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<P STYLE="text-align: center"><B>As filed with the Securities and Exchange Commission on June 18, 2012</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"><B>Registration No. 333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></p>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; border-top: Black 4.5pt double"><B>UNITED
STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Washington, D.C. 20549</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORM S-1</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>WESTERN CAPITAL RESOURCES, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Exact name of registrant as specified in
its charter)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 51%; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; font-weight: bold; text-align: center">Minnesota</TD>
    <TD STYLE="width: 49%; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; font-weight: bold; text-align: center">47-0848102</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: center">(State or other jurisdiction of incorporation or organization)</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 10pt; text-align: center">(I.R.S. Employer Identification Number)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">11550 &ldquo;I&rdquo; Street, Suite 150</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Omaha, Nebraska 68137</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Telephone: (402) 551-8888</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Address, including Zip Code, and Telephone
        Number, including</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Area Code, of Registrant's Principal Executive
        Offices)</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 51%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">John Quandahl</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Chief Executive Officer</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">11550 &ldquo;I&rdquo; Street, Suite 150</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Omaha, Nebraska 68137</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Telephone: (402) 551-8888</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Name, Address, Including Zip Code, and
        Telephone Number,<BR>Including Area Code, of Agent for Service)</P></TD>
    <TD STYLE="width: 49%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>Copy to</I>:</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Paul D. Chestovich, Esq.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Maslon Edelman Borman &amp; Brand, LLP</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">3300 Wells Fargo Center</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">90 South Seventh Street</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Minneapolis, Minnesota 55402</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Telephone: (612) 672-8305</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of the registration statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box. </FONT><FONT STYLE="font-family: Wingdings">&thorn;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement number of the earlier effective registration statement for
the same offering. </FONT><FONT STYLE="font-family: Wingdings">o</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. </FONT><FONT STYLE="font-family: Wingdings">o</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. </FONT><FONT STYLE="font-family: Wingdings">o</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 the definitions of &ldquo;large accelerated
filer,&rdquo; &ldquo;accelerated filer&rdquo; and &ldquo;smaller reporting company&rdquo; in Rule 12b-2 of the Exchange Act (check
one):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 4%; font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 52%; font-size: 10pt; padding: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Large accelerated filer </FONT><FONT STYLE="font-family: Wingdings">o</FONT></TD>
    <TD STYLE="width: 27%; font-size: 10pt; text-align: right; padding: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Accelerated filer </FONT><FONT STYLE="font-family: Wingdings">o</FONT></TD>
    <TD STYLE="width: 17%; padding: 0; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Non-accelerated filer </FONT><FONT STYLE="font-family: Wingdings">o</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif"> (Do not check if a smaller reporting company)</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: right; padding: 0; text-indent: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">Smaller reporting company </FONT><FONT STYLE="font-family: Wingdings">&thorn;</FONT></TD>
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-underline-style: double"><U>CALCULATION
OF REGISTRATION FEE</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36%; border: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Title of Each Class of Securities to
        be Registered</B></P></TD>
    <TD STYLE="width: 12%; border: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">Amount to be Registered</TD>
    <TD STYLE="width: 18%; border: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">Proposed Maximum Offering Price Per Unit</TD>
    <TD STYLE="width: 18%; border: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">Proposed Maximum Aggregate Offering Price</TD>
    <TD STYLE="width: 16%; border: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Amount of </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Registration Fee (1)</B></P></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="border: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">Rights to purchase common stock</TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&mdash;</TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&mdash; (2)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="border: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">Common stock, no par value per share</TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">$4,500,000 (3)</TD>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">$515.70 (4)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">_____________</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>This registration statement relates to (a) non-transferable subscription rights to purchase our common stock, par value $0.01
per share and (b) shares of our common stock deliverable upon the exercise of such subscription rights.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>The rights are being issued to our shareholders pro rata for no consideration. Pursuant to Rule 457(g) under the Securities
Act of 1933, as amended, no separate registration fee is payable.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>Represents gross proceeds from the sale of shares of our common stock assuming the exercise of all subscription rights to be
distributed up to the maximum amount contemplated in this registration statement.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(4)</TD><TD>Registration calculated pursuant to Rule 457(o).</TD></TR></TABLE>
<BR>
<P><B>The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.</B></P>

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<P></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: #FF002B; border: red 3pt solid"><B>The information in
this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting
an offer to buy these securities in any state where the offer or sale is prohibited.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; color: red"><B>SUBJECT TO COMPLETION, DATED
JUNE 18, 2012</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><IMG SRC="image_001.jpg" ALT=""></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>WESTERN CAPITAL RESOURCES, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Subscription Rights to Purchase up to
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>of Common Stock at $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per Share</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are distributing, at no charge, to holders
of our capital stock non-transferable subscription rights (consisting of a basic subscription privilege and an over-subscription
privilege, as described below) to purchase up to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of our common stock. We refer to this offering
as the &ldquo;rights offering.&rdquo; In this rights offering, you will receive &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; subscription rights
for every share of capital stock owned at 5:00 p.m., Minneapolis time, on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2012, the record date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each whole subscription right
will entitle you to purchase one share of our common stock at a subscription price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per
share, which we refer to as the &ldquo;basic subscription privilege.&rdquo; A special committee of our Board of Directors
determined the per-share subscription price for the rights offering. We will not issue fractional shares of common stock in
the rights offering, and holders will only be entitled to purchase a whole number of shares of common stock, rounded to the
nearest whole number a holder would otherwise be entitled to purchase (with halves rounded down). If you fully exercise
your basic subscription privilege and other shareholders do not fully exercise their basic subscription privileges, then you
may also exercise an &ldquo;over-subscription privilege&rdquo; to purchase additional shares of common stock that
remain unsubscribed at the expiration of this rights offering. If all subscription rights are exercised, the aggregate
gross purchase price of the shares purchased in the rights offering would be approximately $4,500,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The subscription rights will expire and
be void and worthless if they are not exercised by 5:00 p.m., Minneapolis time, on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2012, unless we extend the rights offering period. Nevertheless, our Board of Directors reserves the right to cancel the rights
offering at any time, for any reason. If the rights offering is cancelled, all subscription payments received by the subscription
agent will be returned promptly without interest or deduction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Shares of our common stock are, and we expect
that the shares of common stock issued in the rights offering will be, traded on the OTCBB quotation system under the symbol &ldquo;WCRS.&rdquo;
The last reported sales price of our common stock on the OTCBB on June 13, 2012 was $0.10. We urge you to obtain a current market
price for the shares of our common stock before making any determination with respect to the exercise of your subscription rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You should carefully consider whether to
exercise your subscription rights before the expiration of the rights offering. Any exercise of subscription rights is irrevocable.
Our Board of Directors is making no recommendation regarding your exercise of the subscription rights. This is not an underwritten
offering. The shares of common stock are being offered directly by us without the services of an underwriter or selling agent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Exercising the rights and investing in our
common stock involves a high degree of risk. We urge you to carefully read the section entitled &ldquo;Risk Factors&rdquo; beginning
on page 13 of this prospectus, and all other information included in this prospectus in its entirety before you decide whether
to exercise your subscription rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TABLE OF CONTENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 92%; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 8%; padding: 0; text-decoration: underline; text-align: right; text-indent: 0">Page</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">ABOUT THIS PROSPECTUS</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">ii</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">INDUSTRY AND MARKET DATA</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">ii</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">QUESTIONS AND ANSWERS RELATING TO THE RIGHTS OFFERING</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">1</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">PROSPECTUS SUMMARY</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">7</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">RISK RELATING TO FORWARD-LOOKING STATEMENTS</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">12</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">RISK FACTORS</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">13</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">USE OF PROCEEDS</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">23</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">DILUTION</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">23</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">CAPITALIZATION</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">24</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATION</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">25</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">BUSINESS</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">34</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">MANAGEMENT</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">49</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">EXECUTIVE COMPENSATION</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">52</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">55</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">THE RIGHTS OFFERING</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">57</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">65</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">MARKET INFORMATION</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">67</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">DESCRIPTION OF SECURITIES</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">67</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">PLAN OF DISTRIBUTION</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">70</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
    LITIGATION</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">70</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">WHERE YOU CAN FIND MORE INFORMATION</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">71</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">LEGAL MATTERS</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">71</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">EXPERTS</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">71</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding: 0; text-indent: 0">FINANCIAL INFORMATION</TD>
    <TD STYLE="padding: 0; text-align: right; text-indent: 0">F-1</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ABOUT THIS PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Unless otherwise stated or the context otherwise
requires, the terms &ldquo;we,&rdquo; &ldquo;us,&rdquo; &ldquo;our,&rdquo; &ldquo;Western Capital&rdquo; and the &ldquo;Company&rdquo;
refer to Western Capital Resources, Inc. and its subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You should rely only on the information
contained in this prospectus. We have not authorized anyone to provide you with additional or different information. If anyone
provides you with additional, different, or inconsistent information, you should not rely on it. We are not making an offer to
sell securities in any jurisdiction in which the offer or sale is not permitted. You should assume that the information in this
prospectus is accurate only as of the date on the front cover of this prospectus regardless of the time of delivery of this prospectus
or any exercise of the rights. Our business, financial condition, results of operations, and prospects may have changed since that
date. If there is a material change in the affairs of our Company, we will amend or supplement this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No information contained herein, nor in
any prior, contemporaneous or subsequent communication should be construed by a prospective investor as legal or tax advice. Each
prospective investor should consult its, his or her own legal, tax and financial advisors to ascertain the merits and risks of
the transactions described herein prior to exercising your subscription rights. This written communication is not intended to be
issued as a &ldquo;reliance opinion&rdquo; or a &ldquo;marketed opinion,&rdquo; as defined under Section 10.35 of Circular 230
published by the U.S. Treasury Department, so as to avoid any penalties that could be assessed under the Internal Revenue Code
of 1986, as amended (the &ldquo;Code&rdquo;), or its applicable Treasury Regulations. Accordingly, (a) any information contained
in this written communication is not intended to be used, and cannot be used or relied upon for purposes of avoiding any penalties
that may be imposed on a prospective investor by the Code or applicable Treasury Regulations; (b) this written communication has
been written to support the promotion or marketing of the transactions or matters addressed by this written communication; and
(c) each prospective investor should seek advice based on the prospective investor&rsquo;s particular circumstances from an independent
tax advisor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INDUSTRY AND MARKET DATA</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The industry, market and data used throughout
this prospectus have been obtained from our own research, surveys or studies conducted by third parties and industry or general
publications. Industry publications and surveys generally state that they have obtained information from sources believed to be
reliable, but do not guarantee the accuracy and completeness of such information. We believe that each of these studies and publications
is reliable.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>QUESTIONS AND ANSWERS RELATING TO THE
RIGHTS OFFERING</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following are what we anticipate will
be common questions about the rights offering. The answers are based on selected information from this prospectus. The following
questions and answers do not contain all of the information that may be important to you and may not address all of the questions
that you may have about the rights offering. This prospectus contains more detailed descriptions of the terms and conditions of
the rights offering and provides additional information about us and our business, including potential risks related to the rights
offering, our common stock, and our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Exercising you subscription rights and investing
in our common stock involves a high degree of risk. We urge you to carefully read the section entitled &ldquo;Risk Factors&rdquo;
beginning on page 13 of this prospectus, and all other information included in this prospectus in its entirety before you decide
whether to exercise your subscription rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>What is a rights offering?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A rights offering is a distribution of subscription
rights on a pro rata basis to all shareholders of a company. We are distributing to holders of our capital stock as of 5:00 p.m.,
Minneapolis time, on , 2012, the &ldquo;record date,&rdquo; at no charge, non-transferable subscription rights to purchase shares
of our common stock. You will receive &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; subscription rights (rounded to the nearest whole subscription
right, with halves rounded down) for every share of our capital stock you owned as of 5:00 p.m., Minneapolis time, on the record
date. The subscription rights will be evidenced by rights certificates. Each subscription right consists of a basic subscription
privilege and an over-subscription privilege.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>What is the basic subscription privilege?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each whole subscription right gives our
shareholders the opportunity to purchase one share of our common stock for $ per share. We determined the ratio of subscription
rights to distribute per our outstanding shares by dividing $4.5 million by the subscription price of $ to determine the number
of shares to be issued in the rights offering and then dividing that number of shares to be offered by the number of capital shares
outstanding on the record date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>What is the over-subscription privilege?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not expect all of our
shareholders to exercise all of their basic subscription privileges. The over-subscription privilege provides shareholder
that do exercise their entire basic subscription privileges the opportunity to purchase the shares that are not purchased by
other shareholders who do not participate in the rights offering. If you fully exercise your basic subscription privilege and
other shareholders do not fully exercise their basic subscription privileges, then you may also exercise an over-subscription
privilege to purchase additional shares of common stock that remain unsubscribed at the expiration of the rights offering,
subject to the availability and pro rata allocation of such shares among persons exercising this over-subscription privilege.
To the extent that the number of the unsubscribed shares are not sufficient to satisfy all of the properly exercised
over-subscription privilege requests, then the available shares will be prorated among those who properly exercise their
over-subscription privileges based on the number of shares each shareholder subscribed for under his, her or its basic
subscription privilege (i.e., pro rata in accordance with each such shareholder&rsquo;s respective shareholdings. If this pro rata allocation results in any shareholder
potentially receiving a greater number of common shares than the he, she or it subscribed for pursuant to the exercise of
his, her or its over-subscription privilege, then such shareholder will be allocated only that number of shares for which the
shareholder subscribed, and the remaining common shares will again be allocated among all other shareholders exercising the
over-subscription privilege on the same pro rata basis described above. This proration process will be repeated until all
common shares have been allocated or all exercises of over-subscription privileges have been fulfilled, whichever occurs
earlier.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In order to properly exercise your over-subscription
privilege, you must deliver the subscription payment related to your over-subscription privilege prior to the expiration of the
rights offering. Because we will not know the total number of unsubscribed shares prior to the expiration of the rights offering,
if you wish to maximize the number of shares you purchase pursuant to your over-subscription privilege, you will need to deliver
payment in an amount equal to the aggregate subscription price for the maximum number of shares of our common stock available to
you, assuming that no shareholder other than you has purchased any shares of our common stock pursuant to their basic subscription
privilege and over-subscription privilege. See &ldquo;The Rights Offering&mdash;Over-Subscription Privilege.&rdquo;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>How many shares may I purchase if I exercise my subscription
rights?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each subscription right entitles you
to purchase one whole share of our common stock for $ per share. We will not issue fractional subscription rights or shares of
common stock in the rights offering, and holders will only be entitled to purchase a whole number of shares of common stock.
You may exercise any number of your subscription rights (including the over-subscription privilege), or you may choose not to
exercise any subscription rights. As explained elsewhere in this prospectus, there is no limit on the number of offered
shares that may be purchased pursuant to your over-subscription privilege.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you hold your shares in street name through
a broker, bank, or other nominee who uses the services of the Depository Trust Company, or &ldquo;DTC,&rdquo; then DTC will issue
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; subscription rights to your nominee for every share of our common stock you own at the close of
business on the record date. Each subscription right can then be used to purchase one share of common stock for $ per share pursuant
to the basic subscription privilege. For more information, see the question &ldquo;<I>What should I do if I want to participate
in the rights offering, but my shares are held in the name of my broker, dealer, custodian bank or other nominees (commonly referred
to as &ldquo;street name&rdquo;)?</I>&rdquo; below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Will fractional subscription rights or shares be issued in
the rights offering?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No. We will not issue fractional subscription
rights or subscription rights to purchase fractional shares of common stock in the rights offering. In allocating subscription
rights among our shareholders, each share of capital stock held of record at the close of business on the record date will entitle
the holder of such share to receive &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; subscription rights (rounded to the nearest whole subscription
right, with halves rounded down), and each subscription right granted in the rights offering may only be exercised for a full share
of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Are there any limits on the number of shares I may purchase
in this rights offering?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Yes. The total number of offered shares
in this rights offering represents the maximum number of shares you may potentially purchase. In all cases, you are entitled (but
not required) to purchase all shares available to you under your basic subscription privilege. Shares in excess of those available
to you under your basic subscription privilege must be purchased pursuant to your over-subscription privilege. As explained elsewhere
in this prospectus, other shareholders may also exercise their over-subscription privilege. If this occurs, the number of shares
available for purchase by you will be reduced accordingly.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Am I required to exercise the subscription rights I receive
in the rights offering?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No. You may exercise any number of your
subscription rights, or you may choose not to exercise any subscription rights. However, if you choose not to exercise your subscription
rights in full, the relative percentage of our shares of common stock that you own will decrease, and your voting and other rights
will be diluted. Furthermore, if you fail to exercise your full basic subscription privilege, you will not be eligible to exercise
your over-subscription privilege. For more information, see the question &ldquo;<I>How many shares of capital stock will be outstanding
after the rights offering?</I>&rdquo; below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Will our officers, directors and significant shareholders
be exercising their subscription rights?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our officers, directors and greater than
5% beneficial shareholders may participate in this offering at the same subscription price per share as all other purchasers, but
none of our officers, directors or greater-than-5% beneficial shareholders are obligated to so participate. Certain executive officers
and directors (who are also shareholders), and our controlling shareholder, WCR, LLC, have indicated that they will purchase shares
that are subject to their subscription rights, at the same subscription price offered to our shareholders. Nevertheless, these
shareholders have not executed agreements to purchase shares and there is no guarantee or commitment that they will subscribe for
shares in the offering. In the case of our directors, officers and WCR, any shares purchased in the rights offering will be deemed
&ldquo;control securities&rdquo; under federal securities rules and will likely not be eligible for public resale unless sold in
accordance with the limitations of Rule 144 or the public resale of such shares are registered with the SEC.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Has our Board of Directors made a recommendation to our shareholders
regarding the exercise of rights under the rights offering?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No. Our Board of Directors is making no
recommendation regarding your exercise of the subscription rights. Shareholders who exercise their subscription rights risk loss
on their investment. We cannot assure you that the market price of our common stock will be above the subscription price or that
anyone purchasing shares at the subscription price will be able to sell those shares in the future at the same price or a higher
price. You are urged to make your decision based on your own assessment of our business and the rights offering. Please see the
&ldquo;Risk Factors&rdquo; section of this prospectus for a discussion of some of the risks involved in investing in our common
stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Why are we conducting a rights offering?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A rights offering provides eligible shareholders
the opportunity to participate in a capital raise on a pro rata basis and minimizes the dilution of their ownership interest in
our Company. Assuming all the shares of common stock offered are sold, we expect that the gross proceeds from the rights offering
will be approximately $4.5 million. We estimate that our offering-related expenses will be approximately $100,000. We are conducting
the rights offering to raise capital for the Company to be used in making acquisitions that grow or are otherwise complementary
to our current business. In this regard, you should understand that our Board of Directors will have a great deal of discretion
in determining what acquisition opportunities to pursue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>How was the subscription price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share determined?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The subscription price was determined by
a special committee of our Board of Directors. Factors considered by the committee included the strategic alternatives to our Company
for raising capital, the price at which our shareholders might be willing to participate in the rights offering, historical and
current trading prices of our common stock, our business prospects, the condition of the trading market for our common stock, and
the condition of the securities and capital markets in general. We cannot assure you that the market price for our common stock
during the rights offering will be equal to or above the subscription price or that a subscribing owner of rights will be able
to sell the shares of common stock purchased in the rights offering at a price equal to or greater than the subscription price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>How soon must I act to exercise my rights?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you received a rights certificate and
elect to exercise any or all of your subscription rights, the subscription agent must receive your completed and signed rights
certificate and related payment prior to the expiration of the rights offering, which is , 2012, at 5:00 p.m., Minneapolis time.
If you hold your shares in the name of a custodian bank, broker, dealer or other nominee, your custodian bank, broker, dealer or
other nominee may establish a deadline prior to 5:00 p.m. Minneapolis time, on , 2012, by which you must provide it with your instructions
to exercise your subscription rights and pay for your shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Although we will make reasonable attempts
to provide this prospectus to all holders of subscription rights, the rights offering and all subscription rights will expire at
5:00 p.m., Minneapolis time on , 2012 (unless extended), whether or not we have been able to locate each person entitled to receive
subscription rights. Although we reserve the right to extend the expiration of the rights offering, we currently do not intend
to do so.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>May I transfer my subscription rights?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No. You may not sell or transfer your subscription
rights to anyone.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Are we requiring a minimum aggregate subscription to complete
and close the rights offering?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No. There is no minimum subscription requirement
in the rights offering. Nevertheless, our Board of Directors reserves the right to cancel the rights offering for any reason or
no reason, including if our board believes that there is insufficient participation by our shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Are there any conditions to completing the rights offering?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Can the Board of Directors cancel, terminate, amend or extend
the rights offering?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Yes. We have the option to extend the rights
offering and the period for exercising your subscription rights, although we do not presently intend to do so. Our Board of Directors
may cancel the rights offering at any time for any reason. If the rights offering is cancelled, all subscription payments received
by the subscription agent will be returned promptly, without interest or penalty. Our Board of Directors reserves the right to
amend or modify the terms of the rights offering at any time, for any reason.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>When will I receive my subscription rights certificate?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Promptly after the date of this
prospectus, the subscription agent will send a subscription rights certificate to each registered holder of our common stock
as of the close of business on the record date, based on our shareholder register maintained by the transfer agent for our
common stock (and the shareholder register maintained by the Company for our preferred stock). If you hold your shares of common
stock through a brokerage account, bank, or other nominee, you will not receive an actual subscription rights certificate.
Instead, as described in this prospectus, you must instruct your broker, bank or nominee whether or not to exercise rights
on your behalf. If you wish to obtain a separate subscription rights certificate, you should promptly contact your broker,
bank or other nominee and request a separate subscription rights certificate. If you hold your shares of common stock
through a brokerage account, bank, or other nominee, it is not necessary to have a physical subscription rights certificate
in order to exercise your subscription rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>What will happen if I choose not to exercise my subscription
rights?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you do not exercise any subscription
rights, the number of our shares of common stock you own will not change. Nevertheless, due to the fact that other shareholders
may purchase shares in the rights offering, your percentage ownership of our Company will be diluted after the completion of the
rights offering unless you do exercise your subscription rights. For more information, see the question &ldquo;<I>How many shares
of capital stock will be outstanding after the rights offering?</I>&rdquo; below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>How do I exercise my subscription rights?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you wish to participate in the rights
offering, you must take the following steps:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">deliver payment to the subscription agent; and </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">deliver your properly completed and signed rights certificate, and
any other subscription documents, to the subscription agent.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Please follow the payment and delivery instructions
accompanying the rights certificate. Do not deliver documents to Western Capital. You are solely responsible for completing delivery
to the subscription agent of your subscription documents, rights certificate, and related payment on or prior to the deadline for
receipt of such items. We urge you to allow sufficient time for delivery of your subscription materials to the subscription agent
so that they are received by the subscription agent by 5:00 p.m., Minneapolis time, on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2012. We are not responsible for subscription materials sent directly to our offices. If you cannot deliver your rights certificate
to the subscription agent prior to the expiration of the rights offering, you may follow the guaranteed delivery procedures described
under the &ldquo;The Rights Offering&mdash;Guaranteed Delivery Procedures&rdquo; section of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you send a payment that is insufficient
to purchase the number of shares you requested, or if the number of shares you requested is not specified in the forms, the payment
received will be applied to exercise your subscription rights to the fullest extent possible based on the amount of the payment
received, subject to the elimination of any fractional shares. Any excess subscription payments received by the subscription agent
will be returned promptly, without interest or penalty, following the expiration of the rights offering.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>What should I do if I want to participate in the rights offering
but my shares are held in the name of my broker, dealer, custodian bank or other nominee (commonly referred to as &ldquo;street
name&rdquo;)?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you hold your shares of common stock
in the name of a broker, dealer, custodian bank or other nominee, then your broker, dealer, custodian bank or other nominee is
the record holder of the shares you own. Consequently, you will not receive a rights certificate. Instead, the record holder (i.e.,
your broker, dealer, custodian bank or other nominee) must exercise the subscription rights on your behalf for the shares of common
stock you wish to purchase.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you hold your shares of our common stock
in the name of a broker, dealer, custodian bank or other nominee and you wish to purchase shares in the rights offering, please
promptly contact your broker, dealer, custodian bank or other nominee as record holder of your shares. For our part, we will ask
your record holder to notify you of the rights offering. Nevertheless, if your broker, dealer, custodian bank or other nominee
does not contact you regarding the rights offering, you should promptly initiate contact with that intermediary if you wish to
participate in the offering. Your broker, dealer, custodian bank or other nominee may establish a deadline prior to the 5:00 p.m.
