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 30, 2010 or




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




Commission File Number:  
000-52015




Western
Capital Resources, Inc.


(Exact
Name of Registrant as Specified in its Charter)





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




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


(Address
of Principal Executive Offices) (Zip Code)




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





N/A


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




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





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




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




Large accelerated filer 
       ̈
            Accelerated filer 
       ̈Non-accelerated filer 
       ̈
            Smaller reporting company 
      þ




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




Yes  ̈ No þ




APPLICABLE
ONLY TO CORPORATE ISSUERS




As of
August 13, 2010, the registrant had outstanding 7,446,007 shares of common
stock, no par value per share.














Western
Capital Resources, Inc.




Index





PagePART
      I. FINANCIAL INFORMATIONItem
      1. Financial Statements
              
              2Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
              
              12Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
              
              19Item
      4T. Controls and Procedures
              
              19PART
      II. OTHER INFORMATIONItem
      1. Legal Proceedings
              
              19Item
      1A. Risk Factors
              
              20Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
              
              21Item
      3. Defaults Upon Senior Securities
              
              21Item
      6. Exhibits
              
              22SIGNATURES
              
              23




1


PART
I. FINANCIAL INFORMATION




Item 1. Financial
Statements





WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES





CONTENTS





PageCONDENSED
      CONSOLIDATED FINANCIAL STATEMENTSCondensed
      Consolidated Balance Sheets
              3Condensed
      Consolidated Statements of Income
              4Condensed
      Consolidated Statements of Cash Flows
              5Notes
      to Condensed Consolidated Financial Statements
              6




2





WESTERN CAPITAL RESOURCES, INC. AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS





June 30, 2010
                    
                    
                    December 31, 2009(Unaudited)ASSETSCURRENT
      ASSETSCash
                    
                    $
                    1,517,762
                    
                    
                    $
                    1,526,562Loans
      receivable (less allowance for losses of $922,000 and
      $1,237,000)
                    
                    
                    4,620,145
                    
                    
                    
                    4,875,870Inventory
                    
                    
                    176,308
                    
                    
                    
                    373,858Prepaid
      expenses and other
                    
                    
                    249,746
                    
                    
                    
                    288,145Deferred
      income taxes
                    
                    
                    367,000
                    
                    
                    
                    486,000TOTAL
      CURRENT ASSETS
                    
                    
                    6,930,961
                    
                    
                    
                    7,550,435PROPERTY
      AND EQUIPMENT
                    
                    
                    934,440
                    
                    
                    
                    1,075,715GOODWILL
                    
                    
                    11,458,744
                    
                    
                    
                    11,458,744INTANGIBLE
      ASSETS
                    
                    
                    638,891
                    
                    
                    
                    902,069OTHER
                    
                    
                    99,451
                    
                    
                    
                    107,715TOTAL
      ASSETS
                    
                    $
                    20,062,487
                    
                    
                    $
                    21,094,678LIABILITIES AND  SHAREHOLDERS’
      EQUITYCURRENT
      LIABILITIESAccounts
      payable and accrued liabilities
                    
                    $
                    1,019,907
                    
                    
                    $
                    1,352,989Income
      taxes payable
                    
                    
                    92,589
                    
                    
                    
                    145,773Note
      payable – short-term
                    
                    
                    2,000,000
                    
                    
                    
                    1,794,372Current
      portion long-term debt
                    
                    
                    756,757
                    
                    
                    
                    165,431Preferred
      dividend payable
                    
                    
                    800,000
                    
                    
                    
                    1,000,000Deferred
      revenue
                    
                    
                    294,677
                    
                    
                    
                    345,826TOTAL
      CURRENT LIABILITIES
                    
                    
                    4,963,930
                    
                    
                    
                    4,804,391LONG-TERM
      LIABILITIESNotes
      payable – long-term
                    
                    
                    1,310,758
                    
                    
                    
                    2,138,162Deferred
      income taxes
                    
                    
                    282,000
                    
                    
                    
                    250,000Other
                    
                    
                    37,429
                    
                    
                    
                    -TOTAL
      LONG-TERM LIABILITIES
                    
                    
                    1,630,187
                    
                    
                    
                    2,388,162TOTAL
      LIABILITES
                    
                    
                    6,594,117
                    
                    
                    
                    7,192,553SHAREHOLDERS'
      EQUITYSeries
      A convertible preferred stock 10% cumulative dividends, $0.01 par value,
      $2.10 stated value, 10,000,000 shares authorized, issued and
      outstanding
                    
                    
                    100,000
                    
                    
                    
                    100,000Common
      stock, no par value, 240,000,000 shares authorized, 7,446,007 and
      7,996,007 shares issued and outstanding
                    
                    
                    -
                    
                    
                    
                    -Additional
      paid-in capital
                    
                    
                    18,221,777
                    
                    
                    
                    18,478,337Accumulated
      deficit
                    
                    
                    (4,853,407
                    )
                    
                    
                    (4,676,212
                    )TOTAL
      SHAREHOLDERS’ EQUITY
                    
                    
                    13,468,370
                    
                    
                    
                    13,902,125TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY
                    
                    $
                    20,062,487
                    
                    
                    $
                    21,094,678





See
notes to condensed consolidated financial statements.


3


WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)




Three months ended
                                        
                                        
                                        Six months endedJune 30, 2010
                                        
                                        
                                        June 30, 2009
                                        
                                        
                                        June 30, 2010
                                        
                                        
                                        June 30, 2009REVENUESPayday
      loan fees
                                        
                                        $
                                        2,541,063
                                        
                                        
                                        $
                                        2,539,685
                                        
                                        
                                        $
                                        5,031,288
                                        
                                        
                                        $
                                        5,057,495Phones
      and accessories
                                        
                                        
                                        813,995
                                        
                                        
                                        
                                        1,312,795
                                        
                                        
                                        
                                        2,292,543
                                        
                                        
                                        
                                        2,976,975Check
      cashing fees
                                        
                                        
                                        164,590
                                        
                                        
                                        
                                        195,352
                                        
                                        
                                        
                                        397,185
                                        
                                        
                                        
                                        462,650Other
      income and fees
                                        
                                        
                                        629,077
                                        
                                        
                                        
                                        406,267
                                        
                                        
                                        
                                        1,083,711
                                        
                                        
                                        
                                        724,2654,148,725
                                        
                                        
                                        
                                        4,454,099
                                        
                                        
                                        
                                        8,804,727
                                        
                                        
                                        
                                        9,221,385STORE
      EXPENSESSalaries
      and benefits
                                        
                                        
                                        1,148,882
                                        
                                        
                                        
                                        1,358,330
                                        
                                        
                                        
                                        2,379,500
                                        
                                        
                                        
                                        2,578,364Provisions
      for loan losses
                                        
                                        
                                        331,934
                                        
                                        
                                        
                                        359,036
                                        
                                        
                                        
                                        492,678
                                        
                                        
                                        
                                        688,504Phones
      and accessories cost of sales
                                        
                                        
                                        294,618
                                        
                                        
                                        
                                        531,125
                                        
                                        
                                        
                                        722,741
                                        
                                        
                                        
                                        1,333,354Occupancy
                                        
                                        
                                        464,670
                                        
                                        
                                        
                                        419,873
                                        
                                        
                                        
                                        965,626
                                        
                                        
                                        
                                        757,389Advertising
                                        
                                        
                                        93,184
                                        
                                        
                                        
                                        106,114
                                        
                                        
                                        
                                        174,499
                                        
                                        
                                        
                                        256,825Depreciation
                                        
                                        
                                        70,151
                                        
                                        
                                        
                                        67,619
                                        
                                        
                                        
                                        139,023
                                        
                                        
                                        
                                        125,207Amortization
      of intangible assets
                                        
                                        
                                        129,027
                                        
                                        
                                        
                                        179,664
                                        
                                        
                                        
                                        263,178
                                        
                                        
                                        
                                        356,730Other
                                        
                                        
                                        500,211
                                        
                                        
                                        
                                        585,084
                                        
                                        
                                        
                                        1,116,522
                                        
                                        
                                        
                                        1,116,9483,032,677
                                        
                                        
                                        
                                        3,606,845
                                        
                                        
                                        
                                        6,253,767
                                        
                                        
                                        
                                        7,213,321INCOME
      FROM STORES
                                        
                                        
                                        1,116,048
                                        
                                        
                                        
                                        847,254
                                        
                                        
                                        
                                        2,550,960
                                        
                                        
                                        
                                        2,008,064GENERAL
      & ADMINISTRATIVE EXPENSESSalaries
      and benefits
                                        
                                        
                                        378,829
                                        
                                        
                                        
                                        290,290
                                        
                                        
                                        
                                        702,350
                                        
                                        
                                        
                                        635,044Depreciation
                                        
                                        
                                        5,389
                                        
                                        
                                        
                                        4,676
                                        
                                        
                                        
                                        9,645
                                        
                                        
                                        
                                        9,462Interest
      expense
                                        
                                        
                                        112,350
                                        
                                        
                                        
                                        82,310
                                        
                                        
                                        
                                        196,004
                                        
                                        
                                        
                                        164,106Other
                                        
                                        
                                        327,487
                                        
                                        
                                        
                                        394,826
                                        
                                        
                                        
                                        568,716
                                        
                                        
                                        
                                        745,991824,055
                                        
                                        
                                        
                                        772,102
                                        
                                        
                                        
                                        1,476,715
                                        
                                        
                                        
                                        1,554,603INCOME
      BEFORE INCOME TAXES
                                        
                                        
                                        291,993
                                        
                                        
                                        
