise fees, net		2,595,614			2,454,752			5,390,370			5,079,809			3,056,046			2,803,405			8,446,416			7,883,214
Other revenue		3,171,743			1,735,579			6,312,511			3,381,111			3,840,147			2,878,430			10,152,658			6,259,541
Total Revenues		27,172,426			12,876,053			55,607,712			27,237,784			22,525,467			21,951,468			78,133,179			49,189,252

COST OF REVENUES
Cost of sales		9,377,949			3,496,283			19,815,834			8,004,538			6,544,212			7,324,815			26,360,046			15,329,353
Provisions for loans receivable losses		428,613			452,258			731,485			778,468			444,689			572,959			1,176,174			1,351,427
Other		603,667			256,662			1,157,081			529,840			662,410			200,303			1,819,491			730,143
Total Cost of Revenues		10,410,229			4,205,203			21,704,400			9,312,846			7,651,311			8,098,077			29,355,711			17,410,923

GROSS PROFIT		16,762,197			8,670,850			33,903,312			17,924,938			14,874,156			13,853,391			48,777,468			31,778,329

OPERATING EXPENSES
Salaries, wages and benefits		6,677,803			4,281,389			13,426,753			8,497,503			7,040,838			6,236,073			20,467,591			14,733,576
Occupancy		1,897,270			1,406,083			3,871,075			2,713,312			2,081,592			2,016,406			5,949,389			4,729,718
Advertising, marketing and development		2,266,522			191,832			4,217,531			370,827			1,076,102			1,142,751			5,293,633			1,513,578
Depreciation		295,157			106,610			571,749			210,692			309,584			234,122			881,333			444,814
Amortization		140,873			113,510			281,863			217,350			140,647			141,783			422,510			359,133
Other		2,511,751			1,612,593			5,250,977			3,473,710			2,795,326			2,280,809			8,049,581			5,754,519
Total Operating Expenses		13,789,376			7,712,017			27,619,948			15,483,394
Total Operating Expense														13,444,089			12,051,944			41,064,037			27,535,338

OPERATING INCOME		2,972,821			958,833			6,283,364			2,441,544			1,430,067			1,801,447			7,713,431			4,242,991

OTHER INCOME (EXPENSES):
Interest income		957			716			2,009			2,070			955			995			2,964			3,065
Interest expense		(150,714	)		(97,276	)		(319,725	)		(203,251	)		(93,665	)		(198,048	)		(413,390	)		(401,299	)
Total Other Income (Expenses)		(149,757	)		(96,560	)		(317,716	)		(201,181	)		(92,710	)		(197,053	)		(410,426	)		(398,234	)

INCOME BEFORE INCOME TAXES		2,823,064			862,273			5,965,648			2,240,363			1,337,357			1,604,394			7,303,005			3,844,757

INCOME TAX EXPENSE		1,034,000			432,870			2,201,000			972,520			551,000			724,293			2,752,000			1,696,813

NET INCOME		1,789,064			429,403			3,764,648			1,267,843			786,357			880,101			4,551,005			2,147,944

Less net income attributable to noncontrolling interests		(4,553	)		(3,610	)		(8,738	)		(5,987	)		(6,004	)		(6,498	)		(14,742	)		(12,485	)

NET INCOME ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS	$	1,784,511		$	425,793		$	3,755,910		$	1,261,856		$	780,353		$	873,603		$	4,536,263		$	2,135,459

EARNINGS PER SHARE ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS
Basic and diluted	$	0.19		$	0.07		$	0.40		$	0.21		$	0.08		$	0.09		$	0.48		$	0.30

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted		9,497,534			5,997,588			9,497,534			5,997,588			9,497,608			9,497,689			9,497,559			7,177,176

See notes to condensed consolidated financial statements.

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Six Months Ended						Nine Months Ended
	June 30, 2016			June 30, 2015			September 30, 2016			September 30, 2015
OPERATING ACTIVITIES
Net Income	$	3,764,648		$	1,267,843		$	4,551,005		$	2,147,944
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		571,749			210,692			881,333			444,814
Amortization		281,863			217,350			422,510			359,133
Share based compensation		35,167			46,317			49,263			76,538
Deferred income taxes		313,000			121,000			632,000			390,000
Loss on disposal of property and equipment		9,953			-			8,014			-
Changes in operating assets and liabilities:
Loans receivable		459,191			491,024			473,376			233,848
Accounts receivable		445,254			259,139			(297,719	)		(492,684	)
Inventory		380,291			(569,184	)		(1,238,417	)		(1,645,395	)
Prepaid expenses and other assets		973,187			77,067			(224,921	)		(612,532	)
Accounts payable and accrued liabilities		(3,118,195	)		(900,339	)		(2,469,429	)		(468,720	)
Deferred revenue and other current liabilities		(390,943	)		(18,225	)		(570,196	)		(137,896	)
Accrued liabilities and other		22,069			(8,394	)		40,136			(21,252	)
Net cash provided by operating activities		3,747,234			1,194,290			2,256,955			273,798

INVESTING ACTIVITIES
Purchases of property and equipment		(929,291	)		(291,656	)		(1,244,715	)		(507,075	)
Acquisition of stores, net of cash acquired		(588,241	)		(2,608,500	)		(588,241	)		(2,608,500	)
Cash received through acquisitions		-			389,072			-			2,470,930
Proceeds from sale of property and equipment								109,350			-
Net cash used by investing activities		(1,517,532	)		(2,511,084	)		(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			-			418,301			-
Advances (payments) on notes payable – long-term, net		(1,801,638	)		250,000
Payments on notes payable – long-term, net								(2,076,640	)		(191,668	)
Advances (payments) on capital leases, net		130,776			(21,728	)		109,424			(42,107	)
Dividend paid		(237,467	)		-			(474,914	)		-
Net cash provided by (used in) financing activities		(1,490,028	)		228,272
Net cash used in financing activities								(485,121	)		(353,775	)