Minneapolis time on , 2012, which we have established as the expiration date of the rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>When will I receive my new shares?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you purchase shares in the rights offering
by submitting a rights certificate and payment, we will mail you a share certificate as soon as practicable after the completion
of the rights offering. One share certificate will be generated for each rights certificate processed. Until your share certificate
is received, you may not be able to sell the shares of our common stock acquired in the rights offering. If your shares as of the
record date were held by a custodian bank, broker, dealer or other nominee, and you participate in the rights offering, you will
not receive share certificates for your new shares. Instead, your custodian bank, broker, dealer or other nominee will be credited
with the shares of common stock you purchase in the rights offering as soon as practicable after the completion of the rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>After I send in my payment and rights certificate, may I
change or cancel my exercise of rights?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No. All exercises of subscription rights
are irrevocable, even if you later learn information that you consider to be unfavorable to the exercise of your subscription rights.
You should not exercise your subscription rights unless you are certain that you wish to purchase additional shares of our common
stock at a subscription price of $ per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>How many shares of capital stock will be outstanding after
the rights offering?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of June 8, 2012, there
were 5,397,780 shares of our common stock issued and outstanding, and 10,000,000 shares of Series A Convertible Preferred
Stock issued and outstanding. Assuming that, prior to the expiration of the rights offering, no other transactions by us
involving shares of our capital stock, and no options or other convertible securities for shares of our common stock are
exercised, then if the rights offering is fully subscribed through the exercise of the subscription rights, an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock will be issued
upon the closing of the rights offering, for a total
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common
stock outstanding. As a result of the rights offering, the ownership interests and voting interests of the existing
shareholders that do not fully exercise their basic subscription privilege will be diluted. Notwithstanding the foregoing,
there is no minimum amount of shares that must be sold in the rights offering for us to close the offering, accept
subscriptions and access related payments. Therefore, it is possible that fewer
that &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock will be
outstanding after completion of the rights offering. The rights offering will have no effect on the number of issued and
outstanding shares of preferred stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Are there risks in exercising my subscription rights?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Yes. The exercise of your subscription rights
involves risks. Exercising your subscription rights involves the purchase of additional shares of common stock and should be considered
as carefully as you would consider any other equity investment. Among other things, you should carefully consider the risks described
in the section of this prospectus entitled &ldquo;Risk Factors.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>If the rights offering is not completed, will my subscription
payment be refunded to me?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Yes. The subscription agent will hold all
funds it receives in a segregated bank account until completion of the rights offering. If the rights offering is not completed,
all subscription payments received by the subscription agent will be returned promptly, without interest or penalty. If you own
shares in &ldquo;street name,&rdquo; it may take longer for you to receive payment because the subscription agent will return payments
through the record holder of your shares (i.e., through your custodian bank, broker, dealer or other nominee).</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Will the subscription rights be listed on a stock exchange
or national market?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>How do I exercise my rights if I live outside the United
States?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will not mail this prospectus
or the rights certificates to shareholders whose addresses are outside the United States or who have an army post office
or foreign post office address. The subscription agent will instead hold rights certificates for the account of these shareholders. To
exercise subscription rights, our foreign shareholders must notify the subscription agent and timely follow other procedures
described in the section of this prospectus entitled &ldquo;The Rights Offering&mdash;Foreign Shareholders.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>What fees or charges apply if I purchase the shares of common
stock?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are not charging any fee or sales commission
to issue subscription rights to you or to issue shares to you if you exercise your subscription rights. If, however, you exercise
your subscription rights through your broker, dealer, custodian bank or other nominee, you are responsible for paying any fees
your nominee may charge you.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>What are the material U.S. federal income tax consequences
of exercising my subscription rights?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For U.S. federal income tax purposes, you
should not recognize income or loss upon receipt or exercise of subscription rights. You should consult your tax advisor as to
your particular tax consequences resulting from the rights offering. For a more detailed discussion, see the &ldquo;Material U.S.
Federal Income Tax Consequences&rdquo; section of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>To whom should I send my forms and payment?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If your shares are held in the name
of a custodian bank, broker, dealer or other nominee, then you should send your subscription documents, rights certificate
(if any), notices of guaranteed delivery, and related subscription payment to that record holder. If you are the record holder,
then you should send your subscription documents, rights certificate, notices of guaranteed delivery, and subscription
payment by hand delivery, first-class mail or courier service to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Corporate Stock Transfer, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">3200 Cherry Creek South Drive, Suite 430</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Denver, Colorado 80209</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Your payment of the subscription price must
be made in United States Dollars for the full number of shares of our common stock for which you are subscribing, by (i) cashier&rsquo;s
check or (ii) certified check, in either case drawn upon a United States bank and payable to the subscription agent at the address
set forth above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You are solely responsible for completing
delivery to the subscription agent of your subscription materials. The subscription materials must be received by the subscription
agent on or prior to 5:00 p.m., Minneapolis time, on , 2012. We urge you to allow sufficient time for delivery of your subscription
materials to the subscription agent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Whom should I contact if I have other questions?</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you have any questions about the rights
offering or wish to request another copy of a document, please contact Paul D. Chestovich of the law firm Maslon Edelman Borman
&amp; Brand, LLP at (612) 672-8305.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For a more complete description of the rights
offering, see &ldquo;The Rights Offering&rdquo; beginning on page 57 of this prospectus.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS SUMMARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>This summary highlights information contained
elsewhere in this prospectus. This summary is not complete and may not contain all of the information that you should consider
before deciding whether or not you should exercise your rights. You should read the entire prospectus carefully, including the
section entitled &ldquo;Risk Factors&rdquo; beginning on page 13 of this prospectus and all other information included in this
prospectus in its entirety before you decide whether to exercise your rights.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Company</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Western Capital Resources, Inc. is a Minnesota
corporation that maintains two operating segments: one provides short-term consumer loans, commonly referred to as cash advance
or &ldquo;payday&rdquo; loans, and the other operates Cricket retail cellular wireless stores.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Payday operations are conducted under our
wholly owned subsidiary Wyoming Financial Lenders, Inc. The Federal Trade Commission describes these loans as &ldquo;small, short-term
high-rate loans.&rdquo; Our payday loans generally are offered and made in exchange for fees that, if treated as interest, are
at a rate extraordinarily higher than prime and are made to individuals who do not typically qualify for prime rate loans. As a
consequence, our loans may be considered a type of subprime loan. In Wisconsin and Colorado, the Payday division provides short-term
installment loans. The installment loan product has a rate of interest significantly higher than traditional financial institutions.
At March 31, 2012, we operated 52 payday lending stores in nine states, including Colorado, Iowa, Kansas, Nebraska, North Dakota,
South Dakota, Utah, Wisconsin and Wyoming. Our provision of payday and installment loans is typically heavily regulated by the
various states in which we operate, and our payday lending and installment loan business is extremely susceptible to the adverse
effects of any changes in federal or state laws and regulations that may further restrict or flatly prohibit payday lending.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Through our payday segment, we also provide
title and ancillary consumer financial products and services that are complementary to our payday and installment lending business,
such as check-cashing services, money transfers and money orders. Our check-cashing services involve the cashing of checks for
a fee; money-transfer services involve the transfer of money by wire for a fee; and our money-orders services involve the issuing
of money orders for a fee. We believe these services are complementary since customers typically come to our stores for financial
reasons and to procure financial services (i.e., obtain a loan). Once the loan has been obtained, a customer may, for instance,
decide to wire a payment of money or obtain a money order to satisfy a debt or other obligation. Our loans and other services are
subject to state regulations (which vary from state to state), and federal and local regulations, where applicable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our second segment operates retail stores
selling Cricket cellular phones and accessories. Cricket phones are prepaid cellular phones that function for a period of time
for a flat fee, without usage limitations and without any long-term contract or commitment required from the consumer. At March
31, 2012 we owned and operated 48 Cricket wireless retail stores in 13 states, including Arizona, Colorado, Idaho, Illinois, Indiana,
Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon and Texas. While there are state regulations that affect our provision
of Cricket phone products and services, our Cricket phone business is not highly susceptible to the adverse effects of changes
in federal or state laws and regulations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the fiscal year ended December 31, 2011,
each of our major lines of business (i.e., our payday and installment lending, and Cricket phone businesses) generated associated
revenues. In 2011, we generated approximately:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">$10.20 million in payday lending revenues representing approximately
52.3% of our total revenues,</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">$4.59 million in phone and accessory sales representing approximately
23.6% of our total revenues, and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">$3.74 million in Cricket related sales and service fees representing
approximately 19.2% of our total revenues.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The tables below summarize our financial
results and condition as of March 31, 2012 and 2011 (unaudited) and as of December 31, 2011 and 2010 (audited).</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31, 2012</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31, 2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 66%; font-size: 10pt; padding-left: 5.4pt">Revenues</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 13%; font-size: 10pt; text-align: right">7,516,770</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 13%; font-size: 10pt; text-align: right">5,083,631</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Net income (loss) to common shareholders</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">264,042</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(112,631</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,851,373</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">8,418,534</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Current liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,497,621</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,883,414</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Total assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">21,662,004</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">22,021,776</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Total liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">9,306,899</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">9,623,479</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Shareholder equity</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">12,355,105</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">12,398,297</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31, 2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31, 2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 66%; font-size: 10pt; padding-left: 5.4pt">Revenues</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 13%; font-size: 10pt; text-align: right">19,487,920</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 13%; font-size: 10pt; text-align: right">17,978,447</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Net loss to common shareholders</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">664,769</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">751,059</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">8,418,534</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,958,443</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Current liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,883,414</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">6,452,628</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Total assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">22,021,776</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">20,770,882</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Total liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">9,623,479</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,707,816</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Shareholder equity</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">12,398,297</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">13,063,066</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The above figures include an assumed preferred
stock dividend relating to our Series A Convertible Preferred Stock in the amount of $2.1 million in 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Corporate Organization</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our principal offices are located at 11550
&ldquo;I&rdquo; Street, Suite 150, Omaha, Nebraska 68137, and our telephone number at that office is (402) 551-8888.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We were originally incorporated and organized
as a Minnesota corporation under the name URON Inc. in November 2001. From our incorporation until August 2006, we were wholly
owned by Multiband Corporation, a publicly traded Minnesota corporation. Multiband spun us off (as &ldquo;URON&rdquo;) to Multiband&rsquo;s
shareholders in August 2006 and caused us to become a public reporting corporation as part of the spinoff process. At that time,
our principal business was the provision of dial-up internet service to residential and commercial customers, principally in the
midwestern United States, Texas, South Carolina and Florida. In December 2007, we engaged in a merger transaction with Wyoming
Financial Lenders, Inc., a Wyoming corporation. In the merger transaction, we acquired the payday lending business we currently
operate through Wyoming Financial Lenders. Shortly after our merger with Wyoming Financial Lenders, we changed our corporate name
from URON Inc. to &ldquo;Western Capital Resources, Inc.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our fiscal year ends December 31. Neither
us nor any of our predecessors have been in bankruptcy, receivership or any similar proceeding. Our corporate structure, including
our principal operating subsidiaries, is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><IMG SRC="chart.jpg" ALT="">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The Rights Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following summary describes the principal
terms of the rights offering, but is not intended to be complete. See the information in the section entitled &ldquo;The Rights
Offering&rdquo; in this prospectus for a more detailed description of the terms and conditions of the rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 44%">Securities offered</TD>
    <TD STYLE="width: 56%">We are distributing to you, at no charge, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; non-transferable subscription rights for each share of our capital stock that you own as of 5:00 p.m., Minneapolis time, on the record date, either as a holder of record or, in the case of shares held of record by brokers, dealers, custodian banks or other nominees on your behalf, as a beneficial owner of such shares.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Subscription Price</TD>
    <TD>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share.&nbsp; To be effective, any payment related to the exercise of subscription rights must clear prior to the expiration of the rights offering.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Basic Subscription Privilege</TD>
    <TD>The basic subscription privilege component of each subscription right will entitle you to purchase&nbsp;one &nbsp;share of our common stock.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Over-Subscription Privilege</TD>
    <TD>If you fully exercise your entire basic subscription privilege and other shareholders do not fully exercise their entire
    basic     subscription privileges, you may also exercise the over-subscription privilege component of your subscription
    rights.&nbsp;     The over-subscription privilege permits you to purchase additional shares of common stock that remain
    unsubscribed at the     expiration of the rights offering, subject to the availability and pro rata allocation of shares
    among other shareholders     exercising their over-subscription privilege. To the extent there are not enough shares to
    satisfy all of the properly     exercised over-subscription requests, then the shares available will be prorated among those
    who properly exercising their     over-subscription privilege based on the number of shares each such shareholder subscribed
    for under their basic subscription     right. If this method of allocation results in any shareholder receiving a greater
    number of common shares than the     shareholder subscribed for pursuant to the exercise of his, her or its over-subscription
    privilege, then such shareholder     will be allocated only that number of shares for which the shareholder subscribed, and
    the remaining common shares will be     allocated among all other shareholders exercising their over-subscription privilege
    on the same pro rata basis described     above.&nbsp; This pro rata allocation process will be repeated until all common
    shares have been allocated or the exercise of     all over-subscription privileges have been fulfilled, whichever occurs
    earlier.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Record Date</TD>
    <TD>5:00 p.m., Minneapolis time, on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2012.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Expiration Date</TD>
    <TD>5:00 p.m., Minneapolis time, on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; , 2012, unless we extend the rights offering period in our sole discretion.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Use of Proceeds</TD>
    <TD>We intend to use the proceeds of the rights offering primarily to provide capital for acquisitions to grow our current business or expand into new and complementary businesses, and to provide additional liquidity for working capital and general corporate purposes.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Transferability of Rights</TD>
    <TD>The subscription rights are not transferable.</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.75in; text-indent: -2.75in"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 44%">No Board Recommendation</TD>
    <TD STYLE="width: 56%">Our Board of Directors makes no recommendation to you about whether you should exercise any subscription rights. You are urged to make an independent investment decision about whether to exercise your rights based on your own assessment of our business and the rights offering.&nbsp; Please see the section of this prospectus entitled &ldquo;Risk Factors&rdquo; for a discussion of some of the risks involved in investing in our common stock.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>No Revocation</TD>
    <TD>Any exercise of subscription rights is irrevocable, even if you later learn information that you consider to be unfavorable to the exercise of your rights. Consequently, you should not exercise your subscription rights unless you are certain that you wish to purchase additional shares of common stock at a subscription price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>No Purchase Commitments</TD>
    <TD>Although our officers, directors and greater-than-5% beneficial shareholders, including our controlling shareholder,
    WCR, LLC, may participate in this offering at the same subscription price per share as all other purchasers, none of our
    officers, directors or greater-than-5% beneficial shareholders are obligated to so participate.&nbsp; In fact, certain
    officers and directors (who are also shareholders), and our controlling shareholder, WCR, LLC, have indicated that they will
    purchase shares that are subject to their subscription rights, at the same subscription price offered to our
    shareholders.&nbsp; Nevertheless, none of these shareholders have executed any agreements to purchase shares and there is no
    guarantee or enforceable commitment that they will subscribe for shares in the offering.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Material U.S. Federal Income Tax</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;&nbsp; Considerations</TD>
    <TD>For U.S. federal income tax purposes, you should not recognize income or loss upon receipt or exercise of subscription rights.&nbsp; Nevertheless, you should consult your own tax advisor as to your particular tax consequences resulting from the rights offering. For a detailed discussion, see &ldquo;Material U.S. Federal Income Tax Considerations.&rdquo;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Extension, Cancellation and Amendment</TD>
    <TD>We have the option to extend the rights offering and the period for exercising your subscription rights, although we do not presently intend to do so. Our Board of Directors may cancel the rights offering at any time for any reason. In the event that the rights offering is cancelled, all subscription payments received by the subscription agent will be returned promptly, without interest or penalty. We also reserve the right to amend or modify the terms of the rights offering.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Procedure for Exercising Rights</TD>
    <TD>To exercise your subscription rights, you must take the following steps:</TD></TR>
</TABLE>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.75in; text-indent: -2.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 44%"></TD><TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="width: 54%"><FONT STYLE="font-family: Times New Roman, Times, Serif">If you are a registered holder of our shares of capital stock, you
may deliver payment and a properly completed rights certificate to the subscription agent before 5:00 p.m., Minneapolis time, on
, 2012. &nbsp;Payment should be made for all shares you wish to purchase upon exercise of your basic subscription privilege and
your over-subscription privilege, if any. You may deliver the documents and payments by hand, mail or commercial carrier. If regular
mail is used for this purpose, we recommend using registered mail, properly insured, with return-receipt requested.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3.25in"></P>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 44%"></TD><TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="width: 54%"><FONT STYLE="font-family: Times New Roman, Times, Serif">If you are a beneficial owner of shares that are registered in the
name of a broker, dealer, custodian bank or other nominee, or if you would rather an institution conduct the transaction on your
behalf, you should instruct your broker, dealer, custodian bank or other nominee or to exercise your subscription rights on your
behalf and deliver all documents and payments (including payment for the exercise of your over-subscription privilege, if any)
before 5:00 p.m., Minneapolis time, on , 2012.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 44%"></TD><TD STYLE="width: 2%"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="width: 54%"><FONT STYLE="font-family: Times New Roman, Times, Serif">If you cannot deliver your rights certificate to the subscription
agent prior to the expiration of the rights offering, you may follow the guaranteed delivery procedures described under &ldquo;The
Rights Offering&mdash;Guaranteed Delivery Procedures.&rdquo;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.75in; text-indent: -2.75in">&nbsp;</P>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 44%">Subscription Agent</TD>
    <TD STYLE="width: 56%">Corporate Stock &amp; Transfer, Inc.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Capital Shares Outstanding</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;&nbsp; Before Rights Offering</TD>
    <TD>5,397,780 common shares, and 10 million shares of Series A Convertible Preferred Stock, as of June 13, 2012.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Capital Shares Outstanding</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;&nbsp; After Rights Offering</TD>
    <TD>Assuming no outstanding options or other convertible securities for our common shares are exercised prior to the
    expiration of the rights offering and the full $4.5 million is subscribed for, we
    expect&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; shares of common stock will
    be outstanding immediately after completion of the rights offering. There will be no change in the number of issued and
    outstanding preferred shares as a result of the rights offering.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Fees and Expenses</TD>
    <TD>We will pay the fees and expenses relating to the rights offering.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Trading Symbol</TD>
    <TD>Shares of our common stock are, and we expect that the shares of common stock to be issued in the rights offering will be, traded on the over-the-counter Bulletin Board (OCTBB) under the symbol &ldquo;WCRS.&rdquo;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Risk Factors</TD>
    <TD>Shareholders considering exercising their subscription rights should carefully consider the risk factors described in the section of this prospectus entitled &ldquo;Risk Factors,&rdquo; beginning on page 13.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Questions</TD>
    <TD>Questions regarding the rights offering should be directed to Maslon Edelman Borman &amp; Brand, LLP, Attn: Paul Chestovich at (612) 672-8305.</TD></TR>
</TABLE>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RISK RELATING TO FORWARD-LOOKING STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Certain matters discussed in this prospectus
are forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions about our
operations and the investments we make, including, among other things, factors discussed under the heading &ldquo;Risk Factors&rdquo;
in this prospectus and the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">changes in federal, state and local laws and regulations governing
lending practices, or in the interpretation of such laws and regulations;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">potential litigation and regulatory actions directed toward our industry
in general;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">our potential need for additional financing in the future;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">our concentration of revenues in certain states where laws or regulations
may change;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">our historic and current reliance on debt financing, and any potential
default under borrowing arrangements;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">our capital structure, and any attempt by our preferred shareholders
to strictly enforce the rights and privileges of their preferred stock relating to dividends and other matters;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the ultimate control of our management and our Board of Directors
by our controlling shareholder, WCR, LLC;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">any failure to maintain effective internal controls effective at detecting
and preventing fraud;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">our reliance on information management systems and exposure to cyber
incidents;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">unpredictability in financing markets that could affect our ability
finance or grow our business;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">disruptions in the availability of information systems we use to operate
and manage our businesses;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">competition in the markets in which we operate;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">our reliance on certain key personnel in the management of our businesses;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">our relative lack of product and business diversification;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">general economic conditions and outlook;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">any failure by us to accurately forecast loan losses;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">theft, including employee theft;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">employee and management turnover; </FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the fact that goodwill and other intangible assets represent approximately
58% of our total asset value; and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the fact that our common stock is presently thinly traded in an illiquid
market.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Some of the statements in this prospectus
that are not historical facts are &ldquo;forward-looking&rdquo; statements. Forward-looking statements can be identified by the
use of words like &ldquo;believes,&rdquo; &ldquo;could,&rdquo; &ldquo;possibly,&rdquo; &ldquo;probably,&rdquo; &ldquo;anticipates,&rdquo;
&ldquo;estimates,&rdquo; &ldquo;projects,&rdquo; &ldquo;expects,&rdquo; &ldquo;may,&rdquo; &ldquo;will,&rdquo; &ldquo;should,&rdquo;
&ldquo;seek,&rdquo; &ldquo;intend,&rdquo; &ldquo;plan,&rdquo; &ldquo;consider&rdquo; or the negative of these expressions or other
variations, or by discussions of strategy that involve risks and uncertainties. All forward-looking statements involve both known
and unknown risks, uncertainties and other factors that may cause our actual transactions, results, performance or achievements
to be materially different from any future transactions, results, performance or achievements expressed or implied by such forward-looking
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We base the forward-looking statements we
use or include in this prospectus on current expectations and projections about future events and the information currently available
to us. Although we believe that the assumptions for these forward-looking statements are reasonable, any of the assumptions could
prove to be inaccurate. Consequently, no representation or warranty can be given that the estimates, opinions, or assumptions made
in or referenced by this prospectus will prove to be accurate. We caution you that the forward-looking statements in this prospectus
are only estimates and predictions. Actual results could differ materially from those anticipated in the forward-looking statements
due to risks, uncertainties or actual events differing from the assumptions underlying these statements. These risks, uncertainties
and assumptions include, but are not limited to, those discussed in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Although federal securities laws provide
a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this
safe harbor is not available to certain issuers, including issuers that do not have their equity traded on a recognized national
exchange or the Nasdaq Capital Market. Our common stock does not trade on any recognized national exchange or the Nasdaq Capital
Market. As a result, we will not have the benefit of this safe harbor protection in the event of any legal action based upon a
claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because
of our failure to include any statements necessary to make the statements not misleading.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Investing in our securities
involves a high degree of risk. You should carefully consider the specific risks described below, the risks described in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2012, and any risks described in our other filings with the Securities and Exchange Commission, pursuant to
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, before making an investment decision. See the
section of this prospectus entitled &ldquo;Where You Can Find More Information.&rdquo; Any of the risks we describe below
could cause our business, financial condition, results of operations or future prospects to be materially and adversely
affected. The market price of our common stock could decline if one or more of these risks and uncertainties develop into
actual events and you could lose all or part of your investment. Additional risks and uncertainties not currently known to us
or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition,
results of operations or future prospects. In addition, some of the statements in this section of the prospectus are
forward-looking statements. For more information about forward-looking statements, please see the section of this prospectus
entitled &ldquo;Risk Relating to Forward-Looking Statements&rdquo; above</I>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>Risks Related to the Rights Offering </U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>The price of our common stock is volatile and may decline
before or after the subscription rights expire.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The market price of our common stock is
subject to fluctuations in response to numerous factors, including factors that have little or nothing to do with us or our performance,
and these fluctuations could materially reduce our stock price. These factors include, among other things:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">governmental legislation or regulation;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">business conditions in our markets and the general state of the securities
markets and the market for similar stocks;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">changes in capital markets that affect the perceived availability
of capital to companies in our industry;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">general economic and market conditions, such as recessions;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">actual or anticipated variations in our operating results and cash
flow; and</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the
number of shares of our common stock outstanding or issuable</FONT>.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, the stock market historically
has experienced significant price and volume fluctuations. These fluctuations are often unrelated to the operating performance
of particular companies. These broad market fluctuations may cause declines in the market price of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>When the rights offering is completed, your ownership
interest will be diluted if you do not exercise the basic subscription privilege component of your subscription rights.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To the extent that you do not exercise the
basic subscription privilege component of your subscription rights and shares are purchased by other shareholders in the rights
offering, your proportionate economic and voting interest in the Company will be reduced, and the percentage that your original
shares represent of our expanded equity after the rights offering will be diluted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>The subscription price determined for the rights offering
is not necessarily an indication of the fair value of our common stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The subscription price is $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share. The
subscription price was determined by a special committee of our Board of Directors. Factors considered by the committee included
the strategic alternatives available to us for raising capital, the price at which our shareholders might be willing to participate
in the rights offering, historical and current trading prices of our common stock, the business prospects of our Company, and the
general condition of the securities and capital markets. We cannot assure you that the market price for our common stock during
the rights offering will be equal to or above the subscription price or that a subscribing owner of rights will be able to sell
the shares of common stock purchased in the rights offering at a price equal to or greater than the subscription price.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>You may not revoke your subscription exercise and you
could be committed to buying shares above the prevailing market price.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Once you exercise your subscription rights,
you may not revoke the exercise of such rights. This irrevocability applies to both your basic subscription privilege and your
over-subscription privilege. The public trading market price of our common stock may decline before the subscription rights expire.