                                        75,152
                                        
                                        
                                        
                                        1,074,245
                                        
                                        
                                        
                                        453,461INCOME
      TAX EXPENSE
                                        
                                        
                                        72,000
                                        
                                        
                                        
                                        19,000
                                        
                                        
                                        
                                        370,000
                                        
                                        
                                        
                                        169,000NET
      INCOME
                                        
                                        
                                        219,993
                                        
                                        
                                        
                                        56,152
                                        
                                        
                                        
                                        704,245
                                        
                                        
                                        
                                        284,461SERIES
      A CONVERTIBLE PREFERRED STOCK DIVIDENDS(assumes
      all paid)
                                        
                                        
                                        (525,000
                                        )
                                        
                                        
                                        (525,000
                                        )
                                        
                                        
                                        (1,050,000
                                        )
                                        
                                        
                                        (1,050,000
                                        )NET
      LOSS AVAILABLE TO COMMON SHAREHOLDERS
                                        
                                        $
                                        (305,007
                                        )
                                        
                                        $
                                        (468,848
                                        )
                                        
                                        $
                                        (345,755
                                        )
                                        
                                        $
                                        (765,539
                                        )NET
      LOSS PER COMMON SHAREBasic
      and diluted
                                        
                                        $
                                        (0.04
                                        )
                                        
                                        $
                                        (0.06
                                        )
                                        
                                        $
                                        (0.04
                                        )
                                        
                                        $
                                        (0.10
                                        )WEIGHTED
      AVERAGE COMMON SHARES OUTSTANDING -Basic
      and diluted
                                        
                                        
                                        7,458,095
                                        
                                        
                                        
                                        7,996,007
                                        
                                        
                                        
                                        7,725,565
                                        
                                        
                                        
                                        7,888,355





See
notes to condensed consolidated financial statements.


4


WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)




Six Months EndedJune 30, 2010
                
                
                June 30, 2009OPERATING
      ACTIVITIESNet
      Income
                
                $
                704,245
                
                
                $
                284,461Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
                
                
                148,668
                
                
                
                134,669Amortization
                
                
                263,178
                
                
                
                356,730Shares
      retired for reimbursement of expenses
                
                
                (88,000
                )
                
                
                -Deferred
      income taxes
                
                
                151,000
                
                
                
                169,000Loss
      on disposal of property and equipment
                
                
                14,947
                
                
                
                -Changes
      in operating assets and liabilitiesLoans
      receivable
                
                
                255,725
                
                
                
                374,243Inventory
                
                
                197,550
                
                
                
                (177,608
                )Prepaid
      expenses and other assets
                
                
                46,663
                
                
                
                (414,670
                )Accounts
      payable and accrued liabilities
                
                
                (386,266
                )
                
                
                249,085Deferred
      revenue
                
                
                (51,149
                )
                
                
                (35,823
                )Other
      liabilities – long-term
                
                
                37,429
                
                
                
                -Net
      cash provided by operating activities
                
                
                1,293,990
                
                
                
                940,087INVESTING
      ACTIVITIESPurchase
      of property and equipment
                
                
                (22,340
                )
                
                
                (366,200
                )Acquisition
      of stores
                
                
                -
                
                
                
                (2,178,000
                )Net
      cash used by investing activities
                
                
                (22,340
                )
                
                
                (2,544,200
                )FINANCING
      ACTIVITIESAdvances
      (payments) on note payable – short-term
                
                
                205,628
                
                
                
                (100,000
                )Advances
      on line of credit
                
                
                -
                
                
                
                33,000Payments
      on notes payable – long-term
                
                
                (236,078
                )
                
                
                (63,344
                )Dividends
                
                
                (1,250,000
                )
                
                
                (525,000
                )Net
      cash used by financing activities
                
                
                (1,280,450
                )
                
                
                (655,344
                )NET
      DECREASE IN CASH
                
                
                (8,800
                )
                
                
                (2,259,457
                )CASHBeginning
      of period
                
                
                1,526,562
                
                
                
                3,358,547End
      of period
                
                $
                1,517,762
                
                
                $
                1,099,090SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONIncome
      taxes paid
                
                $
                272,184
                
                
                $
                125,000Interest
      paid
                
                
                183,358
                
                
                
                164,106Noncash
      investing and financing activities:Dividend
      accrued
                
                $
                800,000
                
                
                $
                525,000Refinancing
      of note payable – short-term
                
                
                1,636,044
                
                
                
                -





See
notes to condensed consolidated financial statements.


5





WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES




NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




1.
            Basis of Presentation, Nature of
      Business and Summary of Significant Accounting
      Policies –





Basis of
Presentation





The
accompanying unaudited condensed consolidated financial statements have been
prepared according to the instructions to Form 10-Q and Section 210.8-03(b) of
Regulation S-X of the Securities and Exchange Commission (SEC) and, therefore,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) have been omitted.





In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six month periods ended June 30, 2010 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2010. For further information, refer to the Consolidated Financial
Statements and footnotes thereto included in our Form 10-K as of and for the
year ended December 31, 2009. The condensed consolidated balance sheet at
December 31, 2009, has been derived from the audited consolidated financial
statements at that date, but does not include all of the information and
footnotes required by GAAP.





Nature of
Business




Western
Capital Resources, Inc. (WCR), through its wholly owned operating subsidiaries,
Wyoming Financial Lenders, Inc. (WFL) and PQH Wireless, Inc. (PQH), collectively
referred to as the “Company,” provides retail financial services and retail
cellular phone sales to individuals primarily in the Midwestern United
States.  As of June 30, 2010, the Company operated 55 “payday” stores
in 10 states (Colorado, Iowa, Kansas, Montana, Nebraska, North Dakota, South
Dakota, Utah, Wisconsin and Wyoming) and operated 31 Cricket wireless retail
stores in seven states (Illinois, Indiana, Kansas, Maryland, Missouri, Nebraska
and Texas).  The condensed consolidated financial statements include
the accounts of WCR, WFL, and PQH. All significant intercompany balances and
transactions have been eliminated in consolidation.





The
Company, through its “payday” division, provides non-recourse cash advance
loans, check cashing and other money services.  The short-term
consumer loans, known as cash advance loans or “payday” loans, are in amounts
that typically range from $100 to $500. Cash advance loans provide customers
with cash in exchange for a promissory note with a maturity of generally two to
four weeks and the customer’s personal check for the aggregate amount of the
cash advanced plus a fee. The fee varies from state to state based on applicable
regulations, and generally ranges from $15 to $22 per each $100 borrowed. To
repay the cash advance loans, customers may pay with cash, in which their
personal check is returned to them, or by allowing their check to be presented
to the bank for collection.





The
Company also provides title loans and other ancillary consumer financial
products and services that are complementary to its cash advance-lending
business, such as check-cashing services, money transfers and money
orders.  In our check cashing business, we primarily cash payroll
checks, but we also cash government assistance, tax refund and insurance checks
or drafts. Our fees for cashing payroll checks average approximately 2.5% of the
face amount of the check, subject to local market conditions, and this fee is
deducted from the cash given to the customer for the check. We display our check
cashing fees in full view of our customers on a menu board in each store and
provide a detailed receipt for each transaction. Although we have established
guidelines for approving check-cashing transactions, we have no preset limit on
the size of the checks we will cash.





Our loans
and other related services are subject to state regulations (which vary from
state to state), federal regulations and local regulations, where
applicable.





The
Company also operates a Cricket Wireless Retail division that is a premier
dealer for Cricket Wireless, Inc., reselling cellular phones and accessories and
accepting service payments from Cricket customers.





Use of
Estimates





The
preparation of condensed consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that may affect certain
reported amounts and disclosures in the condensed consolidated financial
statements and accompanying notes. Management bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances. Actual results could differ from those estimates.
Significant management estimates relate to the allowance for loans receivable,
allocation of and carrying value of goodwill and intangible assets, and deferred
taxes and tax uncertainties.


6





Revenue
Recognition





The
Company recognizes fees on cash advance loans on a constant-yield basis ratably
over the loans’ terms. Title loan fees are recognized using the interest
method.  The Company records revenue from check cashing fees, sales
of phones, and accessories and fees from all other services in the period
in which the sale or service is completed.





Loans Receivable / Loan Loss
Allowance





We maintain a loan loss allowance for anticipated losses for our
cash advance and title loans. To estimate the appropriate level of the loan loss
allowance, we consider the amount of outstanding loans owed to us, historical
loans charged off, current and expected collection patterns and current economic
trends. Our current loan loss allowance is based on our net write offs,
typically expressed as a percentage of loan amounts originated for the last 24
months applied against the principal balance of outstanding loans that we write
off. The Company also periodically performs a look-back analysis on its loan
loss allowance to verify that the historical allowance established tracks with
the actual subsequent loan write-offs and recoveries. The Company is aware that,
as conditions change, it may also need to make additional allowances in future
periods.





Included
in loans receivable are cash advance loans that are currently due or past due
and cash advance loans that have not been repaid.  This generally is
evidenced 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.  Cash advance loans are carried at cost
less the allowance for doubtful accounts.  The Company does not
specifically reserve for any individual cash advance loan.  The
Company aggregates cash advance loans for purposes of estimating the loss
allowance using a methodology that analyzes historical portfolio statistics and
management’s judgment regarding recent trends noted in the
portfolio.  This methodology takes into account several factors,
including the maturity of the store location and charge-off and recovery
rates.  The Company utilizes a software program to assist with the
tracking of its historical portfolio statistics.  As a result of the
Company’s collection efforts, it historically writes off approximately 45% of
the returned items.  Based on days past the check return date,
write-offs of returned items historically have tracked at the following
approximate percentages: 1 to 30 days – 45%; 31 to 60 days – 67%; 61 to 90 days
– 83%; 91 to 120 days – 88%; and 121 to 180 days – 90%.  All returned
items are charged-off after 180 days, as collections after that date have not
been significant.  The loan loss allowance is reviewed quarterly and
any adjustment to the loan loss allowance as a result of historical loan
performance, current and expected collection patterns and current economic
trends is recorded.