NET INCREASE (DECREASE) IN CASH		739,674			(1,088,522	)		48,228			(724,622	)

CASH
Beginning of period		7,847,669			4,273,350			7,847,669			4,273,350
End of period	$	8,587,343		$	3,184,828		$	7,895,897		$	3,548,728

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Income taxes paid	$	1,490,444		$	1,408,494		$	3,103,162		$	1,759,171
Interest paid	$	451,271		$	194,703		$	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		$	-		$	50,000
Long-term debt proceeds used to pay off debt and interest	$	3,021,699		$	-		$	3,021,699		$	-
Long-term debt proceeds used to pay prepaid financing costs	$	60,000		$	-		$	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) and, therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and ~~six~~nine month period ended ~~June~~September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

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. The condensed consolidated balance sheet at December 31, 2015, 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 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

PQH Wireless, Inc. and subsidiaries (“PQH”) (100%) – owns and operates ~~116~~126 cellular retail stores as an exclusive dealer of the Cricket brand.

Direct to Consumer

J & P Park Acquisitions, Inc. (“JPPA”) (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.

Restorers Acquisition, Inc. (“RAI”) (100% – Acquired July 1, 2015) – an online and direct marketing distribution retailer of home improvement and restoration products operating under Van Dyke’s Restorers.

J & P Real Estate, LLC (“JPRE”) (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

Wyoming Financial Lenders, Inc. (“WFL”) (100%) – owns and operates 4645 “payday” stores in eight 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.

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

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

Basis of Consolidation

The consolidated financial statements include the accounts of 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 credits liability and deferred taxes and tax uncertainties.

Reclassifications

Certain Statements of Income reclassifications have been made in the presentation of our prior financial statements and accompanying notes to conform to the presentation as of and for the three and ~~six~~nine months ended ~~June~~September 30, 2016.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under US GAAP. This 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 (Topic 842)” (“ASU 2016-02”). The standard requires recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted and the standard is to be applied using a modified retrospectively approach. The Company is currently evaluating the impact that 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 Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). 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. ASU 2016-13 is effective for fiscal years, and interim 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 interim periods within those fiscal years and the standard is to be applied using a modified retrospectively approach. The Company is currently evaluating the impact that ASU 2016-13 will have on our financial condition, results of operations and consolidated financial statements.

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

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 existing regulations within its jurisdiction.

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

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

Loans Receivable –

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

June 30, 2016
September 30, 2016												September 30, 2016
	Payday			Installment			Pawn & Title		Total				Payday			Installment			Pawn & Title		Total
Current	$	3,703,331		$	232,718		$	296,759	$	4,232,808			$	3,645,540		$	248,820		$	282,212	$	4,176,572
1-30		284,109			34,636			-		318,745				290,044			46,460			-		336,504
31-60		200,487			14,234			-		214,721				249,995			23,836			-		273,831
61-90		175,938			7,269			-		183,207				175,254			15,287			-		190,541
91-120		117,996			3,551			-		121,547				150,320			10,087			-		160,407
121-150		105,994			1,841			-		107,835				131,000			3,684			-		134,684
151-180		138,883			501			-		139,384				129,724			1,799			-		131,523
		4,726,738			294,750			296,759		5,318,247				4,771,877			349,973			282,212		5,404,062
Less Allowance		(838,000	)		(55,000	)		-		(893,000	)			(920,000	)		(73,000	)		-		(993,000	)
	$	3,888,738		$	239,750		$	296,759	$	4,425,247			$	3,851,877		$	276,973		$	282,212	$	4,411,062

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

Loans Receivable Allowance –

As a result of the Consumer Finance segment’s collection efforts, it historically writes off approximately ~~42%~~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 days – ~~42%~~43%; 31 to 60 days – ~~64%~~65%; 61 to 90 days – 83%; 91 to 120 days – ~~88%~~89%; 121 to 150 days – 91%; and 151 + days – ~~92%~~93%.

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

	Six Months Ended June 30, 2016			Year Ended December 31, 2015			Nine Months Ended September 30, 2016			Year Ended December 31, 2015
Loans receivable allowance, beginning of period	$	1,177,000		$	1,219,000		$	1,177,000		$	1,219,000
Provision for loan losses charged to expense		731,485			1,904,893			1,176,174			1,904,893
Charge-offs, net		(1,015,485	)		(1,946,893	)		(1,360,174	)		(1,946,893	)
Loans receivable allowance, end of period	$	893,000		$	1,177,000		$	993,000		$	1,177,000

Accounts Receivable –

A breakdown of accounts receivables by segment as of ~~June~~September 30, 2016 and December 31, 2015 are as follows:

June 30, 2016
Franchise
Cellular
Retail

Direct to
Consumer

Consumer
Finance
Total
Accounts receivable $ 1,191,553 $ 113,075 $ 378,738 $ 10,572 $ 1,693,938
Less allowance (126,000 ) - (50,000 ) - (176,000 )
Net account receivable $ 1,065,553 $ 113,075 $ 328,738 10,572 $ 1,517,938
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:

June 30, 2016 December 31, 2015
Deferred financing fees $ 234,148 $ 285,452
Deferred franchise development and service fees 162,334 264,000
Merchandise credits and gift card liability 676,301 1,127,470
Other 332,612 119,416
Total $ 1,405,395 $ 1,796,338
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 – ~~Short~~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 a revolving credit facility in an aggregate amount of up to $3,000,000, having a maturity date of April 21, 2018. Funds advanced under the revolving credit facility bear interest at a floating per annum rate equal to one-month LIBOR plus 3.50%, adjusted on a monthly basis. At June 30, 2016 $3,000,000 of credit was available.
~~In conjunction with the closing of the Credit Agreement, all existing short-term credit facilities of the Company were terminated.~~
~~See Note 14 for additional terms and conditions related to the Credit Agreement.~~
10
8. ~~Notes Payable – Long Term –~~
June 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% at June 30, 2016), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2021 3,441,667 -
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% at June 30, 2016), securedby JPRE assets, maturing June 5, 2019 when remaining principal balance is due 3,171,456 3,371,460
Total 6,613,123 7,996,460
Less current maturities (1,100,000 ) (4,900,008 )
$ 5,513,123 $ 3,096,452
~~Future minimum long-term principal payments are as follows:~~
Year Amount
1 $ 1,100,000
2 1,100,000
3 3,071,456
4 700,000
5 641,667
Thereafter -
$ 6,613,123
On April 22, 2016, WCR entered into a Credit Agreement with a financial institution. In addition to the $3,000,000 revolving line of credit facility (see Note 7 above) 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 ~~June~~September 30, 2016 approximately ~~$5,500,000~~$7,195,000 of credit was available under the acquisition ~~loan facility.~~and revolving credit facilities.

See Note 1413 for additional terms and conditions related to the Credit Agreement.

9.8. Reincorporation –

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

A breakout of other expense is as follows:

Three Months Ended
June 30, Six Months Ended
June 30, Three Months Ended
September 30, Nine Months Ended
September 30,
2016 2015 2016 2015 2016 2015 2016 2015
Bank fees $ 497,084 $ 135,222 $ 935,118 $ 284,745 $ 337,939 $ 310,419 $ 1,273,057 $ 595,164
Collection costs 109,963 108,984 226,151 220,303 85,306 99,587 311,457 319,890
Conference expense 29,151 - 294,556 210,644 468,124 460,602 762,680 671,287
Insurance 173,326 93,200 344,889 175,995 184,106 110,788 528,995 286,783
Management and advisory fees 203,504 124,801 424,529 274,303 195,425 125,754 619,954 400,057
Professional and consulting fees 447,735 472,677 1,042,945 918,113 488,978 483,575 1,531,923 1,401,683
Supplies 176,650 158,122 359,924 328,636 231,995 167,480 591,919 496,116
Other 874,338 519,587 1,622,865 1,060,971 803,453 522,604 2,429,596 1,583,539
$ 2,511,751 $ 1,612,593 $ 5,250,977 $ 3,473,710 $ 2,795,326 $ 2,280,809 $ 8,049,581 $ 5,754,519

~~12.~~11. Pro Forma Information –

Effective June 1, 2015, 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, a Washington LLC and Go Green, LLC an Arizona LLC). Effective July 1, 2015, the Company acquired a 100% interest in the businesses of RAI, JPPA, and JPRE, by completing a merger and contribution transaction.

~~As further discussed in Note 13 of the December 31, 2015 Notes to Consolidated Financial Statements, the~~The results of the operations for the acquired business have been included in the consolidated financial statements since the dates of the acquisition. The following table presents the unaudited results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2016 and the unaudited pro forma results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2015 (in thousands, except for per share data) as if the acquisitions had been consummated at the beginning of 2015. The pro forma net income below excludes the expense of the transactions. The pro forma results of operations are prepared for comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisition occurred at the beginning of the 2015 or the results which may occur in the future.

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 –
12
Franchise
Cellular
Retail

Direct to
Consumer

Consumer
Finance
Corporate Total
Three Months Ended June 30, 2016
Revenue $ 3,562 $ 8,083 $ 12,689 $ 2,838 $ - $ 27,172
% of total revenue 13.1 % 29.8 % 46.7 % 10.4 % - % 100.0 %
Net income (loss) $ 568 $ 74 $ 1,103 $ 262 $ (218 ) $ 1,789
Net income attributable to noncontrolling interests $ 4 $ - $ - $ - $ - $ 4
Net income (loss) attributable to WCR common shareholders $ 564 $ 74 $ 1,103 $ 262 $ (218 ) $ 1,785
Earnings (loss) per share attributable to WCR common shareholders – basic and diluted $ 0.059 $ 0.008 $ 0.116 $ 0.028 $ (0.023 ) $ 0.188

Three Months Ended June 30, 2015
Pro forma revenue $ 2,851 $ 8,803 $ 11,403 $ 3,059 $ - $ 26,116
% of total pro forma revenue 10.9 % 33.7 % 43.7 % 11.7 % - % 100.0 %
Pro forma net income (loss) $ 457 $ 127 $ 1,106 $ 257 $ (122 ) $ 1,825
Pro forma net income attributable to noncontrolling interests $ 4 $ - $ - $ - $ - $ 4
Pro forma net income (loss) attributable to WCR common shareholders $ 453 $ 127 $ 1,106 $ 257 $ (122 ) $ 1,821
Pro forma earnings (loss) per share attributable to WCR common shareholders – basic and diluted $ 0.048 $ 0.013 $ 0.116 $ 0.028 $ (0.013 ) $ 0.192
Franchise
Cellular
Retail