If you exercise subscription rights and, afterwards, the public trading market price of our common stock decreases below the subscription
price, you will have committed to buying shares of our common stock at a price above the prevailing market price, in which case
you will have an immediate unrealized loss. Furthermore, after your exercise of subscription rights, you may not be able to sell
your shares of common stock at a price equal to or greater than the subscription price, and you may lose all or part of your investment
in our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>If you do not act promptly and follow the subscription
instructions, you may lose your right to exercise your subscription rights or your exercise of subscription rights may be rejected.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subscription rights holders who desire to
purchase shares in the rights offering must act promptly to ensure that all required forms and payments are actually received by
the subscription agent before 5:00 p.m. Minneapolis time on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2012,
the expiration date of the rights offering, unless extended. If you are a beneficial owner of shares, but not a record holder,
you must act promptly to ensure that your broker, bank, or other nominee acts for you and that all required forms and payments
are actually received by the subscription agent before the expiration date of the rights offering. We will not be responsible if
your broker, custodian, or nominee fails to ensure that all required forms and payments are actually received by the subscription
agent before the expiration date of the rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you fail to complete and sign the required
subscription forms, send an incorrect payment amount or otherwise fail to follow the subscription procedures that apply to your
exercise in the rights offering, the subscription agent may, depending on the circumstances, reject your subscription or accept
it only to the extent of the payment received. Importantly, neither we nor our subscription agent undertakes to contact you concerning
an incomplete or incorrect subscription form or payment, nor are we under any obligation to correct such forms or payment. We have
the sole discretion to determine whether a subscription exercise properly follows the subscription procedures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>The rights offering does not have a minimum amount of
proceeds that must be raised for us to accept subscriptions and access proceeds. Therefore, if you exercise your subscription rights
and if less than the entire offering amount is subscribed for, you may be investing in a company that continues to desire additional
capital.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There is no assurance that any shareholders
will exercise their subscription rights. Further, there is no minimum amount of proceeds required for us to accept subscriptions
and access proceeds at the completion of the rights offering. In addition, all exercises of subscription rights are irrevocable,
even if you later learn information that you consider to be unfavorable to the exercise of your subscription rights and even if
the rights offering is extended by our Board of Directors. Based on the foregoing, if you exercise any subscription rights but
we do not raise the desired amount of capital in this rights offering, you may be investing in a company that continues to desire
additional capital to grow its current business or expand into new and complementary businesses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Significant issuances of our common stock, or the perception
that significant issuances may occur in the future, could adversely affect the market price for our common stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The substantial number of
subscription rights involved in the rights offering, and other actual or perceived potential future issuances of our common
stock, could adversely affect the market price of our common stock. Generally, issuances of substantial amounts of common
stock in the public market, and the availability of shares for future sale, including up to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common
stock that may be issued in the rights offering, could adversely affect the prevailing market price of our common stock
and could cause the market price of our common stock to remain low for a substantial amount of time. Additional options and
other equity awards may also be granted under our incentive plans.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We cannot foresee the impact of the rights
offering and such potential securities issuances on the market for our common stock, but it is possible that the market for our
shares may be adversely affected. It is also unclear whether or not the market for our common stock could absorb a large number
of attempted sales in a short period of time, regardless of the price at which they might be offered. Even if a substantial number
of sales do not occur within a short period of time, the mere existence of this &ldquo;market overhang&rdquo; could have a negative
impact on the market for our common stock and our ability to raise additional equity capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our officers, directors and greater-than-5% shareholders,
including our controlling shareholder, WCR, LLC, may significantly increase their relative ownership and voting interest in the
Company to the extent our other shareholders do not exercise their basic subscription privileges.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 13, 2012, the last practicable date
before the filing of this prospectus:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">WCR, LLC beneficially owned approximately 71.5% of our common stock</FONT></TD></TR></TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">John Quandahl, our Chief Executive Officer, beneficially owned
                                                                                                              approximately 3.7% of our common stock</FONT></TD></TR></TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Steve Irlbeck, our Chief Financial Officer, beneficially owned approximately
3.7% of our common stock</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Richard Miller, our Chairman of the Board, beneficially owned approximately
5.9% of our common stock, and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Rich Horner, the Treasurer of our subsidiary Wyoming Financial Lenders,
Inc., beneficially owned approximately 1.9% of our common stock.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Collectively, the above-identified shareholders
possess beneficial ownership of approximately 75.5% of our common stock. We have been advised that WCR intends to participate in
the rights offering but WCR has not committed or entered into any agreement that would require it to do so. The same is true for
our officers and directors who are also shareholders. To the extent that other shareholders do not participate in the rights offering,
our officers, directors, greater-than-5% shareholders and WCR will necessarily increase their relative percentage of ownership
in the Company if they do in fact participate in the rights offering by exercising their subscription rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We may use the proceeds of this rights offering in ways
with which you may disagree.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We intend to use the net proceeds of this
offering primarily to provide capital for the growth of our business through acquisitions and to potentially add new businesses
that are complementary to our current business, and to provide additional liquidity for working capital and general corporate purposes.
Accordingly, we will have significant discretion in the use of the net proceeds of this offering, and it is possible that we may
allocate the proceeds differently than investors in this offering desire, or that we will fail to maximize our return on these
proceeds. You will be relying on the judgment of our management with regard to the use of the proceeds from the rights offering,
and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately.
For more information, see the section entitled &ldquo;Use of Proceeds.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We may cancel the rights offering at any time, and neither
we nor the subscription agent will have any obligation to you except to return your exercise payments.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We may, in our sole discretion, decide not
to continue with the rights offering or cancel the rights offering. If the rights offering is cancelled, all subscription payments
received by the subscription agent will be returned promptly, without interest or penalty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>Risks Relating to Our Business and Company</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 38 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 laws permitting
payday lending could expire.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For example, recent legislation has been
passed in Colorado, Wisconsin and Montana that restricts certain payday lending practices. In particular:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">During 2010, Colorado House Bill 10-1351 was passed into law effective
August 11, 2010. This law changed the single payment advance (with no minimum term) into a single or multiple payment loan with
a minimum six-month term. It also limited the amount and type of fees that can be charged on these loans, effectively reducing
by one-half the fees that can be charged, and when the fees may be realized. We restructured our lending in Colorado to replace
payday advances with a short-term installment loan product. Our 2011 gross profit from Colorado operations was negatively affected
by these developments, decreasing 22% from 2010 gross profit.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: 3pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">In Wisconsin, new legislation effective January 1, 2011 limited payday
loans to the lesser of $1,500 or 35% of the applicant&rsquo;s monthly income, permits borrowers to cancel loans within 24 hours
and roll their loans over only one time. In addition, payday lenders are required to offer a 60-day, interest free, payment plan
to consumers upon maturity of their payday loans. Our 2011 gross profit from Wisconsin operations was negatively affected by these
developments, decreasing 41% from 2010 gross profit.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: 3pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Finally, on November 2, 2010, voters in Montana passed Petition Initiative
I-164. Effective January 1, 2011, Petition Initiative I-164 capped fees on payday loans at an imputed interest rate of 36%. We
discontinued our operations and closed all four stores in Montana due to this law change. In 2010, approximately 3.87% of our payday
division revenues were generated in Montana.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, legislation banning payday
loans was introduced in Nebraska in 2008 but eventually was dropped. Nevertheless, since we derive approximately 28% 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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)
could 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>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.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 occasionally been introduced in the U.S. Congress. For example:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the interest rate and fees that may be charged on any loans, including
payday loans, to any person in the military are limited to the equivalent of 36% per annum.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: 3pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">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 that 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&rsquo;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&rsquo;s
authority will nonetheless be broad, and it is expected that the Bureau will address issues such as rollovers or extensions of
payday loans and compliance with federal rules and regulations. Future restrictions on the payday lending industry could have serious
consequences for us.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Changes in local regulations could have a material adverse
effect on our business, results of operations and financial condition.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition to state and federal laws and
regulations, our business is subject to various local rules and regulations such as local zoning regulations and permit licensing.
We are aware of increasing efforts by local jurisdictions to restrict payday lending through the use of local zoning and permitting
laws. Any actions taken in the future by local zoning boards or other governing bodies to require special use permits for, or impose
other restrictions on, payday lenders could have a material adverse effect on the growth of our business and business prospects
primarily by restricting any efforts to grow our business &ldquo;organically&rdquo; by opening more payday lending store locations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Litigation and regulatory actions directed toward our
industry or us could adversely affect our operating results, particularly in certain key states.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the last few years, our industry
has been subject to regulatory proceedings, class action lawsuits and other litigation regarding the offering of payday loans,
and we could suffer losses resulting from interpretations of state laws in those lawsuits or regulatory proceedings, even if we
are not a party to those proceedings. Thus, the losses we could suffer could be directly incurred through our involvement in litigation
or regulatory proceedings, or could be indirectly incurred through negative publicity regarding the industry in general that is
generated by litigation on regulatory proceedings involving third parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, regulatory actions taken with
respect to a particular non-payday lending financial service that we offer could negatively affect our ability to offer such other
financial services. For example, if we were the subject of regulatory action related to our check-cashing business, that regulatory
action could adversely affect our ability to maintain our payday lending licenses. Moreover, the suspension or revocation of our
license or other authorization in one state could adversely affect our ability to maintain licenses in other states. Accordingly,
a violation of a law or regulation with respect to otherwise unrelated products or in other jurisdictions could affect other parts
of our business and adversely affect our business and operations as a whole.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We may need additional financing in the future and any
such financing may dilute our existing shareholders.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We anticipate that we will continue to experience
growth in our income and expenses for the foreseeable future and that our operating expenses will be a material use of cash resources.
Presently, we believe we have cash sufficient to maintain operations. In the event that our income does not meet our expectations,
we may sooner require additional financing for working capital. In addition, if we determine to grow our business through acquisitions,
any acquisitions we consummate will likely involve additional financing. Any additional financing, for whatever purpose and for
whatever reason, may dilute our existing shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Additional financing could be sought from
a number of sources, including but not limited to additional sales of equity or debt securities (including equity-linked or convertible
debt securities), loans from banks, loans from our affiliates or other financial institutions. We may not, however, be able to
sell any securities or obtain any such additional financing when needed, or do so on terms and conditions acceptable or favorable
to us, if at all. If financing is not available, we may be forced to consider strategic alternatives, such as (but not limited
to) curtailing certain aspects of our operations or closing certain operating locations. If we successfully enter into a financing
transaction, any additional equity or equity-linked financing would be dilutive to shareholders, and additional debt financing,
if available, may involve restrictive covenants and above-market interest rates.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>The concentration of our revenues in certain states could
adversely affect us.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently provide payday lending services
in nine states. For the year ended December 31, 2011, revenues from our locations in Nebraska represented approximately 28% of
our total payday revenues. For the foreseeable future, we expect that a material and significant portion of our revenues will continue
to be generated in Nebraska. We operate Cricket stores in 13 states as of March 31, 2012. For the year ended December 31, 2011,
revenues from our Missouri and Indiana stores represented approximately 25% and 22% of our total Cricket revenues, respectively.
As a result, changes to prevailing economic, demographic, competitive, regulatory or any other conditions, including the legislative,
regulatory or litigation risks mentioned above, in the markets in which we operate, and in Nebraska and Missouri in particular,
could lead to a reduction in demand for our services and result in a decline in our revenues or an increase in our provision for
doubtful accounts, or even an outright legal prohibition on the conduct of our business. Any of these outcomes could in turn result
in a material and swift deterioration of our financial condition and business prospects principally by impairing our revenues and
affecting our ability to obtain financing and operating liquidity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our controlling shareholder possesses controlling voting
power with respect to our common stock and voting preferred stock, which will limit your influence on corporate matters.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our controlling shareholder, WCR, LLC, has
beneficial ownership of 10,791,250 shares (9,700,000 of which are issuable upon conversion of Series A Convertible Preferred Stock).
These shares represent beneficial ownership of approximately 71.5% of our common stock as of the date of this report. As a result,
WCR has the ability to outrightly control our management and affairs through the election and removal of our entire Board of Directors
and all other matters requiring shareholder approval, including the future merger, consolidation or sale of all or substantially
all of our assets. This concentrated control could discourage others from initiating any potential merger, takeover or other change-of-control
transaction that may otherwise be beneficial to our shareholders. Furthermore, this concentrated control will limit the practical
effect of your participation in Company matters, through shareholder votes and otherwise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our articles of incorporation grant our Board of Directors
the power to issue additional shares of common and preferred stock and to designate other classes of preferred stock, all without
shareholder approval.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our authorized capital consists of 250 million
shares of capital stock. Pursuant to authority granted by our articles of incorporation, our Board of Directors, without any action
by our shareholders, may designate and issue shares in such classes or series (including other classes or series of preferred stock)
as it deems appropriate and establish the rights, preferences and privileges of such shares, including dividends, liquidation and
voting rights, provided it is consistent with Minnesota law. The rights of holders of other classes or series of stock that may
be issued could be superior to the rights of holders of our common shares. The designation and issuance of shares of capital stock
having preferential rights could adversely affect other rights appurtenant to shares of our common stock. Furthermore, any issuances
of additional stock (common or preferred) will dilute the percentage of ownership interest of then-current holders of our capital
stock and may dilute our book value per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>A default under our borrowing arrangement could require
us to seek financing on a short-term basis that may be disadvantageous to us.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On October 18, 2011, we entered in a borrowing
arrangement with River City Equity, Inc. Under this arrangement, we may borrow up to $2,000,000 at an interest rate of 12% per
annum, with interest payable on a monthly basis. The note we delivered to River City Equity matures on September 30, 2013, on which
date all unpaid principal and accrued but unpaid interest thereon is due and payable. The note includes a prepayment penalty and,
under certain circumstances, permits River City Equity to obtain a security interest in substantially all of our assets. As of
March 31, 2012, $1,200,000 has been advanced under this arrangement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If we are unable to comply with the terms
of our promissory note with River City Equity, we may need to seek additional financing. We may not be able to obtain financing
on a short-term basis. Furthermore, even if we are able to obtain needed short-term financing, we may be unable to do so on terms
that are favorable.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>A significant portion of our assets consists of goodwill
and other intangible assets.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of December 31, 2011, 58% of our assets
consisted of goodwill and other intangible assets. Under generally accepted accounting principles, the carrying value of goodwill
is subject to periodic review and testing to determine if it is impaired. The value of our assets will depend on market conditions,
regulatory environment, the availability of buyers and similar factors. While the value of these assets is based on management
projections and assumptions and is determined by using the discounted cash flow method for purposes of our impairment testing,
those values may differ from what could ultimately be realized by us in a sales transaction or otherwise and that difference, while
not affecting cash flow, could have a material adverse impact on our operating results and financial position.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Unpredictability in financing markets could impair our
ability to grow our business through acquisitions.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We anticipate that opportunities to acquire
similar businesses will materially depend on the availability of financing alternatives with acceptable terms. As a result, poor
credit and other market conditions or uncertainty in the financing markets or the payday lending business in particular could materially
limit our ability to grow through acquisitions since such conditions and uncertainty make obtaining financing more difficult.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Public perception of payday lending as being predatory
or abusive could adversely affect our business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Recently, consumer advocacy groups and media
reports have advocated governmental action to prohibit or severely restrict payday loans. The consumer groups and media reports
typically focus on the cost to a consumer for this type of loan, which is higher than the interest typically charged by credit
card issuers. The consumer groups and media reports typically characterize these transactions as predatory or abusive toward consumers.
If this negative characterization of our business becomes widely accepted by consumers, demand for our payday loans could significantly
decrease, which could adversely affect our results of operations primarily by decreasing our revenues. Negative perception of our
business activities could also result in our industry being subject to more restrictive laws and regulations and greater exposure
to litigation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Any disruption in the availability of our information
systems could adversely affect our operations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We rely upon our information systems to
manage and operate our business. Each location is part of an information network that permits us to maintain adequate cash inventory,
reconcile cash balances daily, and report revenues and loan losses in a timely manner. Our security measures could fail to prevent
a disruption in the availability of our information systems or our back-up systems could fail to operate properly. Any disruption
in the availability of our information systems could adversely affect our results of operations by impairing our ability to efficiently
effect transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>If we lose key managers or are unable to attract and retain
the talent required for our business, our operating results could suffer.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our future success depends to a significant
degree upon the members of our executive management, particularly John Quandahl, who is our Chief Executive Officer. Accordingly,
the loss of these services would likely materially and adversely affect our business. We have an employment agreement with Mr.
Quandahl effective through March 31, 2013. Nevertheless, we cannot be certain that Mr. Quandahl will continue providing services
to us for any particular period of time. Our continued growth will also depend upon our ability to attract and retain additional
skilled management personnel. Competition for highly skilled and experienced management is intense and likely to continue and increase.
To the extent that we are unable to attract and retain the talent required for our business, our operating results could suffer.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We lack product and business diversification with a customer
base primarily in urban areas, which creates a risk that our future revenues and earnings will be susceptible to fluctuations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our primary payday business activity is
offering and servicing payday loans. We also provide certain related and other services, such as check cashing, money transfers
and money orders. The payday segment accounted for approximately 58% of our total revenues in 2011. Our Cricket retail segment
accounted for the remaining approximately 42% of our total revenues in 2011. If we are unable to further diversify our business
products and services and expand our customer base outside of urban areas, we may experience fluctuations in our revenues and earnings,
which may be significant, relating to our payday lending business and wireless cellular sales. Such fluctuations could also result
from legal or regulatory changes in one or more jurisdictions, changes in economic conditions in the jurisdictions where we provide
services, or result from other risks or adverse events befalling us. Our susceptibility to fluctuations or the actual happening
of significant fluctuations in our revenues or earnings could cause our Company to be perceived as a less stable and therefore
less attractive investment in general, which would likely negatively affect the market price of our common stock and our ability
to obtain additional financing an acceptable terms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Competition in the retail financial services industry
is intense and could cause us to lose market share and revenues.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe that the primary competitive
factors in the payday loan industry are store location and customer service. We face intense competition in the payday loan industry,
and we believe that the payday lending market is becoming more competitive as this industry matures and begins to consolidate.
The payday loan industry has low barriers to entry, and new competitors, such as Wal-Mart, may enter the market easily. We currently
compete with certain related services, such as overdraft protection offered by traditional financial institutions, and with other
payday loan and check cashing stores and other financial service entities and retail businesses that offer payday loans or other
similar financial services, as well as a rapidly growing Internet-based payday loan market. Some of our competitors have larger
and more established customer bases and substantially greater financial, marketing and other resources than we have. As a result,
we could lose market share and our revenues could decline, thereby affecting our earnings and potential for growth.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We face significant wireless cellular competition that
may reduce our market share and lower our profits.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We face significant competition in the market
in which our Cricket wireless division operates. We currently compete with resellers of our size including US Cellular and Metro
PCS. We also compete with the four national wireless service providers (AT&amp;T, Sprint Nextel, T-Mobile and Verizon Wireless)
and with Walmart&rsquo;s Straight Talk and Family Mobile plans. Our ability to compete effectively will depend on, among other
things, the pricing of Cricket services and equipment, the quality of our customer service, the reach and quality of our sales
and distribution channels and our capital resources. It will also depend on how successfully we anticipate and respond to various
factors affecting our industry, including new technologies and business models, changes in consumer preferences, demographic trends
and economic conditions. Finally, operating solely as a Cricket reseller, we are dependent upon pricing, channel strategies, product
supply, credit terms, dealer compensation structure, and up-to-date wireless technologies and infrastructure of Cricket Wireless.
If the business of Cricket Wireless itself were to suffer, become threatened or fail to effectively compete against its competitors,
our Cricket wireless division would correspondingly be adversely affected, perhaps materially.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Present participants in the wireless industry
also faces competition from other communications and technology companies seeking to capture customer revenue and brand dominance
with respect to the provision of wireless products and services. For example, Apple Inc. is packaging software applications and
content with its handsets, and Google Inc. has developed and deployed an operating system and related applications for mobile devices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our results of operations could be adversely affected
by higher loan losses resulting from a general economic slowdown or other negative economic conditions such as high unemployment.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Provision for loan losses, net of recoveries,
is one of our largest operating expenses, constituting approximately 7% of total revenues for the fiscal year ended December 31,
2011, and 3.7% of total revenues for the period ended March 31, 2012, with payday loan losses comprising most of the losses. Any
changes in economic factors that adversely affect our customers, such as an economic downturn or high unemployment, could result
in higher loan loss experiences than anticipated, which could in turn adversely affect our loan charge-offs and operating results.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>If estimates of our loan losses are not adequate to absorb
actual losses, our financial condition and results of operations may be adversely affected.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We maintain an allowance for loan losses
at levels to cover the estimated incurred losses in the collection of our loan portfolio outstanding at the end of each applicable
period. At the end of each period, management considers recent collection history to develop expected loss rates, which are used
to establish the allowance for loan losses. Our allowance for loan losses was $1.0 million at December 31, 2011 and $.9 million
at March 31, 2012. Our allowance for loan losses is an estimate, and if actual loan losses are materially greater than our allowance
for losses, our financial condition and results of operations could be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Because we maintain a significant supply of cash in our
locations, we may experience losses due to employee error and theft.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Because our business requires us to maintain
a significant supply of cash in our stores, we are subject to the risk of cash shortages resulting from employee error and theft.
We periodically experience employee error and theft in stores, which can significantly increase the operating losses of those stores
for the period in which the employee error or theft is discovered. We self-insure for employee error and theft at the store level.
If our controls to limit our exposure to employee error and theft at the store level and at our corporate headquarters do not operate
effectively or are structured ineffectively, our operating margins could be adversely affected, including by costs associated with
increased security and preventative measures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Failure to achieve and maintain effective internal controls
could limit our ability to detect and prevent fraud and thereby adversely affect our business and stock price.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Effective internal controls are necessary
for us to provide reliable financial reports. Nevertheless, all internal control systems, no matter how well designed, have inherent
limitations. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation. Our most recent evaluation of our internal controls resulted in our conclusion that our disclosure
controls and procedures were effective. Our inability to maintain an effective control environment may cause investors to lose
confidence in our reported financial information, which could in turn have a material adverse effect on our stock price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our reliance on information management and transaction
systems to operate our business exposes us to cyber incidents and hacking of our sensitive information if our outsourced service
provider experiences a security breach.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Effective information security internal
controls are necessary for us to protect our sensitive information from illegal activities and unauthorized disclosure in addition
to denial of service attacks and corruption of our data. In addition, we rely on the information security internal controls maintained
by our outsourced service provider. Despite utilization of a service provider that maintains the highest level of security around
our information systems, the sophistication of hackers continues to increase. Our most recent evaluation of ours and our service
providers&rsquo; internal controls resulted in a conclusion that our disclosure controls and procedures were effective. Nevertheless,
our inability to maintain effective controls or a relationship with an information technology provider that itself maintains effective
controls may increase our vulnerability to cyber attacks. Breaches of our information management system could also adversely affect
our business reputation and we could be subject to third-party lawsuits relating to the unauthorized disclosure of personal information.
Finally, significant information system disruptions could adversely affect our ability to effectively manage operations or reliably
report results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Regular turnover among our location managers and employees
makes it more difficult for us to operate our locations and increases our costs of operation.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We experience a relatively stable workforce
among our location managers and employees. Turnover interferes with implementation of operating strategies. Increases in our workforce
turnover in the future would likely increase our operating pressures and operating costs and could restrict our ability to grow.
Additionally, high turnover would create challenges for us in maintaining high levels of employee awareness of and compliance with
our internal procedures and external regulatory compliance requirements. In sum, high turnover would increase our training and
supervisory costs, and result in decreased earnings with corresponding greater risks of regulatory non-compliance.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Because we became public by means of a reverse merger,
we may not be able to attract the attention of major brokerage firms.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Additional risks to our investors may exist
since we became public through a &ldquo;reverse merger.&rdquo; Security analysts of major brokerage firms may not provide coverage
of our Company since, because we became public through a reverse merger, there is no incentive to brokerage firms to recommend
the purchase of our common stock. In addition, because of past abuses and fraud concerns stemming primarily from a lack of public
information about newly public businesses, there are many people in the securities industry and business in general who view reverse
merger transactions with suspicion. This may be the case even though our reverse merger transaction occurred in 2007. Without brokerage
firm and analyst coverage, there may be fewer people aware of us and our business, resulting in fewer potential buyers of our securities,
less liquidity, and lower stock prices for our investors than would be the case if we had become a public reporting company in
a more traditional manner.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our common stock trades only in an illiquid trading market.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Trading of our common stock is conducted
on the OTC Bulletin Board (OTCBB: WCRS). This has an adverse effect on the liquidity of our common stock, not only in terms of
the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and reduction
in security analysts&rsquo; and the media&rsquo;s coverage of us and our common stock. This may result in lower prices for our
common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our
common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, there has typically been very
little trading activity in our common stock. During 2011, the average daily trading volume (as reported by Google Finance) was
approximately 5,000 shares with the 52-week trading prices ranging from $0.01 to $0.06 per share. The trade volume was as low as
2,000 shares for all of March and April 2011. During the three-month period ended March 31, 2012, the average daily trading volume
was approximately 12,720 shares. The small trading volume will likely make it difficult for our shareholders to sell their shares
as and when they choose. Furthermore, small trading volumes generally depress market prices. As a result, you may not always be
able to resell shares of our common stock publicly at the time and prices that you feel are fair or appropriate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>There is not now and there may not ever be an active market
for shares of our common stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In general, there has been minimal trading
volume in our common stock. The small trading volume will likely make it difficult for our shareholders to sell their shares as
and when they choose. Furthermore, small trading volumes are generally understood to depress market prices. As a result, you may
not always be able to resell shares of our common stock publicly at the time and prices that you feel are fair or appropriate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We do not intend to pay dividends on our common stock
for the foreseeable future. We will, however, pay dividends on our convertible preferred stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">When permitted by Minnesota law, we are
required to pay dividends to the holders of our Series A Convertible Preferred Stock, each share of which carries a $2.10 stated
value. There are 10 million shares of Series A Convertible Preferred Stock outstanding. Our Series A Convertible Preferred Stock
entitles its holders to (i) a cumulative 10% dividend, compounded and payable on a quarterly basis; (ii) in the event of a liquidation
or dissolution of the Company, a preference in the amount of all accrued but unpaid dividends plus the stated value of such shares,
before any payment shall be made or any assets distributed to the holders of any junior securities; (iii) convert their preferred
shares into our common stock on a share-for-share basis, subject to adjustment; and (iv) vote their preferred shares on an as-if-converted
basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have the right to redeem some or all
such preferred shares, at any time upon 60 days&rsquo; advance notice, at a per-share price of $3.50 plus accrued but unpaid dividends.