A
rollforward of the Company’s loans receivable allowance for the six months ended
June 30, 2010 and 2009 is as follows:





Six Months Ended
                    June 30,2010
                  
                  
                  2009Loans
      receivable allowance, beginning of period
                  
                  $
                  1,237,000
                  
                  
                  $
                  1,413,000Provision
      for loan losses charged to expense
                  
                  
                  493,000
                  
                  
                  
                  689,000Charge-offs,
      net
                  
                  
                  (808,000
                  )
                  
                  
                  (1,031,000
                  )Loans
      receivable allowance, end of period
                  
                  $
                  922,000
                  
                  
                  $
                  1,071,000





Net Loss Per Common
Share





Basic net
loss per common share is computed by dividing the loss available to common
shareholders by the weighted average number of common shares outstanding for the
year. Diluted net loss per common share is computed by dividing the net loss
available to common shareholders by the sum of the weighted average number of
common shares outstanding plus potentially dilutive common share equivalents
(stock warrants, convertible preferred shares) when dilutive. Potentially
dilutive Series A Convertible Preferred Stock (10,000,000 shares) were
anti-dilutive and therefore excluded from the dilutive net loss per share
computation for 2010.





Recent Accounting
Pronouncements





In
January 2010, the FASB issued amendments to guidance on fair value measurements
and disclosures that will require inclusion of the amount of significant
transfers in and out of levels 1 and 2 fair value measurements and the reasons
for the transfers. In addition, the reconciliation for level 3 activity will be
required on a gross rather than net basis. An amendment related to the level of
disaggregation in determining classes of assets and liabilities and disclosures
about inputs and valuation techniques was also issued. The amendments are
effective for annual or interim reporting periods beginning after December
15, 2009, except for the requirement to provide the reconciliation for
level 3 activity on a gross basis, which will be effective for fiscal years
beginning after December 15, 2010. The Company adopted this amendment guidance
with no material impact on its condensed consolidated financial
statements.


7





In April
2010, the FASB issued guidance on accounting for certain tax effects related to
the accounting for postretirement health care plans effective on the enactment
date of March 23, 2010.  The Company adopted this amendment guidance
with no material impact on its condensed consolidated financial
statements.





No other
new accounting pronouncement issued or effective during the fiscal quarter has
had or is expected to have a material impact on the condensed consolidated
financial statements.





2.
              Segment Information
      –





The
Company has grouped its operations into two segments – Payday Operations and
Cricket Wireless Retail Operations. The Payday Operations segment provides
financial and ancillary services. The Cricket Wireless Retail Operations segment
is a dealer for Cricket Wireless, Inc., reselling cellular phones and
accessories and serving as a payment center for Cricket customers.





Segment
information related to the three and six months ended June 30, 2010 and 2009 is
set forth below:





Three Months Ended
                    June 30, 2010
                  
                  
                  Three Months Ended
                    June 30, 2009Payday
                  
                  
                  Cricket
                    Wireless
                  
                  
                  Total
                  
                  
                  Payday
                  
                  
                  Cricket
                    Wireless
                  
                  
                  TotalRevenues
      from external customers
                  
                  $
                  2,883,892
                  
                  
                  $
                  1,264,833
                  
                  
                  $
                  4,148,725
                  
                  
                  $
                  2,798,109
                  
                  
                  $
                  1,655,990
                  
                  
                  $
                  4,454,099Net
      income (loss)
                  
                  $
                  504,668
                  
                  
                  $
                  (284,675
                  )
                  
                  $
                  219,993
                  
                  
                  $
                  250,956
                  
                  
                  $
                  (194,804
                  )
                  
                  $
                  56,152




Six Months Ended
                    June 30, 2010
                  
                  
                  Six Months Ended
                    June 30, 2009Payday
                  
                  
                  Cricket
                    Wireless
                  
                  
                  Total
                  
                  
                  Payday
                  
                  
                  Cricket
                    Wireless
                  
                  
                  TotalRevenues
      from external customers
                  
                  $
                  5,666,799
                  
                  
                  $
                  3,137,928
                  
                  
                  $
                  8,804,727
                  
                  
                  $
                  5,641,473
                  
                  
                  $
                  3,579,912
                  
                  
                  $
                  9,221,385Net
      income (loss)
                  
                  $
                  1,013,008
                  
                  
                  $
                  (308,763
                  )
                  
                  $
                  704,245
                  
                  
                  $
                  538,741
                  
                  
                  $
                  (254,280
                  )
                  
                  $
                  284,461Total
      segment assets
                  
                  $
                  14,871,201
                  
                  
                  $
                  5,191,286
                  
                  
                  $
                  20,062,487
                  
                  
                  $
                  15,114,500
                  
                  
                  $
                  5,978,518
                  
                  
                  $
                  21,093,018





3.
            Credit
      Facility –





Credit
Facility with WERCS





On April
2, 2010, WFL, the wholly owned payday lending operating subsidiary of WCR,
refinanced its outstanding credit facility.  On that date, WERCS, a
Wyoming corporation and the former holder of the Company’s Series A Convertible
Preferred Stock, satisfied all of WFL’s financial obligations owing to Banco
Popular North America and entered into a Business Loan Agreement and associated
$2,000,000 Promissory Note with WFL.  The loan from WERCS extinguished
the $1,637,341 that WFL owed to Banco Popular, and the remaining $362,659 has
been used for general working capital.





The
Business Loan Agreement and associated Promissory Note contained terms that were
substantially similar to those contained in the original loan documents with
Banco Popular.  To secure the obligations of WFL under the new
Business Loan Agreement and Promissory Note, the Company entered into (i) a
Commercial Pledge Agreement with WERCS pursuant to which the Company pledged its
share ownership in WFL, and (ii) a Commercial Security Agreement pursuant to
which the Company granted WERCS a security interest in substantially all of the
Company’s assets.  The Company also entered into a Commercial Guaranty
relating to the repayment of WFL’s obligations under the Business Loan Agreement
and Promissory Note.





The
payment terms under the Promissory Note require the Company to make monthly
payments of accrued interest only for 11 months, followed by an April 1, 2011
balloon payment of any remaining accrued but unpaid interest and all $2,000,000
of principal under the Promissory Note.  Interest accrues on the
unpaid principal balance of the promissory note at the rate of 12.0% per
annum.


8





Banco
Popular Loan Satisfaction and Redemption of Stock





On April
2, 2010, as part of the WERCS transactions described above, the Company and WFL
satisfied their obligations to Banco Popular North America under a Business Loan
Agreement and related promissory note, the outstanding principal and accrued
interest amount of which was $1,637,341.





In
connection with the payment in full of WFL’s and the Company obligations to
Banco Popular North America, the guaranty of such obligations that had been
earlier delivered by Mr. Chris Larson (the former Chief Executive Officer of the
Company) expired by its terms.  As a result, the Company obtained and
cancelled all 550,000 shares of common stock of Mr. Larson that had been held in
escrow since May 1, 2009 pursuant to the terms of a Settlement Agreement with
Mr. Larson dated as of May 1, 2009.  As a result of the receipt of the
shares, the Company recorded $88,000 of other income in the second quarter
2010.





4.
            Notes
      Payable - Long-Term –





Effective
March 31, 2010, the Company amended notes payable to related
parties.  Under the amended payment terms of the notes, principal and
interest payments on the notes are to be made monthly in the aggregate amount of
approximately $61,500, beginning April 1, 2010, so as to amortize the
outstanding balances of the notes as of March 31, 2010 over the entire term at a
10% rate of interest with all then-outstanding principal and accrued but unpaid
interest due and payable on March 1, 2013.





5.
            Stock
      Purchase and Sale –





On
February 23, 2010, WERCS, a Wyoming corporation, entered into a definitive
Stock Purchase and Sale Agreement by and between WERCS, and WCR Acquisition,
Inc., a Delaware corporation, pursuant to which WERCS agreed to sell to WCR
Acquisition, Inc. all shares of common stock and Series A Convertible Preferred
Stock of the Company owned by WERCS. The parties later amended the Stock
Purchase and Sale Agreement to substitute WCR, LLC, a Delaware limited liability
company, as the buyer of Company stock from WERCS. The sale of the shares of
common stock and Series A Convertible Preferred Stock was consummated on March
31, 2010. WCR, LLC purchased the common stock and the Series A Convertible
Preferred Stock for aggregate consideration of approximately
$4,770,000.




Since the
10,000,000 shares of Series A Convertible Preferred Stock vote on an
as-converted basis (presently one-for-one) with shares of the Company’s common
stock, the purchase and sale transaction effects a change in the voting control
of the Company, with WCR, LLC possessing approximately 61.8% of the voting
power of the Company’s shares.