Direct to
Consumer

Consumer
Finance
Corporate Total
Six Months Ended June 30, 2016
Revenue $ 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 attributable to noncontrolling interests $ 9 $ - $ - $ - $ - $ 9
Net income (loss) attributable to WCR common shareholders $ 1,074 $ 454 $ 2,007 $ 574 $ (353 ) $ 3,756
Earnings (loss) per share attributable to WCR common shareholders – basic and diluted $ 0.113 $ 0.048 $ 0.211 $ 0.060 $ (0.037 ) $ 0.395

Six Months Ended June 30, 2015
Pro forma revenue $ 5,967 $ 20,095 $ 24,854 $ 6,153 $ - $ 57,069
% of total pro forma revenue 10.5 % 35.2 % 43.5 % 10.8 % - % 100.0 %
Pro forma net income (loss) $ 755 $ 524 $ 1,934 $ 543 $ (195 ) $ 3,561
Pro forma net income attributable to noncontrolling interests $ 6 $ - $ - $ - $ - $ 6
Pro forma net income (loss) attributable to WCR common shareholders $ 749 $ 524 $ 1,934 $ 543 $ (195 ) $ 3,555
Pro forma earnings (loss) per share attributable to WCR common shareholders – basic and diluted $ 0.079 $ 0.055 $ 0.204 $ 0.057 $ (0.021 ) $ 0.374
13 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. ~~Segment Information –~~
~~Segment information related to the three and six month periods ended June 30, 2016 and 2015 is presented below:~~
~~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 segmented assets $ 7 $ 580 $ 24 $ 7 $ - $ 618
~~Three Months Ended June 30, 2015~~
~~(in thousands)~~
Franchise
Cellular
Retail

Direct to
Consumer

Consumer
Finance
Corporate Total

Revenue from external customers $ 2,851 $ 6,966 $ - $ 3,059 $ - $ 12,876
Net income (loss) $ 456 $ 140 $ - $ 257 $ (424 ) $ 429
Expenditures for segmented assets $ 51 $ 3,135 $ - $ 16 $ 14 $ 3,216
~~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 segmented assets $ 15 $ 1,447 $ 38 $ 18 $ - $ 1,518
~~Six Months Ended June 30, 2015~~
~~(in thousands)~~
Franchise
Cellular
Retail

Direct to
Consumer

Consumer
Finance
Corporate Total

Revenue from external customers $ 5,967 $ 15,118 $ - $ 6,153 $ - $ 27,238
Net income (loss) $ 755 $ 467 $ - $ 543 $ (497 ) $ 1,268
Total segment assets $ 9,555 $ 12,222 $ - $ 16,192 $ 317 $ 38,286
Expenditures for segmented assets $ 91 $ 3,656 $ - $ 16 $ 13 $ 3,776
~~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 ~~effective~~ April 1, 2016 to extend the term through March 2019.

Pursuant to the Company’s numerous employment agreements, bonuses of approximately ~~$338,000~~$390,000 and ~~$693,000~~$1,083,000 were accrued for the three and ~~six~~nine month periods ended ~~June~~September 30, 2016, respectively.
14

Credit Facility

On April 22, 2016, WCR entered into 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, ~~(see Note 7),~~ 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.

Cellular Retail Growth Commitment

Effective June 6, 2016, PQH entered into a Cricket Wireless Exclusive Dealer Agreement Amendment for Retail Expansion. Per the agreement, PQH commits to open at least 150 locations by December 31, 2017, including 50 locations by December 31, 2016. Also effective June 6, 2016, Cricket Wireless, LLC has increased certain compensation arrangements in the existing dealer agreement and will provide a subsidy for each location opened during the term of the agreement.

~~15.~~14. Subsequent Events –

WeWireless Retail Transaction
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 evaluated all other events or transactions that occurred after ~~June~~September 30, 2016 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.
15

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

Forward-Looking Statements

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

Specific factors that might cause actual results to differ from our expectations embodied in our forward-looking statements, or that might affect the value of the common stock, include but are not limited to:

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

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

· 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.

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

OVERVIEW

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

16

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 retailer and distributor of live plants, seeds, holiday gifts and garden accessories operating in the retail market under the Park Seed, Jackson & Perkins and Wayside Gardens trade names, and in the wholesale market under the Park Wholesale trade name, 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 andpro forma revenues by operating segment for the three and ~~six~~nine month periods ended ~~June~~September 30, 2016 and 2015:

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Discussion of Critical Accounting Policies

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

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

Loan Loss Allowance

Included in loans receivable are unpaid principal, interest and fee balances of payday, installment, pawn and title loans that have not reached their maturity date, and “late” payday loans that have reached maturity within the last 180 days and have remaining outstanding balances.  Late payday loans generally are unpaid loans where a customer’s personal check has been deposited and the check has been returned due to non-sufficient funds in the customer’s account, a closed account, or other reasons. All returned items are charged-off after 180 days, as collections after that date have not been significant. Loans are carried at cost plus accrued interest or fees through maturity date, less payments made and a loans receivable allowance.

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

Valuation of Long-lived and Intangible Assets

We assess the possibility of impairment of long-lived and intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that could trigger an impairment review include significant underperformance relative to expected historical or projected future cash flows, significant changes in the manner of use of acquired assets or the strategy for the overall business, and significant negative industry events or trends. In addition, we conduct an annual goodwill impairment test as of October 1 each year. We assess our goodwill for impairment at the reporting unit level by applying a fair value test. This fair value test involves a two-step process. The first step is to compare the carrying value of our net assets to our fair value. If the fair value is determined to be less than the carrying value, a second step is performed to measure the amount of the impairment, if any.