Holders of Series A Convertible Preferred Stock have no preemptive or cumulative-voting rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not anticipate that we will pay any
dividends for the foreseeable future on our common stock. Accordingly, any return on an investment in us will be realized only
when you sell shares of our common stock. When legally permitted, we must expect to pay dividends to our preferred shareholders.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>USE OF PROCEEDS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We expect that the gross proceeds from the
rights offering will be approximately $4,500,000, and that our offering and related expenses will be approximately $100,000. We
intend to use the net proceeds of the rights offering primarily to provide capital to grow our current business through acquisitions
or to add new and complementary businesses, and to provide additional liquidity for working capital and general corporate purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DILUTION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Purchasers of our common stock in the rights
offering will experience an immediate and substantial dilution of the net tangible book value of the shares purchased. At March
31, 2012, we had a net tangible book value of approximately $ , or $ per share of our common stock. After giving effect to the
sale of shares of our common stock in the rights offering and assuming the sale of the total gross amount of shares for gross proceeds
of $4,500,000, and after deducting estimated transaction and offering expenses of $100,000, the pro forma net tangible book value
at March 31, 2012, attributable to common shareholders would have been $ , or $ per share of our common stock. This amount represents
an immediate dilution to purchasers in the rights offering of $ . The following table illustrates this per share dilution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="width: 79%; padding-right: 5.4pt; padding-left: 5.4pt">Subscription Price</TD>
    <TD STYLE="width: 10%; padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="width: 11%; padding-right: 5.4pt; padding-left: 5.4pt">$</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Net tangible book value per share at March 31, 2011, before the rights offering</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">$0.073</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Net increase in pro forma tangible book value per share attributable to the rights offering</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">$</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Pro forma net tangible book value per share after giving effect to the rights offering</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">$</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Dilution in pro forma net tangible book value per share to purchasers</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">$</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CAPITALIZATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table describes capitalization
as of March 31, 2012, on an actual basis and as adjusted to give effect to the rights offering, assuming gross proceeds from the
rights offering of $4,500,000 million and before deducting our estimated offering expenses of $100,000. As-adjusted balances are
subject to change based upon final participation in the rights offering. You should read this table together with the information
under the heading &ldquo;Management&rsquo;s Discussion and Analysis of Results of Operations and Financial Condition&rdquo; and
our unaudited consolidated financial statements and related notes and other financial information in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center">As of March 31, 2012</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">Actual</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">As Adjusted</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center">(in thousands)</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Cash and cash equivalents</TD><TD STYLE="width: 2%; font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">2,486,834</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"></TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Current liabilities:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.25in">Accounts payable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,475,506</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left"></TD><TD STYLE="font-size: 10pt; text-align: right"></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.25in">Current portion long-term debt</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">696,910</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.25in">Preferred dividends payable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4,075,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Deferred revenue</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">250,205</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5in">Total current liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">7,497,621</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">Long-term liabilities:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.25in">Notes payable, long-term</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,229,278</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Deferred income taxes</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">580,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.5in">Total long-term liabilities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,809,278</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.5in">Total liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">9,306,899</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Shareholders&rsquo; Equity:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -9pt; padding-left: 27pt">Series A Convertible Preferred Stock 10% cumulative dividends, $0.01 par value, $2.10 stated value, 10,000,000 shares authorized, issued and outstanding</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">100,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -9pt; padding-left: 27pt">Common stock no par value, 240,000,000 shares authorized, 5,397,780 shares issued and outstanding</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">-</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.25in">Additional paid-in capital</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">17,914,543</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Accumulated deficit</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(5,659,438</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.5in">Total shareholders&rsquo; equity</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">12,355,105</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 0.75in">Total capitalization</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">21,662,004</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION<BR>
AND RESULTS OF OPERATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>The following discussion should be read
in conjunction with the financial statements and related notes that appear elsewhere in this prospectus. This discussion contains
forward-looking statements that involve significant uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including those discussed in &ldquo;Risk Factors&rdquo; elsewhere
in this report. For further information, see &ldquo;Risk Relating to Forward-Looking Statements&rdquo; above.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>OVERVIEW</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 and installment loans, check cashing and other money services, including title loans. At the close
of business on March 31, 2012, we owned and operated 52 stores in nine states, including Colorado, Iowa, Kansas, Nebraska, North
Dakota, South Dakota, Utah, Wisconsin and Wyoming.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We provide short-term consumer loans&mdash;known
as &ldquo;payday&rdquo; or &ldquo;cash advance&rdquo; loans&mdash;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&rsquo;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
the cash advance 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. Installment loans provide customers with cash in exchange for a promissory note with
a maturity of generally three to six months. The fee and interest rate on installment loans vary based on applicable regulations.
Like cash advance or payday loans, installment loans are unsecured. All of our payday loans, installment loans and other services
are subject to state regulations (which vary from state to state), federal regulations and local regulation, where applicable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also operate (through PQH Wireless, Inc.)
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. As of March 31, 2012, we operated 48 Cricket wireless retail stores in 13 states (Arizona, Colorado,
Idaho, Illinois, Indiana, Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon and Texas).&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our expenses primarily relate to the operations
of our various stores. The most significant expenses include salaries and benefits for our store employees, phones and accessories,
provisions for payday loan losses and occupancy expenses for our leased real estate. Our other significant expenses are general
and administrative, which includes compensation of employees, professional fees for accounting, audit and legal services, and management
/ consulting fees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">With respect to our cost structure, phone
and accessory cost of sales and salaries and benefits are two of our largest costs and are driven primarily by the number of storefronts
operated throughout the period and seasonal fluctuation in sales volumes. Occupancy costs make up our third largest expense item.
Our provision for losses is also a significant expense. We have experienced seasonality in our Cricket 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We evaluate our stores based on revenue
growth, gross profit contributions and loss ratio (which, for the payday segment, is losses as a percentage of revenues), with
consideration given to the length of time the storefront has been open and its geographic location. We evaluate changes in comparable
storefront financial and other measures on a routine basis to assess operating efficiency. We define comparable storefronts as
those that are open during the full periods for which a comparison is being made. For example, comparable storefronts for the annual
analysis we undertook as of December 31, 2011 have been open at least 24 months on that date. We monitor newer storefronts for
their progress toward profitability and rate of loan growth or units sold.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The payday loan industry is significantly
affected by 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
28% of our 2011 total payday segment 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">With payday loan industry growth and fragmentation,
we believe there are opportunities to grow our business, primarily through acquisitions as opposed to organic growth. We continually
evaluate opportunities in numerous states in which we currently operate and evaluate the regulatory environment and market potential
in the various states in which we currently do not have stores. In addition to expanding our geographic reach, our strategic expansion
plans also 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
will also explore growth opportunity through the conversion (or partial conversion) of payday stores into pawn 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 concentrated geographically.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have 10,000,000 shares of Series A Convertible
Preferred Stock (10% cumulative dividends, $0.01 par value, $2.10 stated value) authorized, issued and outstanding. One-fourth
of the $2.1 million annual preferred dividend accrues each quarter, whether paid or not. Our Board of Directors votes to approve
payment of dividends when appropriate and as permitted by Minnesota law. The dividend can be paid either in cash or in shares of
our common stock at the discretion of the preferred shareholder. This preferred dividend is included in the net income or loss
available to common shareholders. As a result, we had a net loss available to common shareholders in 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our obligation to pay preferred dividends
significantly impacts our cash flow and our ability to grow through acquisitions, which is the most significant way in which we
expect to grow. For instance, our use of cash in satisfaction of the dividend-payment obligations prevents us from using that cash
as part of acquisition transactions. The present condition of the credit markets available to businesses in our industry also makes
it difficult for us to surmount this obstacle through borrowing. In addition, our use of cash in satisfaction of the dividend-payment
obligations requires us to manage our cash in ways that we will ensure the availability of cash for lending to our payday loan
customers during the fall and winter months, which is typically the busiest time of year for payday lending.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The preferred dividend obligation also significantly
affects our net income available to common shareholders. For example, absent the 2011 preferred dividend of $2.1 million, our net
income available to common shareholders would have been approximately $1.44 million. For this reason, we are continuing to explore
ways in which we may be able to retire or redeem the Series A Convertible Preferred Stock. During 2011, we had engaged in discussions
with WCR, LLC regarding the conversion of preferred stock on terms more favorable than those contained in the Certificate of Designation
for the preferred stock, but we were unable to reach a definitive agreement in this regard. It is difficult for us to forecast
what success, if any, we may have in this endeavor since the preferred shareholders are not obligated to surrender their shares,
exchange them, or engage in any sort of recapitalization transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>RESULTS OF OPERATIONS:</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>THREE MONTHS ENDED MARCH 31, 2012 COMPARED TO THREE MONTHS
ENDED MARCH 31, 2011</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the three-month period ended March 31,
2012, net income was $.79 million compared to net income of $.41 million for the three months ended March 31, 2011. During the
three months ended March 31, 2012, income from operations before income taxes was $1.29 million compared to $.67 million for the
three months ended March 31, 2011. The major components of revenues, store expenses, general and administrative expenses, and income
tax expense are discussed below.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><B><I>Revenues</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Revenues totaled $7.52 million for the three
months ended March 31, 2012, compared to $5.04 million for the three months ended March 31, 2011. The increase in total revenues
resulted primarily from higher Cricket division revenue which can be attributed to our recent acquisitions. During the three-month
periods ended March 31, 2012 and 2011, we originated approximately $15.8 million and $15.2 million in cash advance loans, respectively.
Our average loan (including fees) totaled approximately $383 and $378 during the three-month periods ended March 31, 2012 and 2011,
respectively. Our average fee for the three-month periods ended March 31, 2012 and 2011 was $54 and $55, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table summarizes our revenues
for the three months ended March 31, 2012 and 2011, respectively:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Three Months&nbsp;Ended&nbsp; <BR>March 31,</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Three Months&nbsp;Ended&nbsp; <BR>March 31,</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: center">(percentage&nbsp;of&nbsp;revenues)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 44%; font-size: 10pt; text-align: left">Payday loan fees</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">2,307,901</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">2,325,747</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">30.7</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">46.2</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Phones and accessories</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,741,696</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,586,915</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">36.5</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">31.5</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Cricket service fees</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,995,025</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">554,696</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">26.5</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">11.0</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Installment interest income</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">196,509</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2.6</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Check cashing fees</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">195,812</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">232,542</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2.6</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4.6</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Other income and fees</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">79,827</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">338,731</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1.1</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">6.7</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">Total</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">7,516,770</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">5,038,631</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">100.0</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">100.0</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Store Expenses</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Total expenses associated with store operations
for the three months ended March 31, 2012 were $5.31 million, compared to $3.54 million for the three months ended March 31, 2011,
or a 50% increase 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 relating to our store leaseholds, advertising
expenses, depreciation of store equipment and leasehold improvements, amortization of intangible assets and other expenses associated
with store operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Overall, our most significant store expenses
for the three months ended March 31, 2012 and 2011 related to phone and accessory costs, salaries and benefits for our store employees,
occupancy costs and provision for loan losses. A discussion and analysis of the various components of our store expenses appears
below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Phone and Accessories Cost of Sales</I>.
For the three months ended March 31, 2012, our costs of sales were $1.84 million compared to $.96 million for the same period in
2011. The increase in our Cricket Wireless segment phone and accessory costs resulted from operating additional storefronts in
2012 and from a change in the structure of dealer compensation from Cricket, which change decreased our margins while increasing
fees to dealers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Salaries and Benefits</I>. Payroll and
related costs at the store level were $1.69 million compared to $1.11 million for the three-month periods ended March 31, 2012
and 2011, respectively. Year over year, we operated one additional payday store and 17 additional Cricket storefronts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Provisions for Loan Losses</I>. For the
three months ended March 31, 2012, our provisions for loan losses were $.28 million compared to $.18 million for the three months
ended March 31, 2011. Our provisions for loan losses represented approximately 12.0% and 7.7% of our loan fee revenue for the three
months ended March 31, 2012 and 2011, respectively. The increase can be attributed to our introduction of an installment loan product
in Wisconsin, which has higher default rates than payday loans. Due to our inability to foretell the scope and duration of the
current economic recovery, we believe there are currently uncertainties in how significant our total 2012 loan losses may be and
how they may differ from 2011.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Occupancy Costs</I>. Occupancy expenses,
consisting mainly of store leases, were $.55 million for the three months ended March 31, 2012 versus $.42 million for the three
months ended March 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Advertising</I>. Advertising and marketing
expenses remained consistent at $.08 million for the three months ended March 31, 2012 and 2011. In general, we expect that our
marketing and advertising expenses for 2012 will increase due to our acquisition of additional Cricket storefronts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Depreciation</I>. Depreciation, relating
to store equipment and leasehold improvements, increased to $.07 million for the three months ended March 31, 2012 compared to
$.06 million for the three months ended March 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Amortization of Intangible Assets</I>.
Amortization of intangible assets decreased from $.12 million for the three months ended March 31, 2011 to $.06 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Other Store Expenses</I>. Other expenses
increased to $.75 million for the three months ended March 31, 2012 from $.61 million for the three months ended March 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>General and Administrative Expenses</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Total general and administrative costs for
the three months ended March 31, 2012 were $.92 million compared to $.83 million for the period ended March 31, 2011. For the three
months ended March 31, 2012, 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 and analysis of the various
components of our general and administrative costs appears below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Salaries and Benefits</I>. Salaries and
benefits expenses for the three months ended March 31, 2012 were $.53 million, a $.08 million increase from the $.45 million in
such expenses during period ended March 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Interest</I>. Interest expense for the
three months ended March 31, 2012 was $.08 million compared to $.09 million for the three months ended March 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Other General and Administrative Expenses</I>.
Other general and administrative expenses, such as professional fees, management and consulting fees, utilities, office supplies,
and other minor costs associated with corporate headquarters activities, increased $.01 million to $.30 million for the three months
ended March 31, 2012 compared to $.29 million from the three months ended March 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Income Tax Expense</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Income tax expense for the three months
ended March 31, 2012 was $.50 million compared to income tax expense of $.26 million for the three months ended March 31, 2011,
an effective rate of 39% and 38%, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>RESULTS OF OPERATIONS:</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>YEAR ENDED DECEMBER 31, 2011 COMPARED TO YEAR ENDED DECEMBER
31, 2010</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the year ended December 31, 2011, net
income was $1.44 million compared to a net income of $1.35 million in 2010. Income from continuing operations before income taxes
was $2.32 million in 2011 compared to $2.10 million in 2010. The major components of each of revenues, store expenses, general
and administrative expenses, total operating expenses and income tax expense are discussed below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Revenues</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Revenues totaled $19.49 million in 2011
compared to $17.98 million in 2010, an increase of $1.51 million or 8.40%. The increase in total revenues resulted primarily from
the following factors impacting the Cricket Wireless division: an increase in the number of Cricket storefronts in the last four
months of 2011 compared to 2010 and a higher per unit selling price of phones. We originated approximately $67.5 million in payday
loans during 2011 compared to $71.88 million in payday loans during the prior year. The average loan (including fee) totaled $382
in 2011 versus $367 in the prior year. Our average fee for 2011 was $55 compared to $54 for 2010. We closed four payday storefronts
in Montana late in the fourth quarter of 2010 because of recent state legislation. Revenues from Cricket phone sales totaled $4.59
million in 2011 compared to $4.09 million in 2010. Cricket service fee revenue totaled $3.74 million in 2011 compared to $1.42
million in 2010, an increase related primarily to a change in dealer compensation arrangement in 2011. We had 49 Cricket retail
storefronts open and operating during at least some part of fiscal 2011 compared to 37 storefronts during fiscal 2010. During 2011,
we added 18 Cricket storefronts and closed four. In comparison, during 2010, we added four Cricket storefronts and closed six.
Other revenues, including installment interest income, check cashing, title loans, service change fees and other sources, totaled
$1.50 million and $1.86 million for 2011 and 2010, respectively.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table summarizes our revenues:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year Ended December 31,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid; text-align: center">Year Ended December 31,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: center">(percentage of revenues)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 44%; font-size: 10pt; text-align: left; padding-left: 0">Payday loan fees</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">9,663,130</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">10,607,136</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">49.6</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">59.0</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Phones and accessories</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4,585,584</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4,094,049</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">23.5</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">22.8</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Cricket service fees</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,741,495</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,419,446</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">19.2</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">7.9</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Installment interest income</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">538,273</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2.8</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Check cashing fees</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">682,094</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">739,733</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3.5</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4.1</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0">Other income and fees</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">277,344</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,118,083</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1.4</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">6.2</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt; padding-left: 0">Total</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">19,487,920</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">17,978,447</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">100</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">%</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">100</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We expect that our sources of revenue for
2012 may continue to diversify as we continue to improve and increase sales in our Cricket retail operations and look to open new
Cricket retail and pawn storefronts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Store Expenses</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Total expenses associated with store operations
for 2011 were $14.10 million compared to $12.90 million for 2010, an increase of $1.20 million or 9.30%. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Overall, our most significant increases
in store expenses from 2011 to 2010 related to salaries and benefits for our store employees, the provision for loan losses, and
phones and accessories. Our most significant decrease in store expenses over that same period relates to our costs of occupancy.
A discussion and analysis of the various components of our store expenses appears below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Salaries and Benefits</I>. Payroll and
related costs at the store level were $4.70 million in 2011 compared to $4.58 million in 2010, an increase of $.13 million. This
increase is a result of an increase in the number of storefronts operating throughout 2011. As a result of additional Cricket retail
storefronts in 2011, we expect that salaries and benefits for 2012 will increase because the additional storefronts will be operating
the entire year. Our salaries and benefits expenses will further increase if we add additional storefronts in 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Provisions for Loan Losses</I>. Our provision
for losses for 2011 totaled $1.40 million and $1.28 million for 2010. Our provision for loan losses as a percentage of loan fee
revenue was 14.5% during 2011 versus 12.1% during 2010. The less favorable loss ratio is due primarily to higher loss percentages
with installment lending. Due to our inability to foretell the speed and scope of the current economic recovery or the economy
in general, we believe there are currently uncertainties in what loan losses for 2012 may be.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Phone and Accessories Cost of Sales.</I>&nbsp;&nbsp;The
increase in our Cricket Wireless phone and accessory revenues resulted in corresponding increase in costs of sales.&nbsp;&nbsp;For
the year ended December 31, 2011, our costs of sales were $2.86 million compared to $1.71 million in 2010.&nbsp;&nbsp;Also contributing
to the increase was a 2011 change in the dealer compensation arrangement with Cricket that resulted in lower margins, partially
offset by increased fees income.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Occupancy Costs</I>. Occupancy expenses,
consisting primarily of store leases were $1.69 million during 2011 compared to $1.85 million in 2010, a decrease of $.16 million
primarily resulting from a higher number of storefront days (number of storefronts times days leased for year) in 2010 compared
to 2011. Occupancy expenses as a percentage of revenues decreased from 10.3% in 2010 to 8.65% in 2010.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Advertising</I>.&nbsp;&nbsp;Advertising
and marketing related expense was $.33 million in 2011 compared to $.36 million in 2010. We believe that our advertising expenses
in 2012 may increase slightly over those in 2011, mainly as a result of the need to increase advertisement of our Cricket wireless
cellular segment and for pawn stores we open in 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Depreciation</I>. Depreciation decreased
by $.01 million in 2011. Depreciation was $.27 million for 2011 and $.28 million for 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Amortization of Intangible Assets</I>.
Amortization of&nbsp;the customer relationship&nbsp;and other intangible assets was $.44 million for 2011 and $.52 million for
2010. This has been decreasing as intangibles become fully amortized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Other Store Expenses</I>. Other store
expenses increased from $2.33 million in 2010 to $2.42 million in 2011. Other store expenses include bank fees, collection costs,
repair and maintenance, supplies, telephone, utilities and network lines, and others. The increase in these expenses during 2011
was primarily due to increased supplies related to our Cricket store acquisitions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>General and Administrative Expenses</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Total general and administrative costs for
2011 were $3.07 million compared to $2.98 million for 2010. The major components of these costs for 2011 are salaries and benefits
for our corporate headquarters operations and executive management, interest expense, and other general and administrative expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Salaries and Benefits</I>. Salaries and
benefits expenses for 2011 were $1.74 million compared to $1.53 million for 2010, with the increase being mainly attributable to
an increase in the management bonus pool established pursuant to the employment agreement with the Company&rsquo;s CEO. The Company
expects that during 2012 salaries and benefits expenses associated with executive management and corporate headquarters will remain
consistent with their 2011 levels.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Interest Expense</I>. The Company had
$.29 million of interest expense in 2011 compared to $.41 million in 2010, a 29.3% decrease due to a reduction in notes payable
balances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Other General and Administrative Expenses</I>.
Other general and administrative expenses, such as professional fees, management / consulting fees, utilities, office supplies,
and other minor costs associated with corporate headquarters activities were $1.01 million in 2011 compared to $1.03 million during
2010. The decrease in these expenses is mainly attributable to a decrease in nonrecurring professional fees, partially offset by
management / consulting fees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Total Operating Expenses</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Total operating expenses for 2011 and 2010
were $17.17 million and $15.88 million, respectively. We anticipate our total operating expenses in 2012 to increase compared to
2011 due to the increase in number of storefronts during 2011 and 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Income Tax Expense</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Income tax expense&nbsp;on continuing operations
increased&nbsp;to $.88 million in 2011 compared to $.75 million in 2010 for an effective rate of 38% and 36%, respectively.</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>LIQUIDITY AND CAPITAL RESOURCES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Summary cash flow data is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="RIGHT" STYLE="border-collapse: collapse; width: 95%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three Months Ended March 31,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: left; padding-left: 0">Cash flows provided (used) by:</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: 9pt; padding-left: 0">Operating activities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2,240,883</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,065,420</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: 9pt; padding-left: 0">Investing activities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(377,257</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(13,574</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; text-indent: 9pt; padding-left: 0">Financing activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(1,286,234</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(1,172,162</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Net increase (decrease) in cash</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">577,392</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(120,316</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; padding-left: 0">Cash, beginning of period</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">1,909,442</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">2,092,386</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt; padding-left: 0">Cash, end of period</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">2,486,834</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">1,972,070</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE><BR STYLE="clear: both">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At March 31, 2012, we had cash of $2.49
million compared to cash of $1.91 million on December 31, 2011. 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 March 31, 2013. Our
expected short-term uses of available cash include the funding of operating activities (including anticipated increases in payday
loans), the financing of expansion activities, including new store openings or store acquisitions and the repayment of long-term
debt.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Because of the constant threat of regulatory
changes to the payday lending industry, we believe it will be difficult for us to obtain debt financing from traditional financial
institutions. Financing we may obtain from alternate sources is likely to involve higher interest rates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On October 18, 2011, we entered into a borrowing
arrangement with River City Equity, Inc. and delivered a related long-term promissory note in favor of River City Equity. The borrowing
arrangement allows us to borrow up to $2,000,000 at an interest rate of 12% per annum, with interest payable on a monthly basis.
The note matures on September 30, 2013, on which date all unpaid principal and accrued but unpaid interest thereon is due and payable.