6.
            Employment
      Agreement/Management Bonus
Pool –





On March
31, 2010, the Company entered into an Employment Agreement with John Quandahl,
its Chief Executive Officer, Chief Operating Officer, and interim Chief
Financial Officer.  The Employment Agreement provides Mr. Quandahl with an
annual base salary and eligibility for participation in an annual
performance-based cash bonus pool for management.  The performance-based
bonus provisions permit certain members of management to receive annual bonus
payments in cash based on EBITDA targets established by the Board of Directors
annually.  The 2010 Bonus Pool EBITDA target is set at $4
million.  If the Company’s actual EBITDA performance for a particular
annual period ranges from 85-100% of the established EBITDA target, the cash
bonus pool will be 7.5% of EBITDA.  If the Company’s actual EBITDA
performance for a particular annual period exceeds 100% of the established
EBITDA target, 15% of EBITDA over the established target will be added to the
cash bonus pool.





7.
            Risks
      Inherent in the Operating
Environment –





The
Company’s payday or short-term consumer loan activities are highly regulated
under numerous local, state, and federal laws and regulations, which are subject
to change. New laws or regulations could be enacted that could have a negative
impact on the Company’s lending activities. Over the past few years, consumer
advocacy groups and certain media reports have advocated governmental and
regulatory action to prohibit or severely restrict deferred presentment cash
advances.




The
Federal Trade Commission has issued an FTC Consumer Alert (Federal Trade
Commission, March 2008, Consumer Alert entitled “Payday Loans Equal Very Costly
Cash: Consumers Urged to Consider the Alternatives”) that discourages consumers
from obtaining payday loans such as the loans we offer, primarily on the basis
that the types of loans we offer are very costly and consumers should consider
alternatives to accepting a payday loan. For further information, you may obtain
a copy of the alert at
www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt060.shtm.  The federal
government also passed legislation, the 2007 Military Authorization Act,
prohibiting us from offering or making our loans to members of the military when
the interest and fees calculated as an annual percentage rate exceed 36%. This
limitation effectively prohibits us from utilizing our present business model
for cash advance or “payday” lending when dealing with members of the U.S.
military, and as a result we do not and do not plan to conduct payday lending
business with U.S. military personnel. These facts evidence the widespread
belief that our charges relating to our loans are too expensive to be good for
consumers. Some consumer advocates and others have characterized payday lending
as “predatory.” As a result, there are frequently attempts in the various state
legislatures, and occasionally in the U.S. Congress, to limit, restrict or
prohibit payday lending.


9





In
February 2009, Congress introduced H.R. 1214, the Payday Loan Reform Act of 2009
(an amendment to the Truth in Lending Act).  If enacted, this
amendment would restrict charges for a single-payment loan to a 391% effective
annual rate, or $15 per $100 for a two-week loan, prohibit loan rollovers, limit
borrowers to one outstanding loan at a time and permit only one extended
repayment plan every six months.  Presently, the bill is in the House
Financing Committee.  We have no further information regarding this
bill or any legislative efforts Congress may propose at this time.





In July
2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed
by the U.S. Congress and signed into law.  Under the Act, a new
Consumer Financial Protection Bureau will consolidate most federal regulation of
financial services offered to consumers, and replace the Office of Thrift
Supervision’s seat on the FDIC Board. Almost all credit providers, including
mortgage lenders, providers of payday loans, other nonbank financial companies,
and banks and credit unions with assets over $10 billion, will be subject to new
regulations to be passed by the Bureau.  While the Bureau does not
appear to have authority to make rules limiting interest rates or fees charged,
the scope and extent of the Bureau’s authority will nonetheless be broad, and it
is expected that the Bureau will address issues such as rollovers or extensions
of payday loans.  Future restrictions on the payday lending industry
could have serious consequences for the Company.





Any
adverse change in present federal laws or regulations that govern or otherwise
affect payday lending could result in our curtailment or cessation of operations
in certain jurisdictions or locations.  Furthermore, any failure to
comply with any applicable federal laws or regulations could result in fines,
litigation, the closure of one or more store locations or negative
publicity.  Any such change or failure would have a corresponding
impact on our results of operations and financial condition, primarily through a
decrease in revenues resulting from the cessation or curtailment of operations,
decrease in our operating income through increased legal expenditures or fines,
and could also negatively affect our general business prospects as well if we
are unable to effectively replace such revenues in a timely and efficient manner
or if negative publicity effects our ability to obtain additional financing a
needed.





During
the 2010 legislative session in Colorado, House Bill 10-1351 was passed into
law.  This bill amended the Colorado Deferred Deposit Loan Act, the
existing payday lending law.  The law is effective August 11, 2010 and
modifies traditional payday lending by changing the single payment advance (with
no minimum term) into a single or multiple payment loan with a minimum six month
term. It also limits the amount and type of fees that can be charged on these
loans, effectively reducing by one-half the fees that can be
charged.  At present, the Company plans to continue to operate its
sole store in Colorado while the impact to profitability of this new law is
being assessed.  Currently, we derive 1.41% of our Payday division
revenues from fees in Colorado.





In May
2010, new laws were enacted in Wisconsin that restrict the number of times a
consumer may renew (or rollover) a payday loan. Previously, there were no limits
to the number of rollovers permitted.  Effective January 1, 2011,
consumers in Wisconsin will only be allowed to renew a payday loan once, and
then lenders will be required to offer a 60-day, interest free, payment plan to
consumers.  The Company is still assessing the impact of these new
Wisconsin laws. Currently, we derive 6.09% of our Payday division revenues
from fees in Wisconsin.





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





For the
six months ended June 30, 2010 and 2009, the Company had significant
revenues by state (shown as a percentage of applicable division’s revenue) as
follows:





Payday Division
                      
                      Cricket Wireless Division2010
                        % of Revenues
                      
                      
                      2009
                        % of Revenues
                      
                      
                      
                      2010
                        % of Revenues
                      
                      
                      2009
                        % of RevenuesNebraska
                      
                      
                      27
                      %
                      
                      
                      28
                      %
                      Missouri
                      
                      
                      30
                      %
                      
                      
                      44
                      %Wyoming
                      
                      
                      14
                      %
                      
                      
                      14
                      %
                      Nebraska
                      
                      
                      15
                      %
                      
                      
                      13
                      %North
      Dakota
                      
                      
                      16
                      %
                      
                      
                      14
                      %
                      Texas
                      
                      
                      11
                      %
                      
                      
                      11
                      %Iowa
                      
                      
                      12
                      %
                      
                      
                      11
                      %
                      Indiana
                      
                      
                      28
                      %
                      
                      
                      22
                      %





8.
            Preferred Stock Dividend
  –





Cumulated
dividends on the Company's Series A Convertible Preferred Stock are $525,000 and
$1,050,000 for the three and six months ended June 30, 2010, respectively. The
Company has $525,000 cumulative unaccrued preferred dividends at June 30,
2010.


10





9.
            Other Expense
      –





A
breakout of other expense is as follows:





Three Months Ended
                    June 30,
                  
                  
                  Six Months Ended
                    June 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Store expensesBank
      fees
                  
                  $
                  45,897
                  
                  
                  $
                  58,974
                  
                  
                  $
                  104,787
                  
                  
                  $
                  109,952Collection
      costs
                  
                  
                  92,772
                  
                  
                  
                  93,726
                  
                  
                  
                  202,925
                  
                  
                  
                  169,976Repairs
      & maintenance
                  
                  
                  40,850
                  
                  
                  
                  45,004
                  
                  
                  
                  89,956
                  
                  
                  
                  91,047Supplies
                  
                  
                  43,603
                  
                  
                  
                  74,729
                  
                  
                  
                  87,279
                  
                  
                  
                  163,055Telephone
                  
                  
                  36,221
                  
                  
                  
                  45,160
                  
                  
                  
                  75,450
                  
                  
                  
                  96,001Utilities
      and network lines
                  
                  
                  112,457
                  
                  
                  
                  85,311
                  
                  
                  
                  260,704
                  
                  
                  
                  167,033Other
                  
                  
                  128,411
                  
                  
                  
                  182,180
                  
                  
                  
                  295,421
                  
                  
                  
                  319,884$
                  500,211
                  
                  
                  $
                  585,084
                  
                  
                  $
                  1,116,522
                  
                  
                  $
                  1,116,948General & administrative
      expensesProfessional
      fees
                  
                  $
                  155,348
                  
                  
                  $
                  311,192
                  
                  
                  $
                  328,373
                  
                  
                  $
                  552,337Management
      and consulting fees
                  
                  
                  100,000
                  
                  
                  
                  -
                  
                  
                  
                  100,000
                  
                  
                  
                  -Other
                  
                  
                  72,139
                  
                  
                  
                  83,634
                  
                  
                  
                  140,343
                  
                  
                  
                  193,654$
                  327,487
                  
                  
                  $
                  394,826
                  
                  
                  $
                  568,716
                  
                  
                  $
                  745,991





10.
            Litigation Matter
      –





On March
26, 2010, the Company and all of the then-current members of its Board of
Directors, among others, were sued by former members of our management team,
Messrs. Steven Staehr and David Stueve.  In that lawsuit, the
plaintiffs have alleged, among other things, that our Board of Directors
breached certain of their fiduciary duties primarily in connection with the sale
by WERCS of its capital stock in the Company to WCR, LLC.  The
complaint seeks injunctive and declaratory relief and unspecified money
damages.  The Company believes the claims are without
merit.  While we are unable to predict the ultimate outcome of these
claims and proceedings, management currently believes there is not a reasonable
possibility that the costs and liabilities of such matters, individually or in
the aggregate, will have a material adverse effect on our financial condition or
results of operations.  The Company has removed the lawsuit to federal
court, and the plaintiffs have sought to remand the case to state
court.  Plaintiffs’ motion to remand the case to state court has been
argued and is under advisement by the federal court.