Results of Operations – Three Months Ended ~~June~~September 30, 2016 Compared to Three Months Ended ~~June~~September 30, 2015

Net income attributable to our common shareholders was ~~$1.78~~$0.78 million, or ~~$0.19~~$0.08 per share (basic and diluted), for the quarter ended ~~June~~September 30, 2016, compared to ~~$0.43~~$0.87 million, or ~~$0.07~~$0.09 per share (basic and diluted), for the quarter ended ~~June~~September 30, 2015. Pro forma net income attributable to our common shareholders for the three months ended June 30, 2015 was $1.82 million, or $0.19 per share (basic and diluted). See Note 12 of the notes to our condensed consolidated financial statements included in this report for additional pro forma information.

We expect segment operating results and earnings per share to change throughout 2016 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.
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The following table provides quarter-over-quarter revenues and net income attributable to WCR common shareholders by operating segment (in thousands):

Franchise Cellular
Retail Direct to
Consumer Consumer
Finance Corporate Total
Three Months Ended June 30, 2016
Revenues $ 3,562 $ 8,083 $ 12,689 $ 2,838 $ - $ 27,172
% of total revenue 13.1 % 29.8 % 46.7 % 10.4 % - % 100.0 %
Net income (loss) $ 568 $ 74 $ 1,103 $ 262 $ (218 ) $ 1,789
Net income (loss) attributable to WCR common shareholders $ 564 $ 74 $ 1,103 $ 262 $ (218 ) $ 1,785

Three Months Ended June 30, 2015
Revenues $ 2,851 $ 6,966 $ - $ 3,059 $ - $ 12,876
% of total revenue 22.1 % 54.1 % - % 23.8 % - % 100.0 %
Net income (loss) $ 456 $ 140 $ - $ 257 $ (424 ) $ 429
Net income (loss) attributable to WCR common shareholders $ 453 $ 140 $ - $ 257 $ (424 ) $ 426

Pro Forma Three Months Ended June 30, 2015
Pro Forma Revenues $ 2,851 $ 8,803 $ 11,403 $ 3,059 $ - $ 26,116
Pro Forma % of total revenue 10.9 % 33.7 % 43.7 % 11.7 % - % 100.0 %
Pro Forma Net income (loss) $ 457 $ 127 $ 1,106 $ 257 $ (122 ) $ 1,825
Pro Forma Net income (loss) attributable to WCR common shareholders $ 453 $ 127 $ 1,106 $ 257 $ (122 ) $ 1,821
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
% of total revenue 19.0 % 41.2 % 26.4 % 13.4 % -% 100.0 %
Net income (loss) $ 749 $ 73 $ (325 ) $ 391 $ (102 ) $ 786
Net income (loss) attributable to WCR common shareholders $ 743 $ 73 $ (325 ) $ 391 $ (102 ) $ 780

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

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Franchise

The table below summarizes the number of AlphaGraphics business centers owned and operated by franchisees during the quarters ended ~~June~~September 30, 2016 and 2015:

Beginning New Closed Ending Beginning New Closed Ending
2016
US Centers 257 2 (1 ) 258 258 1 (1 ) 258
International Centers 25 - - 25 25 - - 25
Total 282 2 (1 ) 283 283 1 (1 ) 283

2015
US Centers 245 5 - 250 250 4 (2 ) 252
International Centers 32 - (6 ) 26 26 - - 26
Total 277 5 (6 ) 276 276 4 (2 ) 278

Our U.S. franchisees reported approximate center sales for the quarters ended ~~June~~September 30 as follows:

2016 2015
Total gross U.S. network-wide center sales $ 70,875,000 $ 68,289,000
2016 2015
Total gross U.S. network-wide center sales $ 69,849,000 $ 67,193,000

Revenues and net income for the quarters ended ~~June~~September 30, 2016 and 2015 were ~~$3.56~~$4.28 million versus ~~$2.85~~$3.68 million and ~~$0.57~~$0.75 million versus ~~$0.46~~$0.83 million, respectively. ~~The~~Contributing to the revenue growth of ~~24.9%~~16.40% was ~~attributable to~~ a ~~5.7%~~9.01% increase in royalty and franchise development fee revenue ~~with the balance attributable to additional~~and a 150.78% increase in services revenue which includes revenue from new low margin services ~~revenue related to new service offerings~~added in 2016. The revenue growth ~~net~~ of ~~the increased direct costs, the increased costs associated~~3.89% was offset with the ~~increased revenue,~~increase direct cost of services provided and a 13.61% increase in operating costs, ~~resulted~~resulting in the segment net income ~~increase~~decrease to ~~$0.57~~$0.75 million from ~~$0.46~~$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 ended ~~June~~September 30, 2016 and 2015 follows:

2016 2015 2016 2015
Beginning 111 68 116 110
Acquired/ Launched 9 42 10 -
Closed (4 ) - - (8 )
Ending 116 110 126 102

AsThe Cellular Retail division revenues and contribution to net income each decreased period over period. A significant portion of the end of the comparable periods, we added a net of 6 locations. However, we owned and operated 40 of the stores for only one month within the prior year comparable quarter. This resulted in quarter-over-quarter growth in revenue. Phone sales revenue ~~increased due to the additional locations operated, but same store unit~~is from phone sales and ~~sales~~there are two factors that have influenced a decline in phone revenue ~~were down quarter~~period over ~~quarter. This was expected as prior~~period. Prior year comparable quarter volume was positively influenced by customer migrations to Cricket Wireless’ new GSM ~~network. Same store~~network, so a volume decrease was anticipated. Discounting of phones is 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 contributing to the decline in net income are growth related and ~~dealer compensation revenue not related to phone activations on a per store basis both~~include increased ~~quarter over quarter. Expenses (including interest~~marketing and income taxes) increased $1.32 million from $3.54 million for the quarter ended June 30, 2015 to $4.86 million for the quarter ended June 30, 2016, an average store cost similar period-over-period when factoring in the period of time the locations were operated.development costs, infrastructure costs and depreciation expense.