The note includes a prepayment penalty and, under certain circumstances, permits River City Equity to obtain a security interest
in all of the Company&rsquo;s assets. As of March 31, 2011, $1,200,000 had been advanced under this arrangement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our overall cash and liquidity position
has been significantly enhanced by the past and current willingness of the holders of our Series A Convertible Preferred Stock
to not insist that the Company pay dividends to those shareholders to the greatest extent permitted by Minnesota state law. Minnesota
state law indicates that a corporation can only pay a dividend in circumstances where the corporation will be able to pay its debts
in the ordinary course of business after making the dividend. If our preferred shareholders were to insist that the Company pay
dividends to the greatest extent permitted by state law (as required by the terms of the preferred stock), our liquidity position
would likely be negatively affected, perhaps materially, such that we would be required to arrange for or engage in additional
borrowing to ensure that we would have capital available to fund cash advance loans and otherwise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>CRITICAL ACCOUNTING POLICIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our significant accounting policies are
discussed in Note 1, &ldquo;Nature of Business and Summary of Significant Accounting Policies,&rdquo; of the notes to our consolidated
financial statements included in this prospectus. We believe that the following critical accounting policies affect the more significant
estimates and assumptions used in the preparation of our consolidated financial statements:</P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Loans Receivable Allowance</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We maintain a loan loss allowance for anticipated
losses for our payday, installment 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. We also periodically perform
a look-back analysis on our loan loss allowance to verify the historical allowance established tracks with the actual subsequent
loan write-offs and recoveries. We are aware that as conditions change, we may also need to make additional allowances in future
periods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Included in loans receivable are payday
loans that are currently due or past due and payday loans that have not been repaid. This generally is evidenced where a customer&rsquo;s
personal check has been deposited and the check has been returned due to non-sufficient funds in the customer&rsquo;s account,
a closed account, or other reasons. Also included in loans receivable are current and delinquent installment and title loans. Loans
are carried at cost less the loans receivable allowance. We do not specifically reserve for any individual loan. We aggregate loan
types for purposes of estimating the loss allowance using a methodology that analyzes historical portfolio statistics and management&rsquo;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. We utilize a software program to assist with the tracking of its historical
portfolio statistics.&nbsp;As a result of the Company&rsquo;s collection efforts, it historically writes off approximately 42%
of the returned items.&nbsp;&nbsp;Based on days past the check return date, write-offs of returned items historically have tracked
at the following approximate percentages:&nbsp;&nbsp;1 to 30 days &ndash; 42%; 31 to 60 days &ndash; 66%; 61 to 90 days &ndash;
82%; 91 to 120 days &ndash; 88%; and 121 to 180 days &ndash; 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 loans receivable
allowance as a result of historical loan performance, current and expected collection patterns and current economic trends is recorded.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At December 31, 2011 and 2010 our outstanding
loans receivable aging was as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 62%; font-size: 10pt">Current</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 15%; font-size: 10pt; text-align: right">4,626,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 15%; font-size: 10pt; text-align: right">4,542,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">1-30</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">297,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">276,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">31 &ndash; 60</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">220,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">234,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">61 &ndash; 90</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">223,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">209,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt">91 - 120</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">171,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">220,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">121 &ndash; 150</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">189,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">227,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">151 &ndash; 180</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">163,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">201,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5,889,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5,909,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Allowance for losses</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(1,001,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(1,165,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">4,888,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">4,744,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A rollforward of our loans receivable allowance
for the years ended December 31, 2011 and 2010 is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year Ended December 31,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 72%; font-size: 10pt; text-align: left; padding-left: 0">Loans receivable allowance, beginning of year</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,165,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,237,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Provision for loan losses charged to expense:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,397,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,280,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0; padding-bottom: 1pt">Charge-offs, net</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(1,561,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 1pt solid">(1,352,000</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 0">Loans receivable allowance, end of year</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">1,001,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">1,165,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Valuation of Long-lived and Intangible
Assets</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company assesses the possibility of
impairment of long-lived and intangible assets whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. Factors that could trigger an impairment review include significant underperformance relative to expected historical
or projected future cash flows, significant changes in the manner of use of acquired assets or the strategy for the overall business,
and significant negative industry events or trends. In addition, we conduct an<FONT STYLE="color: black"> annual goodwill impairment
test as of October 1 each year</FONT>. W<FONT STYLE="color: black">e assess our goodwill for impairment at the reporting unit level
by applying a fair value test. This fair value test involves a two-step process. The first step is to compare the carrying value
of our net assets to our fair value. If the fair value is determined to be less than the carrying value, a second step is performed
to measure the amount of the impairment, if any. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A reporting unit is an operating segment,
or under certain circumstances, a component of an operating segment that constitutes a business. Our reporting units consist of
multiple state and multi-state based operations and therefore the cessation of operations in any particular state does not imply
that goodwill for the relevant reporting unit will be impaired.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Due to the effect of our capital structure
involving preferred stock and related cumulative preferred dividends, the market capitalization approach of valuing the reporting
unit as a whole is not practical. The discounted future cash flows method is utilized in estimating value. When estimated future
cash flows are less than the carrying value of the net assets and related goodwill, an impairment test is performed to measure
and recognize the amount of the impairment loss, if any. Impairment losses, which are limited to the carrying value of goodwill,
represent the excess of the carrying amount of a reporting unit's goodwill over the implied fair value of that goodwill.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In determining the estimated future discounted
cash flows, we consider current and projected future levels of income, as well as strategic plans, business trends, prospects,
and market and economic conditions. Impairment tests involve the use of judgments and estimates related to the fair market value
of the business operations with which goodwill is associated, taking into consideration both historical operating performance and
anticipated financial position and future earnings. We believe that the estimates of future cash flows and fair value determined
as of October 1, 2011 are reasonable. Changes in estimates of those cash flows and fair value, however, could affect the evaluation.
<FONT STYLE="color: black">Based upon this evaluation, we concluded that the fair value exceeded the carrying value of net assets
and there was no impairment. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of December&nbsp;31, 2011, we evaluated
whether any triggering events or changes in circumstances had occurred subsequent to our annual impairment test. As part of this
evaluation, we considered additional qualitative factors, including whether there had been any significant adverse changes in legal
factors or in our business climate, adverse action or assessment by a regulator, unanticipated competition, loss of key personnel
or likely sale or disposal of all or a significant portion of our reporting unit. This analysis resulted in a determination that
no triggering events or changes in circumstances had occurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>OFF BALANCE SHEET ARRANGEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have no off balance
sheet arrangements.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>OVERVIEW</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Western Capital Resources, Inc. is a Minnesota
corporation that maintains two operating segments: one provides short-term consumer loans, commonly referred to as cash advance
or &ldquo;payday&rdquo; loans, and the other operates Cricket retail cellular wireless stores.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Payday operations are conducted under our
wholly owned subsidiary Wyoming Financial Lenders, Inc. The Federal Trade Commission describes these loans as &ldquo;small, short-term
high-rate loans.&rdquo; Our payday loans generally are offered and made in exchange for fees that, if treated as interest, are
at a rate extraordinarily higher than prime and are made to individuals who do not typically qualify for prime rate loans. As a
consequence, our loans may be considered a type of subprime loan. In Wisconsin and Colorado, the Payday division provides short-term
installment loans. The installment loan product has a rate of interest significantly higher than traditional financial institutions.
At March 31, 2012, we operated 52 payday lending stores in nine states, including Colorado, Iowa, Kansas, Nebraska, North Dakota,
South Dakota, Utah, Wisconsin and Wyoming. Our provision of payday and installment loans is typically heavily regulated by the
various states in which we operate, and our payday lending and installment loan business is extremely susceptible to the adverse
effects of any changes in federal or state laws and regulations that may further restrict or flatly prohibit payday lending.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Through our payday segment, we also provide
title and ancillary consumer financial products and services that are complementary to our payday and installment lending business,
such as check-cashing services, money transfers and money orders. Our check-cashing services involve the cashing of checks for
a fee; money-transfer services involve the transfer of money by wire for a fee; and our money-orders services involve the issuing
of money orders for a fee. We believe these services are complementary since customers typically come to our stores for financial
reasons and to procure financial services (i.e., obtain a loan). Once the loan has been obtained, a customer may, for instance,
decide to wire a payment of money or obtain a money order to satisfy a debt or other obligation. Our loans and other services are
subject to state regulations (which vary from state to state), and federal and local regulations, where applicable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our second segment operates retail stores
selling Cricket cellular phones and accessories. We are a premier Cricket dealer. Cricket phones are prepaid cellular phones that
function for a period of time for a flat fee, without usage limitations and without any long-term contract or commitment required
from the consumer. At March 31, 2012, we owned and operated 48 Cricket wireless retail stores in 13 states, including Arizona,
Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon and Texas. While there are state regulations
that affect our provision of Cricket phone products and services, our Cricket phone business is not highly susceptible to the adverse
effects of changes in federal or state laws and regulations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the fiscal year ended December 31, 2011,
each of our major lines of business (i.e., payday and installment lending, and our Cricket wireless business) generated associated
revenues. In 2011, we generated approximately:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">$10.20 million in payday lending revenues representing approximately
52.3% of our total revenues,</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">$4.59 million in phone and accessory sales representing approximately
23.6% of our total revenues, and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">$3.74 million in Cricket related sales and service fees representing
approximately 19.2% of our total revenues.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The tables below summarize our financial
results and condition as of March 31, 2012 and 2011 (unaudited) and as of December 31, 2011 and 2010 (audited).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="RIGHT" STYLE="border-collapse: collapse; width: 95%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31, 2012</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31, 2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 66%; font-size: 10pt; padding-left: 0">Revenues</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 13%; font-size: 10pt; text-align: right">7,516,770</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 13%; font-size: 10pt; text-align: right">5,083,631</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Net income (loss) to common shareholders</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">264,042</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(112,631</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,851,373</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">8,418,534</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Current liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,497,621</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,883,414</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Total assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">21,662,004</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">22,021,776</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Total liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">9,306,899</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">9,623,479</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Shareholder equity</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">12,355,105</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">12,398,297</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE><BR STYLE="clear: both">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="RIGHT" STYLE="border-collapse: collapse; width: 95%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: center; padding-left: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31, 2011</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31, 2010</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 66%; font-size: 10pt; padding-left: 0">Revenues</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 13%; font-size: 10pt; text-align: right">19,487,920</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 13%; font-size: 10pt; text-align: right">17,978,447</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Net loss to common shareholders</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">664,769</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">751,059</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">8,418,534</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,958,443</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Current liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,883,414</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">6,452,628</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Total assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">22,021,776</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">20,770,882</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Total liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">9,623,479</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">7,707,816</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Shareholder equity</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">12,398,297</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">13,063,066</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE><BR STYLE="clear: both">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The above figures include an assumed preferred
stock dividend relating to our Series A Convertible Preferred Stock in the amount of $2.1 million in 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>PAYDAY LENDING BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>General Description</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The short-term consumer loans we provide
are commonly referred to as &ldquo;payday loans&rdquo; or &ldquo;cash advance&rdquo; loans. Such loans are referred to as &ldquo;payday
loans&rdquo; because they are typically made to borrowers who have no available cash and promise to repay the loan out of their
next paycheck. In some cases, these same types of loans are referred to as &ldquo;deferred deposit advances&rdquo; because the
borrowers, instead of funding repayment of the loan out of a paycheck, promise to repay the loan with their next regular fixed-income
payment, such as a social security check.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">When we make cash advance or &ldquo;payday&rdquo;
loans, we provide our customers with cash in exchange for a promissory note with a maturity of generally up to four weeks that
is supported by that customer&rsquo;s post-dated personal check for the aggregate amount of the loan, plus a fee. During 2011,
we offered payday loans typically ranging from $10 to $500, with the average loan amount being approximately $327. Approximately
75.0% of our loan transactions are made for a period of up to four weeks and approximately 25.0% of our loan transactions involve
loans whose initial maturity extends beyond four weeks. To repay the payday loans, customers may pay with cash, in which case their
personal check is returned to them, or allow their personal check to be presented to their bank for collection.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As part of our payday lending business,
we offer short-term installment loans in Colorado and Wisconsin. In 2011 approximately 5.3% of loan revenue was derived from installment
lending.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>The Payday Loan Process</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Customers seeking to obtain a payday loan
must:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">complete a loan application</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">maintain a personal checking account</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">have a suitable source of income</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">have a valid driver&rsquo;s license or other form of picture ID</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">not otherwise be in default on a loan from us where available</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">enter into a standard loan agreement and promissory note with us,
and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">deliver their personal post-dated check.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our standard payday loan application with
customers provides that we will not cash their check until the due date of the associated loan. 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 loans are subject to state, federal, and where applicable, local regulations. State and local regulations are not uniform.
Where permitted by state regulation, a customer may renew a loan after full payment in cash of the fee associated with the original
loan. When applicable, a customer renewing a loan signs a new promissory note and provides us with a new check.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We require that a payday loan customer have
and maintain a personal checking account for a number of reasons. First, we need to ascertain that the personal post-dated check
we receive from that customer is written against a valid and existing checking account. Second, we review recent bank statements
from the checking account for proof that the customer&rsquo;s statements to us, and the representations made to us in the related
loan agreement, relating to their employment and level of income are accurate. Third, we also review the recent bank statements
for evidence of any returned checks. If an applicant had multiple returned checks on their recent bank statements, we are unlikely
to extend a loan to that person.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Ordinarily, we deem items such as a recent
pay stub, or a bank statement evidencing periodic deposits, as sufficient proof of current employment. We do not, however, independently
verify that a borrowing customer is employed at the time of a loan. Furthermore, we do not require or request any information relating
to whether a borrowing customer&rsquo;s employment is on a full-time or part-time, or hourly or salaried, basis; nor do we otherwise
make any independent verification regarding these kinds of employment-related facts. We make loans without proof of employment
and without a recent bank statement only to repeat customers, who have not previously defaulted on loans we have made to them,
in states that do not require those items as prerequisites for a loan. An employment income source is determined to be &ldquo;suitable&rdquo;
if it appears to be valid from our review of the bank statements a borrower provides us, and any pay stubs they may also offer
as evidentiary support for their employment. Generally, we do not advance a payday customer more than 25% of the monthly income
that they appear to earn, based on our review of applicable documentation the customer provides to us. We apply this limitation
to all of our customers and in all circumstances, including attempts to roll over loans, except for repeat customers who have had
repaid all of their prior loans on time. For installment customers, we will loan up to 35% of their monthly income.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not undertake any formal or informal
credit check of borrowers, or any review of their credit history in connection with a proposed loan transaction. When making a
loan to a first-time customer, we obtain reports from a third-party vendor that summarizes recent credit requests, existing bad
debt, and existing delinquencies. These reports are provided by Teletrack. If an applicant has a poor Teletrack report showing
multiple recent credit requests or existing delinquencies, or more than one returned check on their recent bank statements, we
are unlikely to extend a loan to that person. We do not order Teletrack reports for repeat customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As part of each payday loan transaction,
we enter into a standardized written contract with the borrowing customer. The standardized contracts vary slightly based on differing
state laws, but all of our standard contracts plainly state in simple terms the annual percentage rate (assuming the fees we charge
are computed as interest) in compliance with Regulation Z, and the consequences of defaulting on the loan. We retain copies of
our written contracts at the stores where the transactions are processed and also provide copies to our customers. Our standard
documentation includes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">a promise to repay the loan and associated loan fee</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">an express right to prepay without penalty (but without return of
any portion of the associated loan fee unless required by state law)</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">a statement that the borrower will pay an additional fee in the event
that the post-dated check is returned for insufficient funds</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the borrower&rsquo;s right to rescind the transaction, without cost,
at any time prior to the close of business on the business day immediately following the date of the loan, by returning the borrowed
amount and acknowledgment that the loan was rescinded</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">customary representations and warranties</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">a dispute-resolution clause under which the parties agree to submit
any claims or controversies to binding arbitration</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">a notice of financial privacy rights</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">an affirmative check-the-box representation about whether the borrower
is a member of the U.S. military, and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">an acknowledgment that the borrower has read and understands the borrowing
agreement.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Upon completion of a loan application, the
provision of proof of an existing bank account, current income, a valid driver&rsquo;s license or other acceptable photo identification,
and signed loan agreement and our acceptance of such agreement, the loan approval process is complete. At that point, the customer
signs a promissory note and provides us with a personal post-dated check for the principal loan amount plus a specified fee. All
documentation is reviewed and payday loans are approved at the store level only, barring extraordinary circumstances. Nearly all
of the loans we make are &ldquo;payday loans&rdquo; where the borrower provides us with a personal post-dated check. All checks
are drawn upon the borrower&rsquo;s bank. We do not accept third-party checks in connection with a payday lending transaction.
We make very few &ldquo;deferred deposit advance&rdquo; loans, and we estimate that fewer than one percent of our total loans during
2011 were loans of this type. In part, this is because we require reasonable proof of current employment as a condition to obtaining
a loan from us.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Beyond the steps described above, we do
not make any independent determination of the ability of a potential borrower to repay the loans we make to them. Instead, we rely
on a borrower&rsquo;s representations to us and proof regarding their employment and ownership of an active bank account, our review
of their recent bank statement, and our general policy that limits payday loans to no more than 25% of a borrower&rsquo;s monthly
income, and 35% of an installment loan customer&rsquo;s monthly income.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In general, our lending process and standards
are extraordinarily different from those used by banks. To our knowledge, banks typically order and carefully review credit reports,
engage in some level of analysis relating to the ability of a potential borrower to repay the loan, and will typically make independent
verification of employment and earnings history through payroll deposits, phone calls, reviews of tax returns and other processes&mdash;all
in an effort to minimize the risk of a loan default. As a result, we generally experience a higher default rate on our personal
loans than banks do on their personal loans. At March 31, 2012, we had an aggregate of all loan types of approximately:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">$3.6 million in current outstanding loan principal, fees and interest
due to us</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">$1.1 million of late loans (customers&rsquo; repayment checks presented
as NSF within the last 180 days or installment loan balances not past the final installment due date with 1 or more payments delinquent)</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>The Fees We Charge</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The fee we charge for a payday loan 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. We do not charge interest in connection with our payday loans but do charge interest on our short-term installment
loans made in Colorado and Wisconsin. If, however, we calculate the loan fees we charge as an annual percentage rate of interest,
such rate would range from 177% for a 31-day loan transacted in Kansas (on the low end) to approximately 574% for a 14-day loan
in Wisconsin (on the high end), with the actual average loan amount and average actual loan fees we charge involving an imputed
annual percentage rate of approximately 450% and 203% for a 14-day and 31-day loan, respectively. The term of a loan significantly
affects the imputed APR of the fees we charge for our loans. For instance, when a $15 fee is charged for a two-week loan of $100,
the resulting APR is 391%. When the same fee on $100 is charged for a four-week loan, the resulting APR is 195%. When our general
range of payday loan fees is applied to our average 2011 loan amount of $327, the fee ranges from $46.99 to $68.92 and the APR
ranges from 391% to 574% for a two-week loan and from 195% to 287% for a four-week loan. Currently, we do not charge the maximum
fee permitted in all of the states where we operate. We do, however, charge a uniform fee for all transactions processed in any
particular state that involve the same range of payday loan amounts and the same term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The table below sets forth the uniform fees
we charge and imputed APRs on non-interest payday loans in the states where we operated during 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; font-weight: bold; padding-left: 0">State</TD>
    <TD STYLE="border-bottom: black 1pt solid; font-weight: bold">Fees</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">APR (%)<BR> on a 14-<BR> day $100<BR> Loan</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">APR (%)<BR> on a 28-<BR> day $100<BR> Loan</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">APR (%)<BR> on a 14-<BR> day $300<BR> Loan</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">APR (%)<BR> on a 28-<BR> day $300<BR> Loan</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 14%; padding-left: 0; text-align: left; vertical-align: top">Iowa</TD>
    <TD STYLE="width: 36%">$15 on first $85 advanced; 11.1% on additional amounts (up to $445)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; padding-left: 5.4pt; text-align: right">435%</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">217</TD>
    <TD STYLE="width: 1%">%</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">338</TD>
    <TD STYLE="width: 1%">%</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">169</TD>
    <TD STYLE="width: 1%">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 0">Kansas</TD>
    <TD>$15 per $100 advanced</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 5.4pt; text-align: right">391%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">196</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">391</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">196</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-left: 0">Nebraska</TD>
    <TD>$17.50 per $100 advanced</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 5.4pt; text-align: right">456%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">228</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">456</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">228</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 0">North Dakota</TD>
    <TD>$20 per $100 advanced</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 5.4pt; text-align: right">521%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">261</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">521</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">261</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-left: 0">South Dakota</TD>
    <TD>$20 per $100 advanced</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 5.4pt; text-align: right">521%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">261</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">521</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">261</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 0">Utah</TD>
    <TD>$20 per $100 advanced</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 5.4pt; text-align: right">521%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">261</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">521</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">261</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-left: 0">Wisconsin</TD>
    <TD>$22 per $100 advanced</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 5.4pt; text-align: right">574%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">287</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">574</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">287</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 0; text-align: left; vertical-align: top">Wyoming</TD>
    <TD>30% per $100 advanced if loan is less than $150 or 20% per $100 advanced if loan is equal to or greater than $150 (subject to numerous maximums)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 5.4pt; text-align: right">782%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">391</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">521</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">261</TD>
    <TD>%</TD></TR>
</TABLE>

<P></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Of the nine states in which we presently
operate, three states (South Dakota, Utah and Wisconsin) do not limit the payday loan fees we may charge or the term (i.e., the
length) of the loans we may offer our customers. In addition, Utah does not limit the amount we may loan to customers in a payday
lending transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In Colorado, we offer short-term installment
loans from $100 to $500 payable in six equal monthly payments. Loan terms include a 45% annual interest rate, an origination fee
of 20% on loan amounts up to $300 and 7.5% on loan amounts thereafter and a monthly maintenance fee. In 2011, we introduced a short-term
installment product in Wisconsin. Wisconsin installment loans are payable over four to six months at an annual percentage rate
of approximately 390%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Many states have laws limiting the amount
of fees that may be charged in connection with any lending transaction (including payday lending transactions) when calculated
as an annual percentage rate or the payday lending is expressly prohibited. These limitations, combined with other limitations
and restrictions, effectively prohibit us from utilizing our present business model for cash advance or &ldquo;payday&rdquo; lending
in those jurisdictions. In addition, the federal government passed the &ldquo;2007 Military Authorization Act&rdquo; which prohibits
lenders from offering or making payday loans (or similar lending transactions) to members of the U.S. military when the interest
or fees calculated as an annual percentage rate, exceed 36%. Like the state limitations discussed above, this limitation effectively
prohibits us from utilizing our present business model for cash advance or &ldquo;payday&rdquo; lending when dealing with members
of the U.S. military. As a result of these restrictions, we do not conduct business with U.S. military personnel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The above-described payday fees are the
only fees we assess and collect from our customers for payday loans. Nevertheless, we also charge a flat fee that ranges from $15
to $30 (depending on the state) for returned checks in the event that a post-dated check we attempt to cash as repayment for our
loan is returned. In 2011, we had approximately 7,200 checks returned that were assessed a fee, compared to approximately 8,300
such checks during 2010. In 2011, we collected fees on returned checks on approximately 26% of the returned checks, for a total
of approximately $46,000. In 2010, we collected on approximately 34% of these returned checks, for a total of approximately $55,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Extensions or &ldquo;Rollovers&rdquo;
of Payday Loans</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">When a customer &ldquo;rolls over&rdquo;
or extends the term of an outstanding loan, we treat that rollover or extension as a brand new loan and we again charge the above-described
loan fee for that transaction. This rollover has no effect on the imputed annual percentage rate of the loan in those cases where
the extended term is equal to the initial term of the loan. For example, a $100 four-week loan that costs $20 to obtain is the
APR equivalent of 261%. If a customer extends the term of that loan for an additional four-week period, the customer will have
paid $40 total in fees to obtain the $100 eight-week loan&mdash;which is again the APR equivalent of 261%. In cases where a customer
(1) extends or rolls over a loan for a length of time that is less than the original loan or (2) repays the extended loan prior
to the expiration of the fully extended term, the imputed APR will increase. For example, if a customer who obtained an initial
$100 four-week loan for $20 in loan fees (the APR equivalent of 261%) later extends the term of that loan for only two additional
weeks and pays the additional $20 loan fee, that customer will have borrowed $100 for a six-week period at a total cost of $40&mdash;which
is the APR equivalent of 347%. We do not charge any interest on the unpaid fee from the initial term of the loan because, as a
condition to agreeing to a loan extension, we will only accept cash payment of the fee for extending the loan. In 2011, 10.2% of
our total loan fee revenues were derived from loan fees charged and collected upon the extension or rollover of payday loans. Approximately
10% of payday loans are rolled over or renewed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Most states prohibit payday lenders from
extending or refinancing a payday loan. Nevertheless, four states in which we presently operate&mdash;South Dakota, North Dakota,
Utah and Wisconsin&mdash;do permit a loan to be extended or &ldquo;rolled over&rdquo; for a specified period. Specifically, Wisconsin
and North Dakota permit only one loan extension; South Dakota permits up to four loan extensions; and Utah has no limit on the
number of loan extensions but does limit the time period of extensions to 10 weeks from the origination date of the original loan.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Summary of Loan Terms</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The table below sets forth the minimum and
maximum loans we approve, the maximum fee we charge, the maximum term of the loan and whether an extension/rollover is permitted
in the state were we operate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR>
    <TD STYLE="width: 28%; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>State</B></P></TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 13%; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Minimum Loan</B></P></TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 11%; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">Maximum Loan</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 16%; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Maximum Fee</B></P></TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">Maximum Term</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 12%; vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">Extension/&nbsp; Rollover Permitted</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Colorado - Installment</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No minimum</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">$500</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">20% origination on first $300; 7.5% thereafter; 45% interest and a monthly maintenance fee </TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Minimum</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">6 months</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Yes</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Iowa</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No minimum</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">$500</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">$5+10% of first $100</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">10% thereafter (1)</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">31 days</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Kansas</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No minimum</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">$500</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">$15 per $100</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">30 days</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Nebraska</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No minimum</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">$500</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">15% <SUP>1</SUP> per $100</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">31 days</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">North Dakota</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No minimum</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">$600</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">20%</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">60 days</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Yes (one)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">South Dakota</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No minimum</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">$500</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No limit</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No limit</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Yes (four)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Utah</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No minimum</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No limit</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No limit</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">84 days</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Yes</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Wisconsin - Installment</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No minimum</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">$750</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">390%</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">7 months</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Yes</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Wisconsin - Payday</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No minimum</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">$1,500</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No limit</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No limit</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Yes (one)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Wyoming</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No minimum</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No limit</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">20%</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">30 days</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">No</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">______________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(1)
</FONT>Denotes that the applicable percentage is calculated on the loan amount plus any finance charges.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Multiple Loans to Single Customers</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We occasionally make multiple loans to a
single customer if permitted by applicable law and regulations. Based on our outstanding payday loans as of March 31, 2012, approximately
7.1% of our customers had more than one loan outstanding. In these cases, the average number of separate loans outstanding was
two and the average aggregate principal amount loaned was approximately $420.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Risks Associated With Our Loans&mdash;Default
and Collection</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Ordinarily, our customers approach us for
a loan because they currently have insufficient funds to meet their present obligations, and so rarely if ever do our customers
have sufficient funds in their checking accounts to cover the personal post-dated checks they provide us at the time of the loan
transaction. The nature of our payday loan transactions present a number of risks, including the ultimate risk that the loan will
not be paid back. In addition, we do not obtain security for our payday loans principally because, even assuming our customers
would have potential collateral to offer as security for a payday loan, the small size of each particular lending transaction does
not justify the time, effort and expense of identifying the collateral and properly obtaining a security interest in such collateral.