11.
            Management and Advisory
      Agreement –





Effective
April 1, 2010, the Company entered into a Management and Advisory Agreement with
Blackstreet Capital Management, LLC (“Blackstreet”), to provide certain
financial, managerial, strategic and operating advice and assistance. 
Blackstreet employs two of the Company’s directors and is affiliated with
another entity to which a third director provides consulting services.  The
annual fees for this contract will be the greater of 5% of EBITDA or
$300,000.


11


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





Forward-Looking
Statements




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





Specific
factors that might cause actual results to differ from our expectations or may
affect the value of the common stock, include, but are not limited
to:





·
            Changes
      in local, state or federal laws and regulations governing lending
      practices, or changes in the interpretation of such laws and
      regulations





·
            Litigation
      and regulatory actions directed toward our industry or us, particularly in
      certain key states and/or
nationally;





·
            Our
      need for additional financing, and





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





Other
factors that could cause actual results to differ from those implied by the
forward-looking statements in this report are more fully described in the “Risk
Factors” section of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2009.





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




General
Overview




We
provide (through Wyoming Financial Lenders, Inc.) retail financial services to
individuals primarily in the midwestern and southwestern United States. These
services include non-recourse cash advance loans, check cashing and other money
services. At the close of business on June 30, 2010, we owned and operated 55
stores in 10 states (Colorado, Iowa, Kansas, Montana, Nebraska, North Dakota,
South Dakota, Utah, Wisconsin and Wyoming).





We
provide short-term consumer loans—known as “payday” or “cash advance” loans—in
amounts that typically range from $100 to $500. Payday loans provide customers
with cash in exchange for a promissory note with a maturity of generally two to
four weeks and the customer’s post-dated personal check for the aggregate amount
of the cash advanced, plus a fee. The fee varies from state to state based on
applicable regulations, and generally ranges from $15 to $22 for each whole or
partial increment of $100 borrowed. To repay a payday loan, a customer may pay
with cash, in which case their personal check is returned to them, or allow the
check to be presented to the bank for collection. All of our payday loans and
other services are subject to state regulations (which vary from state to
state), federal regulations and local regulation, where applicable.





In
October 2008, we began operating Cricket Wireless retail stores as an authorized
dealer of Cricket Wireless products and services. Authorized dealers are
permitted to sell the Cricket line and generally locate their store operations
in areas with a strong potential customer base where Cricket does not maintain a
corporate storefront. These locations are generally within the urban core or
surrounding areas of a community. We are an authorized premier Cricket dealer,
and as such, we are only permitted to sell the Cricket line of prepaid cellular
phones at our Cricket retail stores. At the close of business on June 30, 2010,
we owned and operated 31 stores in seven states (Illinois, Indiana, Kansas,
Maryland, Missouri, Nebraska, and Texas).


12





Our
expenses primarily relate to the operations of our various
stores.  The most significant expenses include salaries and benefits
for our store employees, provisions for payday loan losses and occupancy expense
for our leased real estate.  Our other significant expenses are
general and administrative, which includes compensation of employees and
professional fees for consulting, accounting, audit and legal
services.





With
respect to our cost structure, salaries and benefits are one of our largest
costs and are driven primarily by the number of branches operated throughout the
year and changes in loan volumes.  Occupancy and phone and accessory
cost of sales make up our second and third largest expense item.  Our
provision for losses is also a significant expense.  We have
experienced seasonality in our operations, with the first and fourth quarters
typically being our strongest periods as a result of broader economic factors,
such as holiday spending habits at the end of each year and income tax refunds
during the first quarter.





We
evaluate our stores based on revenue growth, gross profit contributions and loss
ratio (which is losses as a percentage of payday loan fees), with consideration
given to the length of time the branch has been open and its geographic
location.  We evaluate changes in comparable branch financial and
other measures on a routine basis to assess operating efficiency.  We
define comparable branches as those branches that are open during the full
periods for which a comparison is being made.  For example, comparable
branches for the annual analysis we undertook as of December 31, 2009 have been
open at least 24 months on that date.  We monitor newer branches for
their progress toward profitability and rate of loan growth, units sold, or
payment volume.





The
contraction of the payday loan industry has followed, and continues to be
significantly affected by, payday lending legislation and regulation in the
various states and nationally.  We actively monitor and evaluate
legislative and regulatory initiatives in each of the states and nationally, and
are involved with the efforts of the various industry lobbying
efforts.  To the extent that states enact legislation or regulations
that negatively impacts payday lending, whether through preclusion, fee
reduction or loan caps, our business could be adversely affected.  In
Nebraska, legislation was introduced in 2008 (but did not advance) to ban all
cash advance or payday loans in Nebraska.  Despite the defeat of this
legislation, since we derived approximately 27% of our 2009 and year-to-date
2010 total payday lending revenues in Nebraska, any subsequent attempts to pass
similar legislation in Nebraska, or other legislation that would restrict our
ability to make cash advance loans in Nebraska, would pose significant risks to
our business.





In an
effort to expand our geographic reach, our strategic expansion plans involve the
expansion and diversification of our product and service
offerings.  For this reason, we have focused, and will continue to
focus, a significant amount of time and resources on the development of our
Cricket Wireless retail stores.  We believe that successful expansion,
both geographically and product- and service-wise, will help to mitigate the
regulatory and economic risk inherent in our business by making us less reliant
on (i) cash advance lending alone and (ii) any particular aspect of our business
that is concentrated geographically.





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, “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




We
maintain a loan loss allowance for anticipated losses for our cash advance and
title loans. To estimate the appropriate level of the loan loss allowance, we
consider the amount of outstanding loans owed to us, historical loans charged
off, current and expected collection patterns and current economic trends. Our
current loan loss allowance is based on our net write offs, typically expressed
as a percentage of loan amounts originated for the last 24 months applied
against the principal balance of outstanding loans that we write off. 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.


13





Included
in loans receivable are cash advance loans that are currently due or past due
and cash advance loans that have not been repaid.  This generally is
evidenced 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.  Cash advance loans are carried at cost
less the allowance for doubtful accounts.  The Company does not
specifically reserve for any individual cash advance loan.  The
Company aggregates cash advance loans for purposes of estimating the loss
allowance using a methodology that analyzes historical portfolio statistics and
management’s judgment regarding recent trends noted in the
portfolio.  This methodology takes into account several factors,
including the maturity of the store location and charge-off and recovery
rates.  The Company utilizes a software program to assist with the
tracking of its historical portfolio statistics.  As a result of the
Company’s collection efforts, it historically writes off approximately 45% of
the returned items.  Based on days past the check return date,
write-offs of returned items historically have tracked at the following
approximate percentages: 1 to 30 days – 45%; 31 to 60 days – 67%; 61 to 90 days
– 83%; 91 to 120 days – 88%; and 121 to 180 days – 90%.  All returned
items are charged-off after 180 days, as collections after that date have not
been significant.  The loan loss allowance is reviewed monthly and any
adjustment to the loan loss allowance as a result of historical loan
performance, current and expected collection patterns and current economic
trends is recorded.





A
rollforward of the Company’s loans receivable allowance for the six months ended
June 30, 2010 and 2009 is as follows:





Six Months Ended
                    June 30,2010
                  
                  
                  2009Loans
      receivable allowance, beginning of period
                  
                  $
                  1,237,000
                  
                  
                  $
                  1,413,000Provision
      for loan losses charged to expense
                  
                  
                  493,000
                  
                  
                  
                  689,000Charge-offs,
      net
                  
                  
                  (808,000
                  )
                  
                  
                  (1,031,000
                  )Loans
      receivable allowance, end of period
                  
                  $
                  922,000
                  
                  
                  $
                  1,071,000





Valuation of Long-lived and
Intangible Assets





The
Company assesses the impairment of long-lived and intangible assets whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable; goodwill is tested on an annual basis. Factors that could trigger
an impairment review include significant underperformance relative to expected
historical or projected future cash flows, significant changes in the manner of
use of acquired assets or the strategy for the overall business, and significant
negative industry trends. When management determines that the carrying value of
long-lived and intangible assets may not be recoverable, impairment is measured
based on the excess of the assets' carrying value over the estimated fair
value.





Results
of Operations - Three Months Ended June 30, 2010 Compared to Three Months Ended
June 30, 2009





For the
three-month period ended June 30, 2010, net income was $.22 million compared to
net income of $.06 million for the three months ended June 30, 2009. During the
three months ended June 30, 2010, income from operations before income taxes was
$.29 million compared to $.08 million for the three months ended June 30, 2009.
The major components of revenues, store expenses, general and administrative
expenses, total operating expenses and income tax expense from continuing
operations are discussed below.





Revenues





Revenues totaled $4.15 million for the three
months ended June 30, 2010, compared to $4.45 million for the three months ended
June 30, 2009. The decrease in total revenues resulted from a reduction in the
number of phone and modem units sold as well as sales of a higher percentage of
units under Cricket’s promotional programs.  These programs have the
effect of decreasing the average per-unit selling price and gross
revenues.   This was partially offset by an increase in fees
generated from accepting Cricket service payments.  This trend is
expected to continue as Cricket changes its compensation structure to
dealers.





Loan
originations in the 2010 interim period remained stable.  During both
the three-month periods ended June 30, 2010 and June 30, 2009, we originated
approximately $17.63 million $17.71 million in cash advance loans, respectively.
Our average loan (including fee) totaled approximately $362 during the
three-month periods ended June 30, 2010 and 2009. Our average fee for the
three-month periods ended June 30, 2010 and 2009 was $53.