Direct to Consumer

~~On July 1, 2015, we added our newest segment, Direct to Consumer.~~ The Direct to Consumer segment has seasonal sources of revenue and historically experiences a greater proportion of annual revenue and net income in the months of March through May and December due to the seasonal products it sells. For the current quarter, the Direct to Consumer segment had net ~~income~~loss of ~~$1.10~~($0.33) million compared to ~~pro forma~~a net ~~income~~loss of ~~$1.11~~($0.57) million for the comparable prior year period. Revenues for the three month period ended ~~June~~September 30, 2016 were ~~$12.69~~$5.94 million compared to pro forma revenues for the comparable period in 2015 of ~~$11.40 million. An~~$5.44 million, an increase in ~~the sales~~ of ~~live plants was the primary contributor to the increase.~~
9.2%
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Consumer Finance

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

2016 2015 2016 2015
Beginning 47 51 46 51
Acquired/ Launched - - - -
Closed (1 ) - (1 ) -
Ending 46 51 45 51

Our Consumer Finance segment revenues decreased ~~7.2%~~8.7% for the quarter ended ~~June~~September 30, 2016 compared to the quarter ended ~~June~~September 30, 2015. ~~The sale of 4 stores on October 1, 2015~~We sold or closed 6 underperforming store locations between the comparable periods and ~~closing of one location in May 2015 account for a 4.4% decrease in revenue. Regional~~regional economic downturns in the Midwest, primarily Wyoming, North Dakota and South Dakota, ~~have contributed significantly~~continue to ~~the balance of the decline.~~contribute to revenue declines. Reductions in net bad debt and operating costs have helped to keep the net income ~~relatively~~ flat quarter over quarter.

Corporate

Costs related to our Corporate segment were ~~$0.22~~$0.10 million for the quarter ended ~~June~~September 30, 2016 compared to ~~$0.42~~$0.21 million for the quarter ended ~~June~~September 30, ~~2015, which included approximately $0.3 million in transaction related costs.~~2015.

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

Net income attributable to our common shareholders was ~~$3.76~~$4.54 million, or ~~$0.40~~$0.48 per share (basic and diluted), for the ~~six~~nine months ended ~~June~~September 30, 2016, compared to ~~$1.26~~$2.14 million, or ~~$0.21~~$0.30 per share (basic and diluted), for the comparable period in 2015 and compared to pro forma net income for the prior comparable period of ~~$3.56~~$4.43 million or ~~$0.37~~$0.47 per share (basic and diluted). As further discussed below, The Franchise, Direct to Consumer and Consumer Finance operating segments each contributed to the increase in net income for the year over year period, while the Retail Wireless segment decreased.

As previously noted, we expect segment operating results and earnings per share to change throughout 2016 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.
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The following table provides period over period revenues and 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, 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

Six Months Ended June 30, 2015
Revenues $ 5,967 $ 15,118 $ - $ 6,153 $ - $ 27,238
% of total revenue 21.9 % 55.5 % - % 22.6 % - % 100.0 %
Net income (loss) $ 755 $ 467 $ - $ 543 $ (497 ) $ 1,268
Net income (loss) attributable to WCR common shareholders $ 749 $ 467 $ - $ 543 $ (497 ) $ 1,262

Pro Forma Six Months Ended June 30, 2015
Pro Forma Revenues $ 5,967 $ 20,095 $ 24,854 $ 6,153 $ - $ 57,069
Pro Forma % of total revenue 10.5 % 35.2 % 43.5 % 10.8 % - % 100.0 %
Pro Forma Net income (loss) $ 755 $ 524 $ 1,934 $ 543 $ (195 ) $ 3,561
Pro Forma Net income (loss) attributable to WCR common shareholders $ 749 $ 524 $ 1,934 $ 543 $ (195 ) $ 3,555
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
% 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 (loss) attributable to WCR common shareholders $ 1,819 $ 526 $ 1,682 $ 964 $ (455 ) $ 4,536

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
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Franchise

The table below summarizes the number of AlphaGraphics business centers owned and operated by franchisees during the ~~six~~nine month periods ended ~~June,~~September, 2016 and 2015:

Beginning New Closed Ending Beginning New Closed Ending
2016
US Centers 254 6 (2 ) 258 254 7 (3 ) 258
International Centers 25 - - 25 25 - - 25
Total 279 6 (2 ) 283 279 7 (3 ) 283

2015
US Centers 242 10 (2 ) 250 242 14 (4 ) 252
International Centers 32 - (6 ) 26 32 - (6 ) 26
Total 274 10 (8 ) 276 274 14 (10 ) 278

Our U.S. franchisees reported approximate center sales for the ~~six~~nine month periods ended ~~June~~September 30 as follows:

2016 2015
Total gross U.S. network-wide center sales $ 138,661,000 $ 132,153,000
2016 2015
Total gross U.S. network-wide center sales $ 208,510,000 $ 199,346,000