As a consequence, all of our payday loans are unsecured. This means that, absent court or other legal action compelling a customer
to repay our loans, we rely principally on the willingness and ability of our customers to repay amounts they owe us. In this regard,
in many cases the costs of merely attempting to collect the amounts owed to us exceed the amounts we would seek to collect&mdash;making
it impractical to take formal legal action against a defaulted borrower.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">When a customer defaults on a loan, we engage
in store-level collection practices that include attempts to contact the customer and obtain payment, and attempts to contact the
customer&rsquo;s bank in order to determine whether funds are available to satisfy their personal post-dated check. If funds are
available, we present the check to the bank for repayment and an official check from the bank is obtained to pay off the item.
The costs involved in these initial collection efforts are minimal as they involve some employee time and possibly a flat $15-30
bank fee to cover the cost of the cashier&rsquo;s check. If funds are not available, we generally attempt to collect returned checks
for up to 90 days (or up to 180 days in cases where a bank account is still active and the customer has not initiated a stop payment
on the postdated check provided), principally through continued attempts to contact the customer. If our attempts remain unsuccessful
after 90 (or 180) days, we assign the item to a collection agency. Assignment to a collection agency may cost us 30-40% of the
amount eventually collected (if any) from the customer. Ordinarily, we do not recoup any costs of collection from our customers.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Historically, we collect approximately 58%
of the amount of all returned checks, which results in approximately 2.42% of our total payday loans being uncollectible. In 2011,
we made approximately 178,000 payday loan transactions, of which approximately:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">83% were paid in full at or prior to the expiration of the original
loan term, accounting for approximately 84% of our loan fee revenues</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">11% were refinanced, extended, renewed or otherwise paid after the
expiration of their original loan term, accounting for approximately 11% of our payday loan fee revenues, and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">6% involved a personal post-dated check that was returned for insufficient
funds.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Marketing Strategy</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our advertising and marketing efforts are
designed to introduce customers to our services, build customer loyalty and generate repeat visits and transactions. Our principal
means of advertising our payday lending services consists of Yellow Page directories used in our active markets as well as building
signage visible from local arterial roadways on which we are located. For our Cricket business, we rely primarily on Cricket advertising
and promotional items as well as building signage visible from local arterial roadways on which we are located. Our Cricket locations
are also listed on the Cricket Wireless website and are searchable by address, city or zip code.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Industry Information</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There are an estimated 20,600 cash advance
loan stores in the United States, which in the aggregate provide approximately $38.5 billion in short-term credit to households
experiencing cash-flow shortfalls. Industry trends indicate that there is likely to be a net decrease in total payday lending stores
over the next few years due to store closings resulting from a combination of regulatory or legal changes, a slowdown in new store
growth and general economic conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">According to the Community Financial Services
Association of America (CFSA), payday loan customers typically are middle-income or lower-middle-income, middle-educated individuals
who are a part of a young family (See Community Financial Services Association of America, citing to The Credit Research Center,
McDonough School of Business, Georgetown University, Gregory Elliehausen and Edward C. Lawrence, &ldquo;Payday Advance Credit in
America: An Analysis of Customer Demand&rdquo;). The CFSA is a lobbying organization for the payday loan industry. The Credit Research
Center study cited by the CFSA was based upon telephone interviews of 427 borrowers of payday loans in 2000 and 2001, and the answers
provided in those interviews by the borrowers were not independently verified by the study&rsquo;s authors. Moreover, the authors
of that study note that, of the 5,364 payday loan consumers whom they attempted to contact and interview for the study, 1,113 were
not able to be reached because their phones had been disconnected and another 1,043 refused to be interviewed or else quit the
interview prior to completion. We do not possess independent information that corroborates the findings of The Credit Research
Center, and we do not collect demographic data about our customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Consumer Federation of America (CFA),
a nonprofit consumer advocacy organization, has submitted written comments to the Federal Trade Commission that make assertions
very different from those proponed by the CFSA. For example, the CFA asserts that &ldquo;payday loan borrowers are typically female,
make around $25,000 a year, are renters, and more likely to be minorities than the general population. Payday lenders have clustered
around military bases, in low to moderate income neighborhoods, and in predominantly minority areas.&rdquo; (See Comments To the
Federal Trade Commission Regarding the Fair Debt Collection Practices Act Collecting Consumer Debts: The Challenges of Change By
the Consumer Federation of America, June 20, 2007). The CFA presently does not make available to the public the research data to
support its claims, and as a consequence we are unable to evaluate their accuracy. However, other statistics concerning payday
lending (such as default rates) that are contained in CFA website material conflict with our statistics borne out by years of involvement
in the business.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Predatory Lending and Regulatory
Concerns</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Federal Trade Commission has issued
an FTC Consumer Alert (Federal Trade Commission, March 2008, Consumer Alert entitled &ldquo;Payday Loans Equal Very Costly Cash:
Consumers Urged to Consider the Alternatives&rdquo;) that discourages consumers from obtaining payday loans such as the loans we
offer, primarily on the basis that payday loans 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In general, the payday lending suffers from
the perception and widespread belief that payday lenders are in the nature of predatory lenders, offering loans to low income and
poorly educated consumers at costs that are too high to be good for consumers. This perception and belief results in frequent efforts
in the U.S. Congress and various state legislatures, often proponed by consumer advocacy groups and lobbyists for traditional financial
institutions such as banks, to further regulate and restrict or prohibit payday lending outright. For example, the federal government
passed the 2007 Military Authorization Act which prohibits any persons from offering or making loans to members of the military
when the interest and loan fees, calculated as an annual percentage rate, exceed 36%. This limitation effectively prohibits payday
lenders from making payday loans to members of the U.S. military.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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&rsquo;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&rsquo;s authority will nonetheless be broad, and it is expected that the Bureau will address
issues such as rollovers or extensions of payday loans and compliance with federal rules and regulations. Future restrictions on
the payday lending industry could have serious consequences for the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 became effective August 11, 2010 and modified 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 limited the amount and type of fees
that can be charged on these loans, effectively reducing by one-half the fees that can be charged and when the fees may be realized.
In 2010, we began offering an installment loan product at our store in Colorado and in 2011 at our four stores in Wisconsin.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 were only allowed to renew a payday loan once, and then
lenders are required to offer a 60-day, interest free, payment plan to consumers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In response to these changes, the Company
began offering unsecured installment loans in Wisconsin in lieu of payday loans beginning in May 2011. By the fourth fiscal quarter,
the Company had phased out payday loans in Wisconsin altogether. Any adverse change in present federal or state laws or regulations
that govern or otherwise affect payday lending could, at any point, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not believe that payday lending is
predatory, nor do we believe that our loans are too costly for consumers if they are judiciously obtained. In fact, we believe
that bank overdraft fees by themselves are typically far more costly for consumers, and bouncing a check can often involve other
negative consequences such as independent fees levied by the parties to whom a bad check is written, negative publicity, etc. In
this regard, the FDIC released a November 2008 report called &ldquo;Study of Bank Overdraft Programs.&rdquo; The report indicates
that the average amount obtained when bank customers overdraw their accounts is $60, and the average overdraft fee charged by the
bank is $27. This equates to an APR of 1,173% and 587% for a two-week and four-week $60 bank &ldquo;loan,&rdquo; respectively.
In sum, we believe that many of the bad perceptions about our industry are fueled primarily by:</P>

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<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the effects of our loans on consumers who do not judiciously obtain
payday loans</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">a lack of genuine understanding about the choices faced by low and
middle-income people facing a critical cash shortage, and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">anti-payday lending lobbying campaigns often funded by traditional
financial institutions, such as banks and credit unions, that would economically benefit from the elimination of payday lending.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Finally, we have become aware of continued
aggressive enforcement and prosecution by the Federal Trade Commission against payday lenders using unfair and abusive lending
practices in violation of the Truth in Lending Act and Regulation Z, including failures to properly disclose loan terms and imputed
APRs. In particular, we believe that FTC regulators are expanding theories relating to &ldquo;fair and adequate&rdquo; disclosure
loan terms. This focus includes marketing and advertising materials (specifically, the layout and presentation of such materials),
and specific practices, that may detract attention from or diminish the prominence of disclosures relating to loan terms, and the
costs and risks involved with payday loans. Moreover, it has come to our attention that FTC regulators are more keenly scrutinizing
whether payday lending business practices match advertised claims. While we do not presently anticipate any adverse regulatory
issues or outcomes relating to our business, it is possible that one or more of our store locations could come under FTC scrutiny
and that any such scrutiny could negatively affect store performance and consume considerable time and attention of our management.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Seasonality</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have experienced seasonality in our payday
lending 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Effect of General Economic Conditions
on our Payday Lending Business</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe that consumer demand for our
payday lending services is increasing as a result of the recent economic recovery and slowly improving employment numbers; however,
we expect improving economic conditions to be partially negated by unemployment levels that remain high in the context of recent
history. High unemployment levels generally reduce the pool of payday loan consumers that can meet all of our loan qualifications,
particularly the employment requirement. In addition, it seems likely that the continued economic situation and higher unemployment
rates could result in greater loan losses than we experienced in 2011 with unemployment rates expected to remain high for the foreseeable
future. Our business experienced fluctuating changes in our provision for loan losses in recent years. For instance, our provision
for loan losses totaled $1.40 million for 2011, an increase of $.12 million from our provision of $1.28 million for 2010. Our provision
for loan losses as a percentage of loan fee revenue was 14.5% for 2011 and 12.1% during 2010. The less favorable loss ratio in
2011 reflected in part a more challenging collections environment as a result of an increase in bankruptcy filings, higher energy
prices and increased competition in the lending industry. We believe that our new installment loan offering has also contributed
to the increased loan loss percentage for 2011. We also believe that as the country moves out of recession and into recovery, our
consumer base will increase as individuals are denied credit by traditional lenders because of recent unemployment, foreclosure
or liquidity issues. Nevertheless, we are not certain how improving economic conditions or an increase in our consumer base will
affect our loan losses for 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Credit and financing available to us and
our industry has been negatively impacted by the recent economic situation, recent federal and state legislation, and the overall
negative perception associated with payday lending.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Future growth in our payday lending business
beyond reinvestment of our current profits may be limited due to the tighter credit markets. Furthermore, we anticipate that the
present condition of the financial markets and increased regulation related to payday lending currently under consideration at
the federal level will make it more difficult for us to borrow money to fund the expansion of our operations through acquisitions.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>CRICKET PHONE BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>General Description</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are an authorized dealer of Cricket Wireless
products and services and operate Cricket retail stores in Arizona, Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Missouri,
Nebraska, Ohio, Oklahoma, Oregon and Texas. Although Cricket Wireless owns a number of corporate stores, Cricket Wireless is partnering
with dealers in order to reach their market-penetration goals. 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. In addition,
each store we operate must resemble a Cricket corporate store. Once we identify an area to locate a new store, we contact Cricket
Wireless to obtain approval. Once Cricket Wireless approves our recommended location, we establish the storefront.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We profit in this business through retail
sales of cellular phones used with Cricket services, sales of phone accessories (e.g., face plates and phone chargers), fees charged
when a customer changes services (service reactivations, adding lines, plan changes, etc.), or whenever a customer pays his or
her Cricket invoice at one of our store locations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We bear no risk of non-payment because of
the prepaid nature of the service and because Leap Wireless Communications provides the cell phone services. Service automatically
terminates upon nonpayment, which is midnight of the date on which the payment is due if the account remains unpaid. If a customer
pays their service charge within 60 days of termination, the service is reinitiated and the phone number remains unchanged. After
60 days, a customer is deemed to be a new customer and a new phone number is assigned.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Market Information and Marketing</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At March 31, 2012, Cricket cellular phone
service was offered in 35 states and had approximately 6.2 million customers. Leap Wireless Communications, Inc. is a Delaware
public reporting corporation and the owner of Cricket Wireless. Cricket Wireless service offers customers unlimited wireless voice,
data, text, Muve Music TM and broadband data services for a flat monthly rate. In addition, our retail stores in select markets
offer Cricket PAYGo&trade; services, which is an unlimited prepaid wireless service. Cricket PAYGo is a daily pay-as-you-go wireless
and text messaging service designed for customers who prefer the flexibility and control offered by traditional prepaid services
but who are seeking greater value for their dollar.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cricket products and services are primarily
targeted to market segments that are underserved by traditional communications companies. Based on disclosures made by Leap Wireless
Communications, Cricket customers tend to be younger, have lower incomes and include a greater percentage of ethnic minorities.
Cricket services are designed to appeal to customers who value unlimited wireless services with predictable billing and who use
the majority of those wireless services from within Cricket service areas. In contrast, the majority of wireless customers in the
U.S. subscribe to post-pay services that may require credit approval and a contractual commitment from the subscriber for a period
of at least one year and may include overage charges for call volumes in excess of a specified maximum. Like Leap Wireless Communications,
we believe that a significant portion of the remaining growth potential in the U.S. wireless market consists of customers who are
price-sensitive, who have lower credit scores or who prefer not to enter into fixed-term contracts. We believe that our authorized
Cricket store business directly caters and appeals strongly to these customer segments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We expect that consumers may wish to prepay
their phone service or purchase prepaid cellular/Cricket phones:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">to avoid costly phone purchase and long-term and expensive service
contracts with wireless carriers</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">because poor credit histories may prevent them from successfully obtaining
a service contract with a wireless carrier, or</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">due to a short-term need and circumstances in which they expect to
engage in heavy usage of phones, and so they wish to pay a flat fee for a period of time instead of risking additional per-minute
charges on their phone usage.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Nevertheless, we do not formally query our
customers who purchase our phone products or services as to their motivations in purchasing those products or services, and we
do not have customer data indicating the extent to which our phone customers cannot obtain a service contract from a long-term
contract carrier of phone service or some other phone service provider.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Market Strategy</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe that our business model is scalable
and can be expanded successfully into current adjacent and new markets as we continue to perfect our operational protocols and
our administrative office functions relating to our Cricket business. We are looking to acquire additional Cricket dealerships
in the midwest and launch additional stores in new Cricket markets that are currently underserved by competing service providers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Products and Services</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our authorized Cricket retail stores offer
the following products and services:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Cricket Wireless service plans, each designed to attract customers
by offering simple, predictable and affordable wireless voice, Muve Music TM, text and data services that are a competitive alternative
to traditional wireless and wireline services by offering plans with a flat-rate and unlimited usage within Cricket service areas,
and without requiring fixed-term contracts, early termination fees or credit checks</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Cricket Wireless plan upgrades (e.g., international calling minutes
to Canada and/or Mexico; roaming service packages, text messages) and applications (including customized ring tones, wallpapers,
photos, greeting cards, games and news and entertainment message deliveries) on a prepaid basis</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Cricket handsets</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Cricket broadband service affording customers unlimited wireless access
to the Internet through their computers at a flat rate with no long-term commitments or credit checks, and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Cricket PAYGo service, an unlimited prepaid (daily pay-as-you-go)
wireless and text messaging service available in select markets.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: 3pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0in; text-indent: 0.5in">The service payment options for
Cricket customers include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: 3pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">automatic charge against a debit or credit card on bill cycle due
date</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">check payment by mail</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">payment at any corporate Cricket store, dealer location or alternative
payment locations (e.g., a local grocery store), and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">payment by telephone using a credit or debit card.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Customers also have an option on the purchase
of their cellular phone, including the latest in Android-based and Blackberry OS-based smartphones. The customer can either purchase
a new or refurbished phone from us or purchase a used phone from a previous customer. All phones must be paid for in full because
there is no contract for the monthly prepaid service. New phone prices range from $59 to high-end cellular phones at $329 before
promotional rebate offers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Seasonality</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our customer activity is influenced by seasonal
effects related to traditional retail selling periods and other factors that arise from our target customer base. We generally
expect new sales activity to be highest in the first and fourth quarters. Nevertheless, our revenues can be strongly affected by
the launch of new markets, promotional activity and competitive actions, any of which have the ability to reduce or outweigh certain
seasonal effects.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>REGULATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are subject to regulation by federal,
state and local governments that affect the products and services we provide. Generally, these regulations are designed to protect
consumers who deal with us and are not designed to protect our shareholders.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Regulation of Payday Lending</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In those states where we currently operate,
we are licensed as a payday lender where required and are subject to various state regulations regarding the terms and conditions
of our payday loans and our lending policies, procedures and operations. In some states, payday lending is referred to as &ldquo;deferred
presentment,&rdquo; &ldquo;cash advance loans&rdquo;, &ldquo;deferred deposit loans&rdquo; or &ldquo;consumer installment loans.&rdquo;
State regulations normally limit the amount that we may lend to any single consumer and may limit the number of loans that we may
make to any consumer at one time or in the course of a single year. State regulations also limit the amount of fees that we may
assess in connection with any loan transaction and may limit a customer&rsquo;s ability to extend or &ldquo;rollover&rdquo; a loan
with us. Often, state regulations also specify minimum and maximum maturity dates for payday loans and, in some cases, specify
mandatory cooling-off periods between transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our payday lending practices must also comply
with the disclosure requirements of the Federal Truth-In-Lending Act and Regulation Z under that Act. Our collection activities
for delinquent loans are generally subject to consumer protection laws regulating debt-collection practices. Finally, our payday
lending business subjects us to the Equal Credit Opportunity Act and the Gramm-Leach-Bliley Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the last few years, legislation has
been introduced and passed in the U.S. Congress and in certain state legislatures proposing or effecting various restrictions or
an outright prohibition on payday lending. Currently, state laws in Arizona, Montana, Oregon and Georgia have effectively eliminated
the ability to conduct payday lending activities in those states. In addition, a 2007 federal law prohibits loans of any type to
U.S. military personnel and their family members with charges or interest in excess of 36% per annum. In 2010, Congress passed
the Dodd-Frank Wall Street Reform and Consumer Protection Act which consolidated most federal regulation of financial services
offered to consumers, and replaced the Office of Thrift Supervision&rsquo;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, are now 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&rsquo;s authority will nonetheless be
broad, and it is expected that the Bureau will address issues such as rollovers or extensions of payday loans and compliance with
federal rules and regulations. Future restrictions on the payday lending industry could have serious consequences for the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For more information, see &ldquo;PAYDAY
LENDING BUSINESS&mdash;Predatory Lending and Regulatory Concerns&rdquo; above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Financial Reporting Regulation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Regulations promulgated by the United States
Department of the Treasury under the Bank Secrecy Act require us to report all transactions involving currency in an amount greater
than $10,000. Generally, every financial institution must report each deposit, withdrawal, exchange of currency or other payment
or transfer that involves an amount greater than $10,000. In addition, multiple currency transactions must be treated as a single
transaction if we have knowledge that the transactions are by or on behalf of any one person and result, in a single business day,
in the transfer of cash in or out totaling more than $10,000. In addition, the regulations require us to maintain information concerning
sales of monetary instruments for cash in amounts from $3,000 to $10,000. The Bank Secrecy Act requires us, under certain circumstances,
to file a suspicious activity report.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Money Laundering Act of 1994 requires
us, as a money service business, to register with the United States Department of the Treasury. Money services businesses include
check cashers and sellers of money orders. Money services businesses must renew their registrations every two years, maintain a
list of their agents, update the agent list annually, and make the agent list available for examination.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Finally, we have established various procedures
designed to comply, and we continue to monitor and evaluate our business methods and procedures to ensure compliance, with the
USA PATRIOT Act.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Privacy Regulation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are subject to a variety of federal and
state laws and regulations restricting the use and seeking to protect the confidentiality of customer identity and other personal
nonpublic customer information. We have identified our systems that capture and maintain nonpublic personal information, as that
term is understood under the Gramm-Leach-Bliley Act and associated regulations. We disclose our public information policies to
our customers as required by that law. We also have systems in place intended to safeguard this information as required by the
Gramm-Leach-Bliley Act, which specifically governs certain aspects of our payday lending business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>COMPETITION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Like most other payday lenders, we believe
that the primary competitive factors in our business are location and customer service. We face intense competition in an industry
with relatively low barriers to entry, and we believe that the payday lending markets are becoming more competitive as the industry
matures and consolidates. We compete with other payday lending and check cashing stores, and with financial service entities and
retail businesses that offer payday loans or similar financial services. For example, we consider credit card companies that offer
payday features, credit unions, banks that offer small loans, and creditors and loan services that can extend payment terms on
outstanding loans to be our competitors. In addition, we compete in part with services offered by traditional financial institutions,
most particularly with respect to the &ldquo;overdraft protection&rdquo; services those institutions may offer and the charges
they levy for checks written with insufficient funds.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Additional areas of competition have recently
arisen. Businesses now offer loans over the Internet as well as &ldquo;loans by phone,&rdquo; and these services compete with the
services we offer. There also has been increasing penetration of electronic banking and related services into the check cashing
and money transfer industry, including direct deposit of payroll checks, payroll or debit cards, stored-value cards, prepaid credit
and debit cards, and electronic transfer of government benefits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also believe that customer service is
critical to developing loyalty. In our industry, we believe that quality customer service means:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">assisting with the loan application process and understanding the
loan terms,</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">treating customers respectfully, and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">processing transactions with accuracy, efficiency and speed.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Cricket store business competes primarily
with other actual or potential authorized sellers and distributors of Cricket products and services. The authorization to sell
Cricket products and services is granted by Cricket Communications, a Delaware corporation (sometimes referred to as &ldquo;Cricket
Wireless, Inc.&rdquo;) and wholly owned subsidiary of Leap Wireless International, Inc. Presently, we believe that our ability
to compete with other sellers of Cricket products and services will materially depend on the success with which we operate those
store locations for which we presently have authorization to operate. If we successfully manage those stores and are able to develop
and maintain a strong working relationship with Cricket Communications, we expect that we may be able to effectively compete for
additional store locations when and as they come available.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Competition within the cellular phone industry
in general is significant. We not only compete with other suppliers of Cricket or other prepaid service providers but also with
the other national cellular phone providers such as Verizon, AT&amp;T and Sprint. It is estimated that there are in excess of 32
million wireless subscriber connections in the U.S.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">With the introduction of additional prepaid
phone providers such as Straight Talk service rolled out by Wal-Mart in October 2009, Wal-Mart&rsquo;s Family Mobile TM powered
by T-Mobile, which began in September 2010, that provides unlimited talk and text for 3 family members, and the increase of national
retailers offering numerous prepaid phone options, such as Cricket PAYGo&trade; services sold at Target stores or Cricket phones
sold at Best Buy or Dollar General, it is possible that current and potential new customers will purchase these or other future
competing services from these national resellers because of brand recognition, location or convenience, any of which would negatively
impact our sales and our ability to win authorizations for new locations to grow our Cricket business. In addition, it is possible
that Cricket Communications may itself, at some point in the future, determine to become more involved in the direct operation
of its retail stores and move away from an authorized distributor business model or modify its existing model by changing the compensation
structure to dealers or by increasing the number of dealer locations and thus reduce traffic to existing locations. In any such
event, our ability to maintain and grow our Cricket business will be negatively impacted.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>TECHNOLOGY AND INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We maintain an integrated system of point
of sale and management software applications and platforms for processing the various types of financial transactions we offer.