14


The
following table summarizes our revenues for the three months ended June 30, 2010
and 2009, respectively:




Three Months Ended
                      June 30,
                    
                    
                    Three Months Ended
                      June 30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009(percentage of revenues)Payday
      loan fees
                    
                    $
                    2,541,063
                    
                    
                    $
                    2,539,685
                    
                    
                    
                    61.2
                    %
                    
                    
                    57.0
                    %Phones
      and accessories
                    
                    
                    813,995
                    
                    
                    
                    1,312,795
                    
                    
                    
                    19.6
                    %
                    
                    
                    29.5
                    %Check
      cashing fees
                    
                    
                    164,590
                    
                    
                    
                    195,352
                    
                    
                    
                    4.0
                    %
                    
                    
                    4.4
                    %Other
      income and fees
                    
                    
                    629,077
                    
                    
                    
                    406,267
                    
                    
                    
                    15.2
                    %
                    
                    
                    9.1
                    %Total
                    
                    $
                    4,148,725
                    
                    
                    $
                    4,454,099
                    
                    
                    
                    100.0
                    %
                    
                    
                    100.0
                    %





Store
Expenses




Total
expenses associated with store operations for the three months ended June 30,
2010 were $3.03 million, compared to $3.60 million for the three months ended
June 30, 2009, or a 15.9% reduction for the interim periods.  The
major components of these expenses are salaries and benefits for our store
employees, provision for loan losses, costs of sales for phones and accessories,
occupancy costs primarily relating to our store leaseholds, advertising
expenses, depreciation of store equipment, amortization of intangible assets and
other expenses associated with store operations.





Overall,
our most significant increases in store expenses for the three months ended June
30, 2010 and 2009 related to our costs of occupancy. Our most significant
decreases in store expenses over that same period related to salaries and
benefits, phone and accessories cost of sales, amortization of intangible
assets, and other store operation expenses.  A discussion and analysis
of the various components of our store expenses appears below.





Salaries
and Benefits. Payroll and related costs at the store level were $1.15 million
compared to $1.36 million for the periods ended June 30, 2010 and 2009,
respectively. We expect salaries and benefits expenses to remain near the three
month ended June 30, 2010 level for the remainder of 2010.





Provisions
for Loan Losses. For the three months ended June 30, 2010, our provisions for
loan losses were $.33 million compared to $.36 million for the three months
ended June 30, 2009. Our provisions for loan losses represented approximately
13.1% and 14.1% of our loan fee revenue for the three months ended June 30, 2010
and 2009, respectively.  The more favorable loss ratio year-to-year
reflects our expanded collection efforts in the three months ended June 30, 2010
compared to the three months ended June 30, 2009.  Due to
our inability to foretell the depth and duration of the continued economic
downturn, we believe there are currently uncertainties in how significant our
total 2010 loan losses may be and how they may differ from 2009.





Phone and
Accessories Cost of Sales.  For the three months ended June 30, 2010,
our costs of sales were $.29 million compared to $.53 million for the same
period in 2009.  The decrease in our Cricket Wireless phone service
segment revenues, which resulted from a general decrease in units sold combined
with a relative increase in sales covered by Cricket’s promotional programs, had
a corresponding downward impact to our costs of sales.  At June 30,
2010, we had 31 Cricket Wireless stores compared to 33 at June 30,
2009.





Occupancy
Costs. Occupancy expenses, comprised mainly of store leases, were $.46 million
for the three months ended June 30, 2010 versus $.42 million for the three
months ended June 30, 2009. The increase in our occupancy expenses resulted from
our operation of more stores throughout the more recent period.





Advertising.
Advertising and marketing expenses decreased from $.11 million for the three
months ended June 30, 2009 to $.09 million for the three months ended June 30,
2010, a $.02 million or 18.2% reduction.  In general, we expect that
our marketing and advertising expenses for 2010 will remain consistent with 2009
levels.





Depreciation.
Depreciation, relating to store equipment and capital expenditures for stores,
remained stable at $.07 million for the three months ended June 30, 2010 and the
three months ended June 30, 2009.




Amortization
of Intangible Assets. Amortization of intangible assets decreased from $.18
million for the three months ended June 30, 2009 to $.13 million, or 27.8%, for
the three months ended June 30, 2010. Payday division expense decreased $.03
million due to intangible assets becoming fully amortized while the expense on
the Cricket division decreased by $.02 million due to amortization expense being
lower each subsequent year.


15





Other
Store Expenses. Other expenses were $.50 million for the three months ended June
30, 2010 versus $.58 million for the three months ended June 30, 2009 primarily
due to higher costs associated with operating a greater number of stores on a
year-over-year basis and an increase in collection costs.





General and Administrative
Expenses





Total
general and administrative costs for the three months ended June 30, 2010 were
$.82 million compared to $.77 million for the period ended June 30, 2009. For
the three months ended June 30, 2010, the major components of these costs were
salaries and benefits for our corporate headquarters operations and executive
management, interest expense, and other general and administrative expenses. A
discussion of the various components of our general and administrative costs for
the three months ended June 30, 2010 and 2009 appears below:





Salaries
and Benefits. Salaries and benefits expenses for the three months ended June 30,
2010 were $.38 million, a $.09 million increase from the $.29 million in such
expenses during period ended June 30, 2009. The increase was due to costs
incurred under the new management bonus plan.





Depreciation.
Depreciation for the three months ended June 30, 2010 and 2009 remained
consistent. Depreciation relates primarily to equipment and capital improvements
at the Company’s corporate headquarters.





Interest.  Interest
expense for the three months ended June 30, 2010 and 2009 was $.11 million for
the three months ended June 30, 2010 compared to $.08 million for the three
months ended June 30, 2009.  Interest expense related to the WERCS
loan and notes payable for store acquisitions made during prior
periods.





Other
General and Administrative Expenses. Other general and administrative expenses,
which includes professional fees for accounting and legal services, management
and consulting fees, utilities, office supplies, collection costs and other
minor costs associated with corporate headquarters activities, decreased $.06
million or 15.4%, to $.33 million for the three months ended June 30, 2010
compared to $.39 million from the three months ended June 30, 2009. The
significant decrease in these expenses is mainly attributable to nonrecurring
professional fees incurred in 2009.  We expect professional fees to
continue to decrease throughout the remainder of 2010 since most fees relate to
the annual audit and non-recurring corporate expense.  Management and
consulting fees, which are expected to recur, were $.10 million for the three
months ended June 30, 2010.





Income Tax
Expense





Income
tax expense for the three months ended June 30, 2010 was $.07 million compared
to income tax expense of $.02 million for the three months ended June 30, 2009,
an effective rate of 25% for both interim periods.





Results
of Operations - Six Months Ended June 30, 2010 Compared to Six Months Ended June
30, 2009





For the
six-month period ended June 30, 2010, net income was $.70 million compared to
net income of $.28 million for the six months ended June 30, 2009. During the
six months ended June 30, 2010, income from operations before income taxes was
$1.07 million compared to $.45 million for the six months ended June 30, 2009.
The major components of revenues, store expenses, general and administrative
expenses, total operating expenses and income tax expense from continuing
operations are discussed below.





Revenues





Revenues
totaled $8.80 million for the six months ended June 30, 2010, compared to $9.22
million for the six months ended June 30, 2009. The decrease in total revenues
resulted from a reduction in the number of phone and modem units sold as well as
sales of a higher percentage of units under Cricket’s promotional
programs.  These programs have the effect of decreasing the average
per-unit selling price and gross revenues.  This was partially offset by an
increase in fees generated from accepting Cricket service
payments.  This trend is expected to continue as Cricket changes its
compensation structure for dealers.  During the six-month period ended
June 30, 2010, we generated $2.29 million in phone and accessory sales compared
to $2.98 million for the six-month period ended June 30, 2009.





A
decrease in check cashing fees in the 2010 interim period also contributed to
the decrease in total revenues.  Loan fees for the 2010 interim period
remained consistent with 2009.  During the six-month period ended June
30, 2010, we originated approximately $33.77 million in cash advance loans
compared to $34.30 million during the 2009 interim period. Our average loan
(including fee) totaled approximately $366 during both six-month periods ended
June 30, 2010 and 2009. Our average fee for both six-month periods ended June
30, 2010 and 2009 was $54.


16





The
following table summarizes our revenues for the six months ended June 30, 2010
and 2009, respectively:




Six Months Ended
                      June 30,
                    
                    
                    Six Months Ended
                      June 30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009(percentage of revenues)Payday
      loan fees
                    
                    $
                    5,031,288
                    
                    
                    $
                    5,057,495
                    
                    
                    
                    57.1
                    %
                    
                    
                    54.8
                    %Phones
      and accessories
                    
                    
                    2,292,543
                    
                    
                    
                    2,976,975
                    
                    
                    
                    26.1
                    %
                    
                    
                    32.3
                    %Check
      cashing fees
                    
                    
                    397,185
                    
                    
                    
                    462,650
                    
                    
                    
                    4.5
                    %
                    
                    
                    5.0
                    %Other
      income and fees
                    
                    
                    1,083,711
                    
                    
                    
                    724,265
                    
                    
                    
                    12.3
                    %
                    
                    
                    7.9
                    %Total
                    
                    $
                    8,804,727
                    
                    
                    $
                    9,221,385
                    
                    
                    
                    100
                    %
                    
                    
                    100
                    %





Store
Expenses




Total
expenses associated with store operations for the six months ended June 30, 2010
were $6.25 million, compared to $7.21 million for the six months ended June 30,
2009.  The major components of these expenses are salaries and
benefits for our store employees, provision for loan losses, costs of sales for
phones and accessories, occupancy costs primarily relating to our store
leaseholds, advertising expenses, depreciation of store equipment, amortization
of intangible assets and other expenses associated with store
operations.