Revenues for the ~~six~~nine month period ended ~~June~~September 30, 2016 and 2015 were ~~$7.17~~$11.45 million and ~~$5.97~~$9.64 million, respectively. ~~The~~Contributing to the revenue growth of ~~20.1%~~18.78% was ~~attributable to~~ a ~~6.1%~~7.14% increase in royalty and franchise development fee revenue ~~with the balance~~and a 122.04% increase in services revenue, primarily attributable to ~~additional~~revenue from new low margin services ~~revenue related to new service offerings~~added in 2016. ~~Services revenue increased $0.8 million while cost of revenue increased $0.63 million.~~ The revenue growth, net of direct costs and together with a ~~slight~~6.18% increase in operating costs period over period resulted in the segment net income increase to ~~$1.08~~$1.83 million from ~~$0.76~~$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 ~~six~~nine month periods ended ~~June~~September 30, 2016 and 2015 follows:

2016 2015 2016 2015
Beginning 99 61 99 61
Acquired/ Launched 23 49 33 49
Closed (6 ) - (6 ) (8 )
Ending 116 110 126 102

~~The number of stores operated when factoring in date acquired/launched or closed was 111 for the six month period ended June 30, 2016 compared to 74 for the comparable period in 2015.~~ Average store revenue and gross profit was down period over period as expected since the prior period volume was positively influenced by customer migrations to Cricket Wireless’ new GSM network. Discounted phone prices (with a corresponding decrease in cost) have also contributed to the decrease in revenue. However, ~~per store average payment fee revenue~~dealer compensation and ~~other~~customer fee revenue, both with no direct ~~costs~~cost of revenues associated with the revenue, each have increased. ~~In addition, average~~Increased operating ~~cost per location has decreased for the period year over year. Current period~~ costs ~~also reflect one time~~include one-time store consolidation costs in addition to cost incurred ~~late in the current period~~ related to expansion efforts. Management expects to realize the benefit of these non-recurring costs in the mid-term.

Direct to Consumer

On July 1, 2015, we added our newest segment, Direct to Consumer. As discussed in the previous quarter over quarter discussion and analysis section this segment has significant seasonal sources of revenue within the first six month period of the year resulting in this period contributing significantly to the yearly results. Revenues for the ~~six~~nine month period ended ~~June~~September 30, 2016 were ~~$24.75~~$30.70 million, ~~compared to~~up a marginal 1.3% from pro forma revenues for the comparable period in 2015 of ~~$24.85~~$30.30 million. For the ~~six~~nine month period ended ~~June~~September 30, 2016, the Direct to Consumer segment had net income of ~~$2.0~~$1.68 million and pro forma net income of ~~$1.93~~$1.37 million in the comparable period of the prior ~~year.~~
year, a 22.6% increase.
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Consumer Finance

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

2016 2015 2016 2015
Beginning 47 51 47 51
Acquired/ Launched - - - -
Closed (1 ) - (2 ) -
Ending 46 51 45 51

Our Consumer Finance segment revenues decreased ~~5.38%~~6.57% for the ~~six~~nine months ended ~~June~~September 30, 2016 from the comparable ~~six~~nine month period ended ~~June~~September 30, 2015. ~~The sale of four stores on October 1, 2015~~Same store payday and ~~closing of one in May 2016 account for a 4.36% decline in~~installment lending revenue ~~period over period.~~decreased 3.76%. The impact of the regional economic downturns in the Midwest, primarily Wyoming, North Dakota and South Dakota, have contributed significantly to the ~~remainder of the decline. Same~~decrease in same store revenue ~~from payday and installment lending has decreased 2.28%~~ period over period. Similarly to the quarter over quarter results, reductions in net bad debt and operating costs have helped to keep the net results relatively stable period over ~~period, with net income showing a 5.7% increase from the prior year comparable~~ period.

Corporate

Costs related to our Corporate segment were ~~$0.35~~$0.46 million for the ~~six~~nine months ended ~~June~~September 30, 2016 compared to ~~$0.5~~$0.71 million for the ~~six~~nine months ended ~~June~~September 30, 2015. The ~~six~~nine month period in 2015 included approximately ~~$0.3~~$0.32 million in transaction related ~~costs and was operational for only four and one half of the six month period.~~costs.

Liquidity and Capital Resources

Summary cash flow data is as follows:

Six Months Ended June 30,
2016 2015 Nine Months Ended September 30,
2016 2015
Cash flows provided (used) by:
Operating activities $ 3,747,234 $ 1,194,290 $ 2,256,955 $ 273,798
Investing activities (1,517,532 ) (2,511,084 ) (1,723,606 ) (644,645 )
Financing activities (1,490,028 ) 228,272 (485,121 ) (353,775 )
Net increase (decrease) in cash 739,674 (1,088,522 ) 48,228 (724,622 )
Cash, beginning of period 7,847,669 4,273,350 7,847,669 4,273,350
Cash, end of period $ 8,587,343 $ 3,184,828 $ 7,895,897 $ 3,548,728

At ~~June~~September 30, 2016, we had cash of ~~$8.59~~$7.90 million compared to cash of ~~$3.18~~$3.55 million on ~~June~~September 30, 2015. Both comparable periods include cash flows utilized for growth in our Cellular Retail ~~segment in 2016.~~segment. We believe that our available cash, combined with expected cash flows from operations and available financing, will be sufficient to fund our scheduled debt repayments and the Cellular Retail segment anticipated capital expenditures through ~~June~~September 30, 2017.
On April 22, 2016, the Company entered into a Credit Agreement with a financial institution. The Credit Agreement provides the company with (i) a revolving credit facility in an aggregate amount of up to $3,000,000, having a maturity date of April 21, 2018, and (ii) an acquisition loan facility in an aggregate amount of up to $9,000,000, having a maturity date of April 21, 2018. Under the Credit Agreement, both the revolving credit facility and acquisition loan facility bear interest at a floating per annum rate equal to one-month LIBOR plus 3.50%, adjusted on a monthly basis. At closing, $ 3,500,000 was advanced under the acquisition loan replacing the $3,000,000 River City Equity debt, which had a maturity date of June 30, 2016, and $500,000 of other term debt.