These systems provide us with customer service, internal control mechanisms, record-keeping and reporting information. Both of
our point-of-sale systems used at our payday and Cricket store locations integrate transaction data with our management information
systems on a real-time basis. These systems are designed to provide summary, detailed and exception information to regional, area
and store managers as well as corporate staff and are designed to collect customer information for demographic analysis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>SECURITY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe the principal security risks
to our operations are robbery and employee theft. We have established extensive security systems, dedicated security personnel
and management information systems to address both areas of potential loss. To protect against robbery, most payday lending store
employees work behind bullet-resistant glass and steel partitions, and the back office, safe and computer areas are locked and
closed to customers. Our security measures in most payday lending and Cricket stores include safes, electronic alarm systems monitored
by third parties, control over entry to customer service representative and inventory areas, detection of entry through perimeter
openings, walls and ceilings and the tracking of all employee movement in and out of secured areas. Payday segment employees use
cellular phones to ensure safety and security whenever they are outside secured areas. Additional security measures used in many
stores include some combination of alarm systems, remote control over alarm systems, the arming, disarming and changing of user
codes, and mechanically and electronically controlled time-delay safes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Since we have high volumes of cash and negotiable
instruments at our payday stores and inventory volumes at our Cricket stores, we believe that daily monitoring, unannounced audits
and immediate responses to irregularities are critical to security and play an important role in our internal controls. Our regional
managers and corporate staff perform unannounced store audits and cash counts at our stores as well as random inventory counts
of cellular phones and accessories. We self-insure for employee theft and dishonesty at the store level.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>EMPLOYEES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At March 31, 2012, we had approximately
268 employees, consisting of 250 store personnel (106 of whom were employed at payday loan stores and 144 of whom were employed
at Cricket retail stores), 12 corporate office employees and six corporate office managers. We believe our relationship with our
employees is good, and we have not suffered any work stoppages or labor disputes. We do not have any employees that operate under
collective-bargaining agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>LEGAL PROCEEDINGS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are involved in a variety of legal claims
and proceedings incidental to our business, including customer bankruptcy and employment-related matters from time to time, and
other legal matters that arise in the normal course of business. We believe these claims and proceedings are not out of the ordinary
course for a business of the type and size in which we are engaged. While we are unable to predict the ultimate outcome of these
claims and proceedings, management 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.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>PROPERTIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our headquarters is in Omaha, Nebraska.
There, we have a 5,775-square-foot space, with additional space available, which is sufficient for our projected near-term future
growth. The monthly lease amount is currently $3,900 and escalates to $5,500 by the end of the lease term on December 31, 2014.
The corporate phone number is (402) 551-8888.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of March 31, 2012, we had 52 payday store
locations. Our payday store locations typically range in size from 1,000 square feet to 2,000 square feet, and have varying lease
terms (none of which, however, have remaining terms of more than five years). As of that date, our payday lending stores were in
the following cities:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Sterling,
        Colorado</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Council
        Bluffs, Iowa (two locations)</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Des
        Moines, Iowa (four locations)</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Sioux
        City, Iowa</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Dodge
        City, Kansas</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Garden
        City, Kansas</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Columbus,
        Nebraska</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Grand
        Island, Nebraska</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Hastings,
        Nebraska</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Lincoln,
        Nebraska (three locations)</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">North
        Platte, Nebraska</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Omaha,
        Nebraska (seven locations)</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Bismarck,
        North Dakota (two locations)</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Grand
        Forks, North Dakota (three locations)</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Fargo,
        North Dakota (four locations)</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Minot,
        North Dakota</FONT></P></TD>
    <TD STYLE="width: 50%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Aberdeen,
        South Dakota</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Rapid
        City, South Dakota</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Sioux
        Falls, South Dakota</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Watertown,
        South Dakota</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Salt
        Lake City, Utah</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Sandy,
        Utah</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Taylorsville,
        Utah</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">West
        Jordan, Utah</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Kenosha,
        Wisconsin</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Pleasant
        Prairie, Wisconsin</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Racine,
        Wisconsin (two locations)</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Casper,
        Wyoming (two locations)</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Gillette,
        Wyoming</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Laramie,
        Wyoming</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Sheridan,
        Wyoming</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Rock
        Springs, Wyoming</FONT></P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of March 31, 2012, we had 48 Cricket
store locations. Our Cricket store locations typically range in size from 1,000 square feet to 2,500 square feet, and have varying
lease terms (none of which, however, have remaining terms of more than five years). As of that date, our Cricket retail stores
were in the following cities:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Nogales,
        Arizona</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Phoenix,
        Arizona</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Fort
        Collins, Colorado</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Greeley,
        Colorado</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Coeur
        d&rsquo;Alene, Idaho</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Cahokia,
        Illinois</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Fairview
        Heights, Illinois</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Mundelein,
        Illinois</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Arlington
        Heights, Illinois</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Round
        Lake Beach, Illinois</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Elkhart,
        Indiana</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Gary,
        Indiana (two locations)</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Merrillville,
        Indiana</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Mishawaka,
        Indiana</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">South
        Bend, Indiana</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&nbsp;</P></TD>
    <TD STYLE="width: 50%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Griffith,
        Indiana</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Council
        Bluffs, Iowa</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Kansas
        City, Kansas</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Kansas
        City, Missouri (four locations)</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">St.
        Louis, Missouri (four locations)</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Wellston,
        Missouri</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Lincoln,
        Nebraska</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Omaha,
        Nebraska (seven locations)</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Cincinnati,
        Ohio</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Oklahoma
        City, Oklahoma (two locations)</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Tulsa,
        Oklahoma</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Hillsboro,
        Oregon</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Portland,
        Oregon</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">San
        Antonio, Texas (three locations)</FONT></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">McAllen, Texas (two locations)</FONT></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;&#9;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">Laredo, Texas </FONT></P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Board of Directors consists of Richard
E. Miller, Angel Donchev, Thomas H. Ripley, Ellery Roberts and John Quandahl. The following table sets forth the name and position
of each of our current directors and executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 23%; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Name</TD>
    <TD STYLE="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 8%; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">Age</TD>
    <TD STYLE="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 65%; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Positions</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">John Quandahl</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">45</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Chief Executive Officer, Chief Operating Officer and Director</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Steve Irlbeck</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">47</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Chief Financial Officer</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Rich Horner</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">49</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Vice President and Treasurer, Wyoming Financial Lenders</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Richard Miller</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">65</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Director (Chairman)</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Angel Donchev</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">30</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Director</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Thomas H. Ripley</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">42</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Director</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Ellery Roberts</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">42</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Director</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The biographies of the above-identified
individuals are set forth below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>John Quandahl</I>, the Company&rsquo;s
Chief Executive and Operating Officer, currently also serves as the President of Wyoming Financial Lenders, Inc., a position he
has held since 2007. Mr. Quandahl served as the Company&rsquo;s Interim Chief Financial Officer from January 1, 2008 to May 10,
2011. From 2005 until joining Wyoming Financial Lenders, Mr. Quandahl was the President of Houlton Enterprises, Inc., and prior
to that served as that corporation&rsquo;s Chief Operating Officer from 1999 until 2004. During his tenure at Wyoming Financial
Lenders and Houlton Enterprises, Mr. Quandahl and the respective employers were based in Omaha, Nebraska. Mr. Quandahl was the
controller as Silverstone Group, Inc., from 1993 until 1998, and before that began his career at the Nebraska Department of Revenue
as a tax auditor in 1989. Mr. Quandahl is a certified public accountant (inactive) and earned a degree in accounting from the University
of Nebraska - Lincoln. Mr. Quandahl served as Chief Operating Officer of Wyoming Financial Lenders prior to its merger with the
Company has continued to serve as our Chief Operating Officer since that time. Effective January 1, 2009, Mr. Quandahl was appointed
as our Chief Executive Officer and until May 2011, our interim Chief Financial Officer. Mr. Quandahl was appointed to the Board
of Directors on March 9, 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Steve Irlbeck</I> was appointed the Company&rsquo;s
Chief Financial Officer in May 2011. Mr. Irlbeck joined the Company in January 2009 as the Company&rsquo;s Senior Director of Accounting.
From 1995 until 2008, Mr. Irlbeck was employed at Lutz &amp; Company, PC, a public accounting and consulting firm in Omaha, Nebraska
where he was a tax partner. Mr. Irlbeck is a certified public accountant (inactive) and earned a degree in accounting from Creighton
University.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Rich Horner</I>, the Company&rsquo;s
Vice President of Wyoming Financial Lenders, joined Wyoming Financials Lenders in 2000 as its general manager. Since that time,
he has served as the Wyoming Financial Lenders controller from 2007 to present. Mr. Horner was promoted to Vice President of Wyoming
Financial Lenders in January 2009. Prior to joining Wyoming Financial Lenders, Mr. Horner served in a finance and budgetary capacity
for InfoUSA. Mr. Horner has an MBA in finance and management from the University of Nebraska-Omaha.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Richard Miller</I> is an independent
business consultant. Previously, Mr. Miller was Chief Executive Officer of Pirelli Tire North America, a $120 million tire manufacturer,
and Chief Executive Officer of Dunn Tire Corporation, a $25 million regional tire retailer. Prior experience also includes senior
operating positions with Dunlop Tire and Michelin Tire. Mr. Miller has served as Executive Chairman of True Home Value, Inc., and
currently serves as Chairman of Flow Dry Industries and Swift Spinning, Inc. &#8213; two private companies to which Blackstreet
Capital Management, LLC provides management and advisory services. Mr. Miller is a highly decorated former Marine Captain and holds
a BA from Chapman College in California. Mr. Miller serves as Chairman of the Board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Angel Donchev </I>was appointed
as a director of the Company on March 31, 2010 in connection with the acquisition of voting control of the Company by WCR,
LLC. Mr. Donchev is employed by Blackstreet Capital Management, LLC, a Delaware limited liability company principally engaged
in the management of private investments. Mr. Donchev joined Blackstreet Capital Management in 2005 and currently serves as
a director of American Combustion Industries, Flow Dry Technology, Inc., Swift Spinning, Inc., and Alpha Graphics, Inc. (all
of which are private companies). Mr. Donchev has been involved in control buyouts of companies with combined revenues in
excess of $300 million over the past five years. Previously, Mr. Donchev worked as a generalist in the Corporate Finance
division of Stephens Inc., a middle market investment bank, where he gained experience in a variety of M&amp;A and
public offering transactions. Prior to that, Mr. Donchev worked for Teton Capital, an Austin, Texas based hedge fund, where
he provided research and analysis on potential investments. Mr. Donchev graduated summa cum laude from the McCombs School
of Business at the University of Texas at Austin, where he received a BBA in Business Honors and Finance.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Thomas H. Ripley</I>, was appointed as
a director of the Company on February 17, 2012 to fill the vacancy created by Aldus Chapin, II. Mr. Ripley is an independent operating
partner that has worked with Blackstreet Capital Management, LLC. since April 2008 and currently serves as the Chairman of the
Board of American Combustion Industries, and is also the President and a director of ThinkDirect Marketing Group. Mr. Ripley has
been an operating partner and member of the executive team of several companies since 2001. Prior to his private equity experience,
Mr. Ripley worked on Wall Street for Bear Stearns, and Goldman Sachs. Mr. Ripley was a Captain in the U.S. Marine Corps and holds
a Masters in Business from the University of Chicago, and completed his undergraduate studies at the Virginia Military Institute.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Ellery Roberts</I> was appointed by the
Board of Directors to serve as a director on May 10, 2010. Mr. Roberts is the co-founder and co-managing principal of RW Capital
Partners LLC, a lower middle-market mezzanine fund. Mr. Roberts brings over 15 years of private equity investing experience having
been one of the founding members and Managing Director of Parallel Investment Partners, LP (formerly SKM Growth Investors, LP),
a Dallas based private equity fund focused on re-capitalizations, buyouts and growth capital investments in lower middle market
companies throughout the United States. Mr. Roberts was responsible for approximately $400 million in invested capital across two
funds. Also during his tenure with Parallel, Mr. Roberts sat on the boards of Environmental Lighting Concepts, Hat World Corporation,
Senex Financial Corporation, Builders TradeSource Corporation, Action Sports, Weisman Discount Home Centers, Winnercom, Mealey&rsquo;s
Furniture, Regional Management Corporation, Marmalade Cafes and Diesel Service and Supply (all of which are private companies).
Prior to Parallel, Mr. Roberts was a Vice President with Lazard Freres &amp; Co. While at Lazard, he focused on and also gained
experience in the home building, health care, retail, industrial and lodging sectors. Prior to joining Lazard in 1997, Mr. Roberts
was with Colony Capital, Inc., where he analyzed and executed transactions for Colony Investors II, L.P., a $625 million private
equity fund and prior to that was with the Corporate Finance Division of Smith Barney, Inc. where he participated in a wide variety
of investment banking activities. During his career Mr. Roberts has been directly involved with over $3.0 billion in direct private
equity investments. Mr. Roberts received his B.A. degree in English from Stanford University.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under our corporate bylaws, all of our directors
serve for indefinite terms expiring upon the next annual meeting of our shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">When considering whether directors and nominees
have the experience, qualifications, attributes and skills to enable the Board of Directors to satisfy its oversight responsibilities
effectively in light of the Company&rsquo;s business and structure, the Board of Directors focuses primarily on the industry and
transactional experience, and other background, in addition to any unique skills or attributes associated with a director. With
regard to Mr. Quandahl, the Board of Directors considered his significant experience, expertise and background with regard to accounting,
financial and tax matters, his particular experience with the payday lending industry as well as retail operations, and his demonstrated
experience and skills in managing and evaluating the coordination and integration of the Company&rsquo;s two principal operating
segments. With regard to Mr. Donchev, the Board of Directors considered his background and experience with the public securities
markets and his former employment and experience with the investment banking field. With regard to Mr. Ripley, the Board of Directors
considered his experience in business acquisitions and post-acquisition operational improvements with emphasis upon cost reduction
and revenue growth. With regard to Mr. Miller, the Board of Directors considered his leadership experience as well as his background
and experience in retail operations. Finally, with regards to Mr. Roberts, the Board of Directors considered his extensive experience
in finance and capital structures, his prior board leadership experience as well as his prior experience in retail operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company does not have a standing nominating
committee. Instead, the entire Board of Directors shares the responsibility of identifying potential director-nominees to serve
on the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Board of Directors does have a standing
Compensation Committee and Audit Committee. The Compensation Committee is composed of Mr. Roberts. The Audit Committee is composed
of Messrs. Roberts and Donchev, with Mr. Roberts serving as the chairperson. The Board of Directors has determined that only Mr.
Roberts is &ldquo;independent,&rdquo; as such term is defined in Section 5605(a)(2) of the Nasdaq listing rules, and meets the
criteria for independence set forth in Rule 10A-3(b)(1) under the Exchange Act. The preceding disclosure respecting director independence
is required under applicable SEC rules. However, as a corporation whose shares are listed for trading on the OTCBB, the Company
is not required to have any independent directors at all on its Board of Directors, or any independent directors serving on any
particular committees of the Board of Directors.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Board of Directors has determined that
at least one member of the Audit Committee, Mr. Ellery Roberts, is an &ldquo;audit committee financial expert&rdquo; as that term
is defined in Regulation S-K promulgated under the Exchange Act. Mr. Robert&rsquo;s relevant experience is detailed above. As noted
above, Mr. Roberts qualifies as an &ldquo;independent director,&rdquo; as such term is defined in Section 5605(a)(2) of the Nasdaq
listing rules, and meets the criteria for independence set forth in Rule 10A-3(b)(1) under the Exchange Act. The Board of Directors
has determined that each of the Audit Committee members is able to read and understand fundamental financial statements and that
at least one member of the Audit Committee has past employment experience in finance or accounting.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXECUTIVE COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Summary Compensation Table</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth the cash
and non-cash compensation for awarded to or earned by: (i) each individual who served as the principal executive officer and principal
financial officer of Western Capital during the year ended December 31, 2011; and (ii) each other individual that served as an
executive officer of either Western Capital or Wyoming Financial Lenders, Inc. at the conclusion of the year ended December 31,
2011 and who received more than $100,000 in the form of salary and bonus during such fiscal year. For purposes of this report,
these individuals are collectively the &ldquo;named executives&rdquo; of the Company.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font: bold 10pt Times New Roman, Times, Serif; border-bottom: Black 1pt solid">Name and Principal Position</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Salary</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Other Annual Compensation</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Stock Option<BR>Awards</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 30%; font: 10pt Times New Roman, Times, Serif; text-align: left; padding-bottom: 1pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">John
Quandahl <SUP>(1)</SUP></P></TD><TD STYLE="width: 2%; font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; font-size: 10pt; text-align: right">2011</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 11%; font: 10pt Times New Roman, Times, Serif; text-align: right">246,000</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 11%; font: 10pt Times New Roman, Times, Serif; text-align: right">80,114</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 11%; font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 11%; font: 10pt Times New Roman, Times, Serif; text-align: right">326,114</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;&nbsp;&nbsp;Pres. and Chief Operating Officer</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2010</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">246,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">70,313</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">316,313</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Steve
Irlbeck <SUP>(2)</SUP></P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">140,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">70,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">210,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;&nbsp;&nbsp;Chief Financial Officer</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2010</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">120,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">55,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">175,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Rich
Horner <SUP>(3)</SUP></P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">148,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">64,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">212,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;Vice President and Treasurer of WFL</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2010</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">145,500</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">50,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">195,500</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">___________</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Mr. Quandahl is the President and Chief Operating Officer of Wyoming Financial Lenders, Inc., the wholly owned and principal
operating subsidiary of Western Capital that offers payday lending services. Mr. Quandahl also began serving as the Chief Operating
Officer of Western Capital effective November 29, 2007, and continues to serve in that capacity. Effective January 1, 2009, Mr.
Quandahl was also appointed to serve as the Company&rsquo;s President and Chief Executive Officer. From January 1, 2009 through
May 10, 2011, Mr. Quandahl also served as interim Chief Financial Officer.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Mr. Irlbeck is the Chief Financial Officer of Western Capital Resources. Mr. Irlbeck began serving as our Chief Financial Officer
on May 10, 2011. Prior to May 10, 2011, Mr. Irlbeck was the Company&rsquo;s Senior Director of Accounting.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>Mr. Horner is the Company&rsquo;s Controller and became the Vice President and Treasurer of Wyoming Financial Lenders in
                                                            January 2009.                                                             Prior
                                                            to January 2009, Mr. Horner served as the Company&rsquo;s
                                                            Controller.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Outstanding Equity Awards at Fiscal Year End</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We had no outstanding equity awards as of
December 31, 2011 for any named executives.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Employment and Change-In-Control Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not currently have change-in-control
agreements with any named executives or any other current members of our executive management. On March 31, 2010, we entered into
an Employment Agreement with Mr. Quandahl to serve as our Chief Executive Officer and Chief Operating Officer. Prior to that time,
Mr. Quandahl served in such capacities without any written agreement. Mr. Quandahl receives an annual base salary of $246,000 and
is eligible for an annual performance-based cash bonus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The performance-based bonus provisions of
the Employment Agreement permit Mr. Quandahl and other members of management to receive annual bonus payments based on adjusted
EBITDA targets annually established by the Board of Directors. The 2011 and 2010 adjusted EBITDA target was $4 million. If the
Company&rsquo;s actual adjusted EBITDA performance for a particular annual period ranges from 85-100% of the established adjusted
EBITDA target, management will be entitled to receive a cash bonus consisting of 7.5% of the actual adjusted EBITDA. Mr. Quandahl&rsquo;s
share of the bonus pool for any particular year is expected to be 10-50% and the bonus pool will be payable to other management-level
participants in the bonus pool selected from time to time by the Board of Directors. If the Company&rsquo;s actual adjusted EBITDA
performance for a particular annual period is less than 85% of the established adjusted EBITDA target, no bonus will be payable,
and if such performance exceeds 100% of the established adjusted EBITDA target, the bonus pool will include 15% of the amount by
which such performance exceeds the target. In addition to the adjusted EBITDA threshold, the agreement also contains capital expenditure
and working capital thresholds.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During 2011 and 2010, the Board of Directors
authorized certain transactions that resulted in the capital expenditure limitation and working capital threshold eligibility requirements
not being satisfied. The board waived compliance with these two eligibility requirements in 2010 and approved the exclusion of
such transactions when testing these two eligibility requirements in 2011. The board also authorized the adjusted EBITDA calculation
to exclude certain expenditures. The effect of those actions permitted eligible participants to benefit under the management bonus
pool arrangement in both 2010 and 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Employment Agreement also contains customary
provisions prohibiting Mr. Quandahl from soliciting customers and employees of the Company for three years after any termination
of his employment with the Company, and from competing with the Company for either three years (if Mr. Quandahl is terminated for
good cause or if he resigns without good reason) or two years (if the Company terminates Mr. Quandahl&rsquo;s employment for without
good cause or if he resigns with good reason). If Mr. Quandahl&rsquo;s employment is terminated by the Company without &ldquo;good
cause&rdquo; or if Mr. Quandahl voluntarily resigns with &ldquo;good reason,&rdquo; then Mr. Quandahl will be entitled to (i) severance
pay for a period of 12 months and (ii) reimbursement for health insurance premiums for his family if he elects continued coverage
under COBRA.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Compensation of Directors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font: bold 10pt Times New Roman, Times, Serif; border-bottom: Black 1pt solid">Name and Principal Position</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Compensation</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Other Annual Compensation</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Stock Option<BR>Awards</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 34%; font-size: 10pt; text-align: left; padding-bottom: 1pt">Richard Miller <SUP>(1)</SUP>&#9;</TD><TD STYLE="width: 2%; font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; font-size: 10pt; text-align: right">2011</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 10%; font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 10%; font: 10pt Times New Roman, Times, Serif; text-align: right">100,000</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 10%; font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 10%; font: 10pt Times New Roman, Times, Serif; text-align: right">100,000</TD><TD STYLE="width: 1%; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;Chairman</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2010</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">75,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">75,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Ellery Roberts <SUP>(2)</SUP></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">102,583</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">102,583</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;Director</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2010</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">11,666</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">11,666</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Angel Donchev</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;Director</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2010</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Aldus Chapin II <SUP>(3)</SUP></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2011</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;Director</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2010</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">____________</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Mr. Miller provides management consulting services to the Company in addition to his services as Chairman of the Board. In
accordance with the consulting agreement, his compensation is $100,000 per year. All compensation reflected in the table for Mr.
Miller was paid pursuant to his consulting agreement with the Company.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Mr. Roberts serves on a special committee of the Board of Directors. In connection with this service, the Board of Directors
approved the payment of compensation to Mr. Roberts in the amount of $13,000 per month from June through November 2011, and $10,000
per month from December 2011 through November 2012.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>Mr. Chapin resigned from the Board of Directors effective February 17, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Related-Party Transactions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On October 18, 2011 the Company entered
into a borrowing arrangement with River City Equity, Inc. and delivered a related long-term promissory note in favor of River City
Equity. The borrowing arrangement allows the Company to borrow up to $2,000,000 at an interest rate of 12% per annum, with interest
payable on a monthly basis. The note matures on September 30, 2013, on which date all unpaid principal and accrued but unpaid interest
thereon is due and payable. The note includes a prepayment penalty and, under certain circumstances, permits River City Equity
to obtain a security interest in substantially all of the Company&rsquo;s assets. As of December 31, 2011, $1,000,000 has been
advanced under this arrangement. After the initial advancement from River City Equity under the borrowing arrangement, the brother
of the Company&rsquo;s Chief Executive Officer obtained an ownership interest in River City Equity. Since such time, there have
been additional advancements. The Board of Directors has been apprised of the fact that, subsequent to the transactions creating
the arrangement with River City Equity, that entity has become a &ldquo;related party&rdquo; under applicable SEC disclosure rules.