Overall,
our most significant increases in store expenses for the six months ended June
30, 2010 and 2009 related to our costs of occupancy. Our most significant
decreases in store expenses over that same period related to the provision for
loan losses, and phone and accessories cost of sales.  Salaries and
benefits related to our store employees also decreased between the interim
periods.  A discussion and analysis of the various components of our
store expenses appears below.





Salaries
and Benefits. Payroll and related costs at the store level were $2.38 million
compared to $2.58 million for the periods ended June 30, 2010 and 2009,
respectively. We expect future salaries and benefits expenses to be consistent
with 2010 levels.





Provisions
for Loan Losses. For the six months ended June 30, 2010, our provisions for loan
losses were $.49 million compared to $.69 million for the six months ended June
30, 2009. Our provisions for loan losses represented approximately 9.8% and
13.6% of our loan fee revenue for the six months ended June 30, 2010 and 2009,
respectively.  The more favorable loss ratio year-to-year reflects our
expanded collection efforts in the six months ended June 30, 2010 compared
to the six months ended June 30, 2009.  Due to our inability
to foretell the depth and duration of the continued economic downturn, we
believe there are currently uncertainties in how significant our total 2010 loan
losses may be and how they may differ from 2009.





Phone and
Accessories Cost of Sales.  For the six months ended June 30, 2010,
our costs of sales were $.72 million compared to $1.33 million for the same
period in 2009.  The decrease in our Cricket Wireless phone service
segment revenues, which resulted from a decrease in units sold and from
Cricket’s promotional programs, had a corresponding downward impact to our costs
of sales.  At June 30, 2010, we had 31 Cricket Wireless stores
compared to 33 at June 30, 2009.





Occupancy
Costs. Occupancy expenses, comprised mainly of store leases, were $.97 million
for the six months ended June 30, 2010 versus $.76 million for the six months
ended June 30, 2009. The increase in our occupancy expenses resulted from our
operation of more stores throughout the more recent period.





Advertising.
Advertising and marketing expenses decreased significantly from $.26 million for
the six months ended June 30, 2009 to $.17 million for the six months ended June
30, 2010, a $.09 million or 34.6% reduction.  In general, we expect
that our marketing and advertising expenses for 2010 will remain consistent with
2009 levels.





Depreciation.
Depreciation, relating to store equipment and capital expenditures for stores,
increased to $.14 million for the six months ended June 30, 2010 from $.12
million for the six months ended June 30, 2009.  The 16.7% increase in
depreciation expense was due to an increased number of Cricket Wireless store
locations containing depreciable assets.




Amortization
of Intangible Assets. Amortization of intangible assets decreased from $.36
million for the six months ended June 30, 2009 to $.26 million, or 27.8%, for
the six months ended June 30, 2010. Payday division expense decreased due to
intangible assets becoming fully amortized while the expense on the Cricket
division decreased due to amortization expense being lower each subsequent
year.





Other
Store Expenses. Other expenses were $1.12 million for both six months ended June
30, 2010 and June 30, 2009.


17


General and Administrative
Expenses





Total
general and administrative costs for the six months ended June 30, 2010 were
$1.48 million compared to $1.55 million for the period ended June 30, 2009. For
the six months ended June 30, 2010, the major components of these costs were
salaries and benefits for our corporate headquarters operations and executive
management, interest expense, and other general and administrative expenses. A
discussion of the various components of our general and administrative costs for
the six months ended June 30, 2010 and 2009 appears below:





Salaries
and Benefits. Salaries and benefits expenses for the six months ended June 30,
2010 were $.70 million, a $.06 million increase from the $.64 million in such
expenses during period ended June 30, 2009. The increase was due to costs
incurred under the new management bonus plan.





Depreciation.
Depreciation for the six months ended June 30, 2010 and 2009 remained
consistent. Depreciation relates primarily to equipment and capital improvements
at the Company’s corporate headquarters.





Interest.  Interest
expense for the six months ended June 30, 2010 and 2009 was $.20 million and
$.16 million for the six months ended June 30, 2010 and June 30, 2009,
respectively.  Interest expense related to the WERCS loan and notes
payable for store acquisitions made during prior periods.





Other
General and Administrative Expenses. Other general and administrative expenses,
which includes professional fees for accounting and legal services, management
and consulting fees, utilities, office supplies, collection costs and other
minor costs associated with corporate headquarters activities, decreased $.18
million or 24%, to $.57 million for the six months ended June 30, 2010 compared
to $.75 million from the six months ended June 30, 2009. The significant
decrease in these expenses is mainly attributable to nonrecurring professional
fees incurred in 2009.  We expect professional fees to continue to
decrease throughout the remainder of 2010 since most fees relate to the annual
audit and non-recurring corporate expense. Management and consulting fees, which
are expected to recur, were $.10 million for the six months ended June 30,
2010.





Income Tax
Expense





Income
tax expense for the six months ended June 30, 2010 was $.37 million compared to
income tax expense of $.17 million for the six months ended June 30, 2009, an
effective rate of 34% and 37%, respectively.




Liquidity and Capital Resources





Summary
cash flow data is as follows:


Six Months Ended June 30,2010
                    
                    
                    2009Cash
      flows provided (used) by :Operating
      activities
                    
                    $
                    1,293,990
                    
                    
                    $
                    940,087Investing
      activities
                    
                    
                    (22,340
                    )
                    
                    
                    (2,544,200
                    )Financing
      activities
                    
                    
                    (1,280,450
                    )
                    
                    
                    (655,344
                    )Net
      decrease in cash
                    
                    
                    (8,800
                    )
                    
                    
                    (2,259,457
                    )Cash,
      beginning of period
                    
                    
                    1,526,562
                    
                    
                    
                    3,358,547Cash,
      end of period
                    
                    $
                    1,517,762
                    
                    
                    $
                    1,099,090


At June
30, 2010, we had cash of $1.52 million compared to cash of $1.53 million on
December 31, 2009.  We believe that our available cash, combined with
expected cash flows from operations will be sufficient to fund our liquidity and
capital expenditure requirements through June 30, 2011. Our expected short-term
uses of available cash include the funding of operating activities (including
anticipated increases in payday loans) and the financing of expansion
activities, including new store openings and
store acquisitions.




18


WERCS
Credit Facility





On April
2, 2010, WFL, the wholly owned payday lending operating subsidiary of WCR,
refinanced its outstanding credit facility.  On that date, WERCS, the
former holder of the Company’s Series A Convertible Preferred Stock, satisfied
all of WFL’s financial obligations owing to Banco Popular North America and
entered into a Business Loan Agreement and associated $2,000,000 promissory note
with WFL.  The loan from WERCS extinguished the $1,637,341 that WFL
then owed to Banco Popular.  The remaining $362,659 of loan proceeds
was used for general working capital.  The Business Loan Agreement and
associated promissory note contained terms that were substantially similar to
those contained in the original loan documents with Banco Popular.  To
secure the obligations of WFL under the new Business Loan Agreement and
promissory note, the Company entered into (i) a Commercial Pledge Agreement with
WERCS pursuant to which the Company pledged its share ownership in WFL, and (ii)
a Commercial Security Agreement pursuant to which the Company granted WERCS a
security interest in substantially all of the Company’s assets.  The
Company also entered into a Commercial Guaranty relating to the repayment of
WFL’s obligations under the Business Loan Agreement and promissory
note.  The payment terms under the promissory note require WFL to make
monthly payments of accrued interest only for 11 months, followed by an April 1,
2011 balloon payment of any remaining accrued but unpaid interest and all
$2,000,000 of principal under the promissory note.  Interest accrues
on the unpaid principal balance of the promissory note at the rate of 12.0% per
annum.





Off-Balance
Sheet Arrangements




The
Company had no off-balance sheet arrangements as of June 30, 2010.





Item 3. Quantitative and
Qualitative Disclosures About Market Risk





Not
applicable.




Item 4T. 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.





As of
June 30, 2010, our Chief Executive Officer and Interim Chief Financial Officer
carried out an evaluation of the effectiveness of our disclosure controls and
procedures as such term is defined in Rule 13a-15(e) under the Securities and
Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded our disclosure controls and procedures are
effective as of June 30, 2010.





Changes in Internal Control
over Financial Reporting




There
were no changes in our internal control over financial reporting during the
quarter ended June 30, 2010 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.





PART
II. OTHER INFORMATION




Item 1.
Legal Proceedings





On March
26, 2010, the Company and all of the then-current members of its Board of
Directors, among others, were sued by former members of our management team,
Messrs. Steven Staehr and David Stueve.  In that lawsuit, the
plaintiffs have alleged, among other things, that our Board of Directors
breached certain of their fiduciary duties primarily in connection with the sale
by WERCS of its capital stock in the Company to WCR, LLC.  The
complaint seeks injunctive and declaratory relief and unspecified money
damages.  The Company believes the claims are without
merit.  While we are unable to predict the ultimate outcome of these
claims and proceedings, management currently believes there is not a reasonable
possibility that the costs and liabilities of such matters, individually or in
the aggregate, will have a material adverse effect on our financial condition or
results of operations.  The Company has removed the lawsuit to federal
court, and the plaintiffs have sought to remand the case to state
court.  Plaintiffs’ motion to remand the case to state court has been
argued and is under advisement by the federal court.




19


Item 1A. Risk
Factors





In
evaluating the Company’s business and prospects, readers should consider the
following risk factor, which supplements and updates the risk factors contained
in our Annual Report on Form 10-K for the fiscal year ended December 31,
2009.