Off-Balance Sheet Arrangements

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

In our previous 10-Q and the Annual Report on Form 10-K for the year ended December 31, 2015 we identified material weaknesses in internal control over proper segregation of duties and effective general computer controls over change management. Management has strengthened controls in both of these areas and was able to conclude that the material weaknesses were effectively remediated as of June 30, 2016.
As of ~~June~~September 30, 2016, 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~~September 30, 2016.

Changes in Internal Control over Financial Reporting

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

25
25

PART II. OTHER INFORMATION
~~Item 5. Other Information~~
On June 21, 2016, the Company entered into an amendment to the Amended and Restated Employment Agreement with Mr. John Quandahl the Company's Chief Executive Officer. The amendment was entered into primarily to extend the term of Mr. Quandahl's employment arrangement through March 2019, increase his annual base salary from $246,000 to $300,000. The amendment also made minor modifications and restated the basis on which Mr. Quandahl may obtain an annual cash-based performance bonus. By its terms, the amendment is effective April 1, 2016.

Item 6. Exhibits

Exhibit Description
~~10.1~~ ~~First Amendment to Amended and Restated Employment Agreement with John Quandahl, dated effective April 1, 2016 (~~~~filed herewith~~).
~~10.2~~ ~~Credit Agreement by and between WCR and Fifth Third Bank, dated as of April 21, 2016 (~~~~filed herewith~~).

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

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

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

101.INS XBRL Instance Document (filed herewith).

101.SCH XBRL Schema Document (filed herewith).

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

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

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

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

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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: ~~August 15,~~November 14, 2016 Western Capital Resources, Inc.
(Registrant)

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

By: /s/ Stephen Irlbeck
Stephen Irlbeck
Chief Financial Officer
27

June 30, 2016
	Franchise			Cellular Retail		Direct to Consumer			Consumer Finance		Total
Accounts receivable	$	1,191,553		$	113,075	$	378,738		$	10,572	$	1,693,938
Less allowance		(126,000	)		-		(50,000	)		-		(176,000	)
Net account receivable	$	1,065,553		$	113,075	$	328,738			10,572	$	1,517,938

	June 30, 2016		December 31, 2015
Deferred financing fees	$	234,148	$	285,452
Deferred franchise development and service fees		162,334		264,000
Merchandise credits and gift card liability		676,301		1,127,470
Other		332,612		119,416
Total	$	1,405,395	$	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		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 June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015		2016		2015		2016		2015
Bank fees	$	497,084	$	135,222	$	935,118	$	284,745	$	337,939	$	310,419	$	1,273,057	$	595,164
Collection costs		109,963		108,984		226,151		220,303		85,306		99,587		311,457		319,890
Conference expense		29,151		-		294,556		210,644		468,124		460,602		762,680		671,287
Insurance		173,326		93,200		344,889		175,995		184,106		110,788		528,995		286,783
Management and advisory fees		203,504		124,801		424,529		274,303		195,425		125,754		619,954		400,057
Professional and consulting fees		447,735		472,677		1,042,945		918,113		488,978		483,575		1,531,923		1,401,683
Supplies		176,650		158,122		359,924		328,636		231,995		167,480		591,919		496,116
Other		874,338		519,587		1,622,865		1,060,971		803,453		522,604		2,429,596		1,583,539
	$	2,511,751	$	1,612,593	$	5,250,977	$	3,473,710	$	2,795,326	$	2,280,809	$	8,049,581	$	5,754,519

	Beginning		New		Closed			Ending		Beginning		New		Closed			Ending
2016
US Centers		257		2		(1	)		258		258		1		(1	)		258
International Centers		25		-		-			25		25		-		-			25
Total		282		2		(1	)		283		283		1		(1	)		283

2015
US Centers		245		5		-			250		250		4		(2	)		252
International Centers		32		-		(6	)		26		26		-		-			26
Total		277		5		(6	)		276		276		4		(2	)		278

		2016				2015
Total gross U.S. network-wide center sales		$	70,875,000			$	68,289,000

	Six Months Ended June 30,
	2016			2015			Nine Months Ended September 30,
							2016			2015
Cash flows provided (used) by:
Operating activities	$	3,747,234		$	1,194,290		$	2,256,955		$	273,798
Investing activities		(1,517,532	)		(2,511,084	)		(1,723,606	)		(644,645	)
Financing activities		(1,490,028	)		228,272			(485,121	)		(353,775	)
Net increase (decrease) in cash		739,674			(1,088,522	)		48,228			(724,622	)
Cash, beginning of period		7,847,669			4,273,350			7,847,669			4,273,350
Cash, end of period	$	8,587,343		$	3,184,828		$	7,895,897		$	3,548,728

Exhibit		Description

~~10.1~~		~~First Amendment to Amended and Restated Employment Agreement with John Quandahl, dated effective April 1, 2016 (~~~~filed herewith~~).

~~10.2~~		~~Credit Agreement by and between WCR and Fifth Third Bank, dated as of April 21, 2016 (~~~~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: ~~August 15,~~November 14, 2016	Western Capital Resources, Inc.
	(Registrant)

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

	By:	/s/ Stephen Irlbeck
		Stephen Irlbeck
		Chief Financial Officer