The
payday loan industry is highly regulated under state laws. Changes in state laws
and regulations governing lending practices, or changes in the interpretation of
such laws and regulations, could negatively affect our business.





Our
business is regulated under numerous state laws and regulations, which are
subject to change and which may impose significant costs or limitations on the
way we conduct or expand our business.  As of the date of this report,
approximately 34 states and the District of Columbia had legislation permitting
or not prohibiting payday loans.  During the last few years,
legislation has been adopted in some states that prohibits or severely restricts
payday loans.





There are
nearly always bills pending in various states to alter the current laws
governing payday lending.  Any of these bills, or future proposed
legislation or regulations prohibiting payday loans or making them less
profitable, could be passed in any state at any time, or existing payday loan
laws could expire.  In 2008, legislation banning payday loans was
introduced in Nebraska, however, the bill never made it out of
committee.  Nevertheless, since we derive approximately 27% of our
payday revenues in Nebraska, the passage of any such legislation in Nebraska
would have a highly material and negative effect on our business.





More
recently, legislation has been introduced in Colorado and Wisconsin that
restricts certain payday lending practices.  During the 2010
legislative session in Colorado, House Bill 10-1351 was passed into law.
 This bill amended the Colorado Deferred Deposit Loan Act, the existing
payday lending law.  The law is effective August 11, 2010 and modifies
traditional payday lending by changing the single payment advance (with no
minimum term) into a single or multiple payment loan with a minimum six month
term.  It also limits the amount and type of fees that can be charged on
these loans, effectively reducing by one-half the fees that can be
charged.  At present, the Company plans to continue to operate its
sole store in Colorado while the impact to profitability of this new law is
being assessed.  Currently, we derive 1.41% of our Payday division
revenues from fees in Colorado.  In Wisconsin, new legislation
effective January 1, 2011 will limit payday loans to the lesser of $1,500 or 35%
of the applicant’s monthly income, and permit borrowers to cancel loans within
24 hours and roll their loans over only one time.  In addition, payday
lenders will be required to offer a 60-day, interest free, payment plan to
consumers upon maturity of their payday loans.  The Company is still
assessing the impact of these new Wisconsin laws. Currently, we derive
6.09% of our Payday division revenues from fees in Wisconsin.





Statutes
authorizing payday loans typically provide state agencies that regulate banks
and financial institutions with significant regulatory powers to administer and
enforce the laws relating to payday lending.  Under statutory
authority, state regulators have broad discretionary power and may impose new
licensing requirements, interpret or enforce existing regulatory requirements in
different ways or issue new administrative rules, even if not contained in state
statutes, that affect the way we do business and may force us to terminate or
modify our operations in those jurisdictions.  They may also impose
rules that are generally adverse to our industry.  Finally, in many
states, the attorney general has scrutinized or continues to scrutinize the
payday loan statutes and the interpretations of those statutes.





Any
adverse change in present laws or regulations, or their interpretation, in one
or more such states (or an aggregation of states in which we conduct a
significant amount of business) would likely result in our curtailment or
cessation of operations in such jurisdictions.  Any such action could
have a corresponding highly material and negative impact on our results of
operations and financial condition, primarily through a material decrease in
revenues, and could also negatively affect our general business prospects as
well if we are unable to effectively replace such revenues in a timely and
efficient manner.





Our
business is subject to complex federal laws and regulations governing lending
practices, and changes in such laws and regulations could negatively affect our
business.





Although
states provide the primary regulatory framework under which we offer payday
loans, certain federal laws also affect our business.  For example,
because payday loans are viewed as extensions of credit, we must comply with the
federal Truth-in-Lending Act and Regulation Z under that
Act.  Additionally, we are subject to the Equal Credit Opportunity
Act, the Gramm-Leach-Bliley Act and certain other federal
laws.  Additionally, anti-payday loan legislation has been introduced
in the U.S. Congress in the past.  These efforts culminated in federal
legislation in 2006 that limits the interest rate and fees that may be charged
on any loans, including payday loans, to any person in the military to the
equivalent of 36% per annum.  The military lending prohibition became
effective on October 1, 2007.





In July
2008, a bill was introduced before the U.S. Senate, entitled the “Protecting
Consumers from Unreasonable Credit Rates Act of 2008” (an amendment to the Truth
in Lending Act), proposing to set a maximum actual or imputed interest rate of
36% on all extensions of credit of any type.  The bill was intended to
limit the charges and fees payable in connection with payday
lending.  No action has been taken on the bill since its referral to
the Senate Committee on Banking, Housing and Urban Affairs in July
2008.





20


In
February 2009, Congress introduced H.R. 1214 (the Payday Loan Reform Act of
2009, an amendment to the Truth in Lending Act).  If enacted, this
amendment would restrict charges for a single-payment loan to a 391% effective
annual rate, or $15 per $100 for a two-week loan, prohibit loan rollovers, limit
borrowers to one outstanding loan at a time and permit only one extended
repayment plan every six months.  Presently, the bill is in the House
Financing Committee.  We have no further information regarding this
bill or any legislative efforts Congress may propose at this
time.  The passage of this bill would have a material and adverse
effect on the Company, operating results, financial conditions and prospects and
even its viability.





In July
2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed
by the U.S. Congress and signed into law.  Under the Act, a new
federal agency, the Consumer Financial Protection Bureau, will consolidate most
federal regulation of financial services offered to consumers and replaces the
Office of Thrift Supervision’s seat on the FDIC Board.  Almost all
credit providers, including mortgage lenders, providers of payday loans, other
nonbank financial companies, and banks and credit unions with assets over $10
billion, will be subject to new regulations.  While the Bureau does
not appear to have authority to make rules limiting interest rates or fees
charged, the scope and extent of the Bureau’s authority will nonetheless be
broad, and it is expected that the Bureau will address issues such as rollovers
or extensions of payday loans.  Future restrictions on the payday
lending industry could have serious consequences for the Company.





Any
adverse change in present federal laws or regulations that govern or otherwise
affect payday lending could result in our curtailment or cessation of operations
in certain jurisdictions or locations.  Furthermore, any failure to
comply with any applicable federal laws or regulations could result in fines,
litigation, the closure of one or more store locations or negative
publicity.  Any such change or failure would have a corresponding
impact on our results of operations and financial condition, primarily through a
decrease in revenues resulting from the cessation or curtailment of operations,
decrease in our operating income through increased legal expenditures or fines,
and could also negatively affect our general business prospects as well if we
are unable to effectively replace such revenues in a timely and efficient manner
or if negative publicity effects our ability to obtain additional financing a
needed.





Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds




In
connection with the repayment by WFL of all obligations owing to Banco Popular
North America on April 2, 2010, the guaranty of such obligations that had been
earlier delivered by Mr. Chris Larson (the former Chief Executive Officer of the
Company) expired by its terms and the Company redeemed and cancelled all
550,000 shares of common stock of Mr. Larson that had been held in escrow since
May 1, 2009 pursuant to the terms of a Settlement Agreement with Mr. Larson
dated as of May 1, 2009.





Item 3. Defaults upon
Senior Securities





As of
June 30, 2010, the Company had an outstanding accrued but unpaid and cumulated
dividends on its Series A Convertible Preferred Stock aggregating to
$800,000.  Our Series A Convertible Preferred Stock ranks senior to
our common stock.





21


On May
10,2010, the Company terminated its engagement ofB&CCapital, LLC, a
Minnesota limited liability





Item 6.
Exhibits




Exhibit
                
                Description10.1
                
                Business
      Loan Agreement between Wyoming Financial Lenders, Inc. and Banco Popular
      North America, dated effective as of October 30, 2009 (incorporated by
      reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K
      filed on January 19, 2010).10.2
                
                Promissory
      Note of Wyoming Financial Lenders, Inc. to Banco Popular North America,
      dated effective as of October 30, 2009 (incorporated by reference to
      Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on
      January 19, 2010).10.3
                
                Commercial
      Pledge Agreement between Western Capital Resources, Inc. and Banco Popular
      North America, dated effective as of October 30, 2009 (incorporated by
      reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K
      filed on January 19, 2010).10.4
                
                Management
      and Advisory Agreement with Blackstreet Capital Management, LLC dated May
      12, 2010 (filed
      herewith).10.5
                
                Business
      Loan Agreement between Wyoming Financial Lenders, Inc. and WERCS, dated
      effective as of April 2, 2010 (incorporated by reference to Exhibit 10.5
      to the Quarterly Report on Form 10-Q filed with the SEC on May 13,
      2010).10.6
                
                Promissory
      Note of Wyoming Financial Lenders, Inc. to WERCS, dated effective as of
      April 2, 2010 (incorporated by reference to Exhibit 10.6 to the Quarterly
      Report on Form 10-Q filed with the SEC on May 13,
2010).10.7
                
                Commercial
      Pledge Agreement between Western Capital Resources, Inc. and WERCS, dated
      effective as of April 2, 2010 (incorporated by reference to Exhibit 10.7
      to the Quarterly Report on Form 10-Q filed with the SEC on May 13,
      2010).10.8
                
                Commercial
      Security Agreement between Western Capital Resources, Inc. and WERCS,
      dated effective as of April 2, 2010 (incorporated by reference to Exhibit
      10.8 to the Quarterly Report on Form 10-Q filed with the SEC on May 13,
      2010).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).




22


SIGNATURES




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





Dated:
      August 13, 2010
                Western
      Capital Resources, Inc.(Registrant)By:
                /s/
      John QuandahlJohn
      QuandahlChief
      Executive Officer, Chief Operating Officer and
                  Interim
      Chief Financial Officer





23