The Company may in the future seek advancements from the $1,000,000 remaining available under the borrowing arrangement. In any
such case, advancements will be approved in the manner required under the board&rsquo;s related-party transaction policy discussed
below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Board of Directors has adopted a written
Conflict of Interest and Related Party Transaction Policy. That policy governs the approval of all related-party transactions,
subject only to certain customary exceptions (e.g., compensation, certain charitable donations, transactions made available to
all employees generally, etc.). The policy contains a minimum dollar threshold of $5,000.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The entire Board of Directors administers
the policy and approves any related-party transactions. At each calendar year&rsquo;s first regularly scheduled meeting, management
discloses any related-party transactions to be entered into by the Company for that calendar year, including the proposed aggregate
value of such transactions if applicable. After full disclosure of all material facts, review and discussion, the board approves
or disapproves such transactions. If a related-party transaction will be ongoing, the board may establish guidelines for management
to follow in its ongoing dealings with the related party. However, management is generally required to update the board as to any
material change to the related-party transactions approved at the first calendar year meeting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the event management recommends any related-party
transactions after the first calendar year meeting, such transactions are generally presented to the board for approval in advance,
or preliminarily entered into by management subject to ratification by the board. If ratification is not obtained, management must
make all reasonable efforts to cancel or annul such transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Procedurally, no director is allowed
to vote in any approval of a related-party transaction for which he or she is the related party, except that such a director
may otherwise participate in a related discussion and shall provide to the board all material information concerning the
related-party transaction and the director&rsquo;s interest therein.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of the close of business on June 13, 2012,
we had outstanding two classes of voting securities&mdash;common stock, of which there were 5,397,780 shares issued and outstanding;
and Series A Convertible Preferred Stock, of which there were 10,000,000 shares issued and outstanding. Each share of capital stock
is currently entitled to one vote on all matters put to a vote of our shareholders. The following table sets forth the number of
common shares, and percentage of outstanding common shares, beneficially owned as of June 13, 2012, by:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">each person known by the Company to be the beneficial owner of more
than five percent of the Company&rsquo;s outstanding common stock</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">each current director</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">each executive officer of the Company and other persons identified
as a named executive in our Summary Compensation Table above, and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">all current executive officers and directors as a group.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Unless otherwise indicated, the address
of each of the following persons is 11550 &ldquo;I&rdquo; Street, Omaha, Nebraska 68137, and each such person has sole voting and
investment power with respect to the shares set forth opposite his, her or its name.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font: bold 10pt Times New Roman, Times, Serif; border-bottom: Black 1pt solid; padding-left: 0">Name and Address</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Common Shares<BR>Beneficially Owned <SUP>(1)</SUP></B></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Percentage of </B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Common Shares <SUP>(1)</SUP></B></P></TD><TD STYLE="padding-bottom: 1pt; font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 68%; font-size: 10pt; text-align: left; padding-left: 0">Richard Miller <SUP>(2)</SUP></TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">333,750</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">5.9</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Ellery Roberts <SUP>(3)</SUP></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Angel Donchev <SUP>(3)</SUP></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Thomas H. Ripley <SUP>(3)</SUP></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Rich Horner <SUP>(4)</SUP></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">100,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1.9</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Steve Irlbeck <SUP>(5)</SUP></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">200,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3.7</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">John Quandahl <SUP>(6)</SUP></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">200,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3.7</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">All current executive officers and directors as a group <SUP>(7)</SUP></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">833,750</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">14.6</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; padding-left: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">WCR, LLC <SUP>(8)</SUP></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt">c/o Blackstreet Capital Advisors II</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt">5425 Wisconsin Avenue, Suite #701</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt">Chevy Chase, MD 20815</P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">10,791,250</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">71.5</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; padding-left: 0"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Alpha Capital Anstalt <SUP>(9)</SUP></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt">Pradaafant 7</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt">Furst en Tums 9490</P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt">Vaduz, Liechtenstein</P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">416,667</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">7.7</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
</TABLE>
<P></P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">_______________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">* less than 1%</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Beneficial ownership is determined in accordance with the rules of the SEC, and includes general voting power and/or investment
power with respect to securities. Shares of common stock issuable upon exercise of options or warrants that are currently exercisable
or exercisable within 60 days of the record rate, and shares of common stock issuable upon conversion of other securities currently
convertible or convertible within 60 days, are deemed outstanding for computing the beneficial ownership percentage of the person
holding such securities but are not deemed outstanding for computing the beneficial ownership percentage of any other person. Under
the applicable SEC rules, each person&rsquo;s beneficial ownership is calculated by dividing the total number of shares with respect
to which they possess beneficial ownership by the total number of outstanding shares of the Company. In any case where an individual
has beneficial ownership over securities that are not outstanding, but are issuable upon the exercise of options or warrants or
similar rights within the next 60 days, that same number of shares is added to the denominator in the calculation described above.
Because the calculation of each person&rsquo;s beneficial ownership set forth in the &ldquo;Percentage of Common Shares&rdquo;
column of the table may include shares that are not presently outstanding, the sum total of the percentages set forth in such column
may exceed 100%.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Mr. Miller is a director of the Company. Share figures contained in the table are taken from Mr. Miller&rsquo;s most recent
filing under &sect;13 of the Securities Exchange Act of 1934 on Schedule 13G/A, filed with the SEC on November 3, 2010.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>Messrs. Roberts, Donchev, and Riley are directors of the Company.</TD></TR></TABLE>

<P>&nbsp;</P>

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<P></P>
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(4)</TD><TD>Mr. Horner became the Treasurer of Wyoming Financial Lenders, Inc. in January 2009.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(5)</TD><TD>Mr. Irlbeck became the Company&rsquo;s Chief Financial Officer on May 10, 2011 and was the Company&rsquo;s Senior Director
of Accounting from January 1, 2009 to May 10, 2011.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(6)</TD><TD>Mr. Quandahl is the Company&rsquo;s Chief Executive Officer and a director of the Company.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(7)</TD><TD>Consists of Messrs. Miller, Roberts, Donchev, Riley, Irlbeck, Horner and Quandahl.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(8)</TD><TD>Consists of 1,091,250 shares of common stock and 9,700,000 shares of Series A Convertible Preferred Stock which are convertible
into an equal number of shares of common stock. Share figures contained in the table are taken from WCR LLC&rsquo;s most recent
filing under &sect;13 of the Securities Exchange Act of 1934 on Schedule 13D/A, filed on November 5, 2010.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(9)</TD><TD>Based solely on a registered shareholder report dated June 1, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>THE RIGHTS OFFERING</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The Subscription Rights</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are distributing, at no charge, to the
record holders of our shares of capital stock as of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2012, the record date, non-transferable
subscription rights to purchase shares of our common stock at a subscription price of $ per share. Each subscription right will
entitle the holders of our capital stock to purchase one share of our common stock, which we refer to as the &ldquo;basic subscription
privilege.&rdquo; Each eligible holder of record of shares of our capital stock will receive &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;subscription
rights for each share of capital stock owned by such holder as of 5:00 p.m., Minneapolis time, on the record date. We intend to
keep the rights offering open until , 2012, unless our Board of Directors, in its sole discretion, extends such time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You may exercise all or a portion of your
subscription rights, or none at all. If, however, you exercise less than your entire basic subscription privilege, you will not
be eligible to exercise your over-subscription privilege</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will not issue fractional shares of common
stock in the rights offering, and holders will only be entitled to purchase a whole number of shares of common stock. Any excess
subscription payments received by the subscription agent will be returned promptly, without interest or penalty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Over-Subscription Privilege</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you fully exercise your basic
subscription privilege and other shareholders do not fully exercise their basic subscription privileges, then you may also
exercise the over-subscription privilege component of your subscription rights to purchase additional shares of common stock
that remain unsubscribed at the expiration of the rights offering, subject to the availability and pro rata allocation of
shares among persons exercising their over-subscription privileges. To the extent that the number of the unsubscribed shares
is not sufficient to satisfy all of the properly exercised over-subscription requests, then the shares which are available
will be prorated among those shareholders properly exercising their over-subscription privileges based on the number of
shares each such shareholder subscribed for under their basic subscription privilege. If this pro rata allocation results in
any shareholder receiving a greater number of common shares than the shareholder subscribed for pursuant to the exercise of
his, her or its over-subscription privilege, then such shareholder will be allocated only that number of shares for which the
shareholder subscribed, and the remaining common shares will be allocated among all other shareholders exercising their
over-subscription privileges on the same pro rata basis described above. This share-allocation process will be repeated until
all common shares have been allocated or all over-subscription exercises have been honored, whichever occurs earlier.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In order to properly exercise your over-subscription
privilege, you must deliver the subscription payment related to the exercise of your over-subscription privilege prior to the expiration
of the rights offering. Because we will not know the total number of unsubscribed shares prior to the expiration of the rights
offering, if you wish to maximize the number of shares you purchase pursuant to your over-subscription privilege, you will need
to deliver payment in an amount equal to the aggregate subscription price for the maximum number of shares of our common stock
available to you, assuming that no shareholder other than you has purchased any shares of our common stock pursuant to their basic
subscription privilege and over-subscription privilege.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We can provide no assurances that you will
actually receive the number of shares you wish to purchase upon exercise of your over-subscription privilege. For example, we will
not be able to satisfy any portion of your exercise of the over-subscription privilege if all of our other shareholder exercise
their basic subscription privileges in full. We will only fully honor an exercised over-subscription privilege to the extent sufficient
shares of our common stock are available after the exercise of all basic subscription privileges associated with the subscription
rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To the extent there are fewer shares available
to you upon exercise of your over-subscription privileges than that for which you subscribe and tender payment under such privilege,
you will be allocated only the number of unsubscribed shares available to you, and any excess subscription payments received by
the subscription agent will be returned to you, without interest or deduction, as soon as practicable. To the extent shareholders
properly exercise their over-subscription privileges for an aggregate amount of shares that is less than the number of the unsubscribed
shares, you will be allocated the number of shares for which you actually tender payment in connection with the exercise of your
over-subscription privilege. We will deliver certificates representing shares of our common stock purchased with the over-subscription
privilege as soon as practicable after the expiration of the rights offering.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Delivery of Shares of Common Stock Acquired in the Rights
Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you purchase shares in the rights offering
by submitting a rights certificate and payment, we will mail you a stock certificate evidencing the new shares purchased as soon
as practicable after the completion of the rights offering. One stock certificate will be generated for each rights certificate
processed. Until your stock certificate is received, you may not be able to sell the shares of common stock acquired in the rights
offering. If, as of the record date, your shares were held by a custodian bank, broker, dealer or other nominee, and you participate
in the rights offering, you will not receive stock certificates for your new shares. Nevertheless, your custodian bank, broker,
dealer or other nominee will be credited with the shares of common stock you purchase in the rights offering as soon as practicable
after the completion of the rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Reasons for the Rights Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Prior to approving the rights offering,
our Board of Directors carefully considered our current and expected acquisition opportunities, our liquidity requirements, our
expected results of operations, current market conditions, and business and capital-raising opportunities, as well as the dilution
of the ownership percentage of the current holders of our common stock that may be caused by the rights offering if they do not
exercise their rights in full.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">After weighing the factors discussed above
and the effect of the $4,400,000 in additional capital, after deducting $100,000 of estimated offering-related expenses, that may
be generated by the sale of shares pursuant to the rights offering, our Board of Directors determined the rights offering to be
in the best interests of the Company and its shareholders. Although we believe that the rights offering will strengthen our financial
condition and allow us to pursue opportunities to grow and diversify the Company, the Board of Directors is not making any recommendation
as to whether you should exercise your subscription rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Effect of Rights Offering on Existing Shareholders</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The ownership interests and voting interests
of our existing shareholders that do not fully exercise their subscription rights will be diluted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Method of Exercising Subscription Rights</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The exercise of subscription rights is irrevocable
and may not be cancelled or modified. You may exercise your subscription rights as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Subscription by Registered Holders</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you hold certificates of shares of our
capital stock, the number of rights you may exercise pursuant to your subscription rights will be indicated on the rights certificate
delivered to you. You may exercise your subscription rights by properly completing and executing the rights certificate and forwarding
it, together with your full subscription payment, to the subscription agent at the address set forth below in this section under
the caption &ldquo;&mdash;Subscription Agent,&rdquo; prior to the expiration of the rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Subscription by DTC Participants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We expect that the exercise of your subscription
rights may be made through the facilities of DTC. If your subscription rights are held of record through DTC, you may exercise
your subscription rights by instructing DTC, or having your broker instruct DTC, to transfer your subscription rights from your
account to the account of the subscription agent, together with certification as to the aggregate number of subscription rights
you are exercising and the number of shares of our common stock you are subscribing for under both the basic subscription privilege
and the over-subscription privilege, if any, together with your full subscription payment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Subscription by Beneficial Owners</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you are a beneficial owner of our
shares of common stock that are registered in the name of a broker, dealer, custodian bank or other nominee, you will not
receive a rights certificate. Instead, subscription rights will be issued to the nominee record holder for shares of our
common stock that you beneficially own at the record date. If you are not contacted by your broker, dealer, custodian bank or
other nominee, you should promptly contact your broker, dealer, custodian bank or other nominee in order to subscribe for
shares of our common stock in the rights offering.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you hold your shares in the name of a
broker, dealer, custodian bank or other nominee, your nominee will exercise the subscription rights on your behalf in accordance
with your instructions. Your nominee may establish a deadline that may be before the 5:00 p.m., Minneapolis time, , 2012 expiration
date we have established for the rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Payment Method for Registered Holders</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As described in the instructions accompanying
the rights certificate, payments must be made in full in United States Dollars for the full number of shares of our common stock
for which you are subscribing by (i) cashier&rsquo;s check or (ii) certified check, in either case drawn upon a United States bank
and made payable to the subscription agent at the address set forth below in this section under the caption &ldquo;&mdash;Subscription
Agent.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Personal checks are not accepted. Payment
received after the expiration of the rights offering may not be honored, and the subscription agent will return your payment to
you promptly, without interest or penalty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You should read and follow the delivery
and payment instructions accompanying the rights certificate. DO NOT SEND RIGHTS CERTIFICATES OR PAYMENTS DIRECTLY TO WESTERN CAPITAL.
Except as described below under the caption &ldquo;&mdash;Guaranteed Delivery Procedures,&rdquo; we will not consider your subscription
received until the subscription agent has received delivery of a properly completed and duly executed rights certificate and other
subscription documents, together with payment of the full subscription amount. The risk of delivery of all documents and payments
is borne by you or your nominee, not by the subscription agent or us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The method of delivery of rights certificates
and payment of the subscription amount to the subscription agent will be at the risk of the holders of subscription rights. If
sent by mail, we recommend that you send subscription materials and payments by overnight courier or by registered mail, properly
insured, with return-receipt requested, and that a sufficient number of days be allowed to ensure delivery to the subscription
agent and clearance of payment prior to the expiration of the rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Unless a rights certificate provides that
the shares of our common stock are to be delivered to the record holder of such rights or such certificate is submitted for the
account of a bank or a broker, signatures on such rights certificate must be guaranteed by an &ldquo;eligible guarantor institution&rdquo;
(as such term is defined in Rule 17Ad-15 of the Securities Exchange Act of 1934) that is a participant in the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Program Medallion Signature Program or the Stock Exchange Medallion Program,
subject to any standards and procedures adopted by the subscription agent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Missing or Incomplete Subscription Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you do not indicate the number of subscription
rights being exercised, or the subscription agent does not receive the full subscription payment for the number of subscription
rights that you indicate are being exercised, then you will be deemed to have exercised the maximum number of subscription rights
that may be exercised with the aggregate subscription payment you delivered to the subscription agent. If the subscription agent
does not apply your full subscription payment to your purchase of our shares of common stock, any excess subscription payment received
by the subscription agent will be returned promptly, without interest or penalty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Expiration Date and Amendments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The subscription period, during which you
may exercise your subscription rights, expires at 5:00 p.m., Minneapolis time, on , 2012, which is the expiration of the rights
offering. If you do not exercise your subscription rights prior to that time, your subscription rights will expire and will no
longer be exercisable. We will not be required to issue shares of common stock to you if the subscription agent receives your rights
certificate and subscription payment after that time, regardless of when the rights certificate and subscription payment were sent
by you, unless you send the documents in compliance with the guaranteed delivery procedures described below. We have the option
to extend the rights offering and the period for exercising your subscription rights, although we do not presently intend to do
so. We may extend the expiration of the rights offering by giving oral or written notice to the subscription agent prior to the
expiration of the rights offering. If we elect to extend the expiration of the rights offering, we will issue a press release announcing
such extension no later than 9:00 a.m., New York time, on the next business day after the most recently announced expiration of
the rights offering. We reserve the right to amend or modify the terms of the rights offering.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Subscription Price</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The subscription price was determined by
a special committee of our Board of Directors. Factors considered by the committee included the strategic alternatives available
to our Company for raising capital, the price at which our shareholders might be willing to participate in the rights offering,
historical and current trading prices of our common stock, the business prospects of our Company and the general condition of the
securities market. The market price for our common stock during the rights offering may not be equal to or above the subscription
price. Furthermore, a subscribing owner of rights may be unable to sell the shares of common stock purchased in the rights offering
at a price equal to or greater than the subscription price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We urge you to obtain a current quote for
our common stock before exercising your subscription rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Conditions, Withdrawal and Termination</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We reserve the right to withdraw the rights
offering prior to the expiration of the rights offering for any reason. We may terminate the rights offering, in whole or in part,
if at any time before completion of the rights offering there is any judgment, order, decree, injunction, statute, law or regulation
entered, enacted, amended or held to be applicable to the rights offering that in the sole judgment of our Board of Directors would
or might make the rights offering or its completion, whether in whole or in part, illegal or otherwise restrict or prohibit completion
of the rights offering. We may waive any of these conditions and choose to proceed with the rights offering even if one or more
of these events occur. Moreover, our Board of Directors may otherwise choose in its sole discretion to terminate the rights offering
at any time and for any reason. If we terminate the rights offering, in whole or in part, all affected subscription rights will
expire without value, and all excess subscription payments received by the subscription agent will be returned promptly, without
interest or penalty. If we cancel the rights offering, we will issue a press release notifying shareholders of the cancellation,
and all subscription payments received by the subscription agent will be returned promptly, without interest or penalty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Subscription Agent</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The subscription agent for this offering
is Corporate Stock Transfer, Inc.. The address to which subscription documents, rights certificates, notices of guaranteed delivery
and subscription payments should be mailed or delivered is:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Corporate Stock Transfer, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">3200 Cherry Creek South Drive, Suite 430</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Denver, Colorado 80209</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You are solely responsible for completing
delivery to the subscription agent of your subscription materials. The subscription materials are to be received by the subscription
agent on or prior to 5:00 p.m., Minneapolis time, on , 2012. We urge you to allow sufficient time for delivery of your subscription
materials to the subscription agent. If you deliver subscription materials in a manner different from those described in this prospectus,
we may not honor the exercise of your subscription rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Whom to Contact for Information </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Any questions regarding our rights offering
or requests for additional copies of documents may be directed to Maslon Edelman Borman &amp; Brand, LLP, Attn: Paul Chestovich,
at (612) 672-8305, Monday through Friday (except bank holidays), between 9:00 a.m. and 5:00 p.m., Minneapolis time.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Fees and Expenses</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will pay all fees charged by the subscription
agent. You are responsible for paying any other commissions, fees, taxes or other expenses incurred in connection with the exercise
of the subscription rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>No Fractional Shares</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will not issue fractional subscription
rights or fractional shares in the rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Medallion Guarantee May Be Required</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Your signature on each subscription rights
certificate must be guaranteed by an eligible institution, such as a member firm of a registered national securities exchange or
a member of the Financial Industry Regulatory Authority, Inc., or a commercial bank or trust company having an office or correspondent
in the United States, subject to standards and procedures adopted by the subscription agent, unless:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">your subscription rights certificate provides that shares are to be
delivered to you, as record holder of those subscription rights, at your address of record; or </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">you are an eligible institution.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You can obtain a signature guarantee from
a financial institution&mdash;such as a commercial bank, savings, bank, credit union or broker dealer&mdash;that participates in
one of the Medallion signature guarantee programs. The three Medallion signature guarantee programs are the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Securities Transfer Agents Medallion Program (STAMP) whose participants
include more than 7,000 U.S. and Canadian financial institutions. </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Stock Exchanges Medallion Program (SEMP) whose participants include
the regional stock exchange member firms and clearing and trust companies. </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">New York Stock Exchange Medallion Signature Program (MSP) whose participants
include NYSE member firms.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If a financial institution is not a member
of a recognized Medallion signature guarantee program, it would not be able to provide signature guarantees. Also, if you are not
a customer of a participating financial institution, it is likely the financial institution will not guarantee your signature.
Therefore, the best source of a Medallion Guarantee would be a bank, savings and loan association, brokerage firm, or credit union
with whom you do business. The participating financial institution will use a Medallion imprint or stamp to guarantee the signature,
indicating that the financial institution is a member of a Medallion signature guarantee program and is an acceptable signature
guarantor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Notice to Nominees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you are a broker, dealer, custodian bank
or other nominee holder that holds shares of our common stock for the account of others on the record date, you should notify the
beneficial owners of the shares for whom you are the nominee of the rights offering as soon as possible to learn their intentions
with respect to exercising their subscription rights. You should obtain instructions from the beneficial owner, as set forth in
the instructions we have provided to you for your distribution to beneficial owners. If the beneficial owner so instructs, you
should submit information and payment for shares. We expect that the exercise of subscription rights on behalf of beneficial owners
may be made through the facilities of DTC. You may exercise individual or aggregate beneficial owner subscription rights by instructing
DTC to transfer subscription rights from your account to the account of the subscription agent, together with certification as
to the aggregate number of subscription rights exercised and the number of common shares subscribed for under the basic subscription
privilege and the over-subscription privilege, if any, and your full subscription payment.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Beneficial Owners</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you do not hold certificates for shares
of our capital stock, you are a beneficial owner of shares of our capital stock. Instead of receiving a rights certificate, you
will receive your subscription rights through a broker, dealer, custodian bank or other nominee. We will ask your broker, dealer,
custodian bank or other nominee to notify you of the rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You should contact your broker, dealer,
custodian bank or other nominee if you do not receive information regarding the rights offering, but believe you are entitled to
subscription rights. We are not responsible if you do not receive notice by your broker, dealer, custodian bank or other nominee
or if you do not receive notice in time to respond to your nominee by the deadline established by the nominee, which may be prior
to 5:00 p.m. Minneapolis time, on , 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you wish to exercise your subscription
rights, you will need to have your broker, dealer, custodian bank or other nominee act for you. If you hold certificates for shares
of our common stock and received a rights certificate, but would prefer to have your broker, dealer, custodian bank or other nominee
act for you, you should contact your nominee and request it to effect the transaction for you.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Guaranteed Delivery Procedures</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you wish to exercise subscription rights,
but you do not have sufficient time to deliver the rights certificate evidencing your subscription rights to the subscription agent
prior to the expiration of the rights offering, you may exercise your subscription rights by the following guaranteed delivery
procedures:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">deliver to the subscription agent prior to the expiration of the rights
offering the subscription payment for each share you elected to purchase pursuant to the exercise of subscription rights in the
manner set forth above under the caption &ldquo;&mdash;Payment Method&rdquo;; </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">deliver to the subscription agent prior to the expiration of the rights
offering the form entitled &ldquo;Notice of Guaranteed Delivery&rdquo;; and </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">deliver the properly completed rights certificate evidencing your
subscription rights being exercised and the related nominee holder certification, if applicable, with any required signatures guaranteed,
to the subscription agent within three business days following the date you submit your Notice of Guaranteed Delivery.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Your Notice of Guaranteed Delivery must
be delivered in substantially the same form provided with the &ldquo;Form of Instructions for Use of Western Capital Subscription
Rights Certificates,&rdquo; which will be distributed to you with your rights certificate. Your Notice of Guaranteed Delivery must
include a signature guarantee from an eligible institution, acceptable to the subscription agent. A form of that guarantee is included
with the Notice of Guaranteed Delivery.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In your Notice of Guaranteed Delivery, you
must provide:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">your name;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the number of subscription rights represented by your rights certificate,
the number of shares of our common stock for which you are subscribing under your basic subscription privilege, and the number
of shares of our common stock for which you are subscribing under your over-subscription privilege, if any; and</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">your guarantee that you will deliver to the subscription agent a rights
certificate evidencing the subscription rights you are exercising within three business days following the date the subscription
agent receives your Notice of Guaranteed Delivery.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You may deliver your Notice of Guaranteed
Delivery to the subscription agent in the same manner as your rights certificate at the address set forth above under &ldquo;&mdash;Subscription
Agent.&rdquo; Eligible institutions may also alternatively transmit a Notice of Guaranteed Delivery to the subscription agent by
facsimile transmission at (303) 282-5800.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you require additional copies of the
Notice of Guaranteed Delivery form, you should call Paul Chestovich of Maslon Edelman Borman &amp; Brand, LLP, at (612) 672-8305.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Validity of Subscriptions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will resolve all questions regarding
the validity and form of the exercise of your subscription rights, including time of receipt and eligibility to participate in
the rights offering. Our determination will be final and binding. Once made, subscriptions and directions are irrevocable, and
we will not accept any alternative, conditional or contingent subscriptions or directions. We reserve the absolute right to reject
any subscriptions or directions not properly submitted or the acceptance of which would be unlawful. You must resolve any irregularities
in connection with your subscriptions before the subscription period expires, unless waived by us in our sole discretion. Neither
we nor the subscription agent shall be under any duty to notify you or your representative of defects in your subscriptions. A
subscription will be considered accepted, subject to our right to withdraw or terminate the rights offering, only when a properly
completed and duly executed rights certificate and any other required documents and the full subscription payment has been received
by the subscription agent. Our interpretations of the terms and conditions of the rights offering will be final and binding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Escrow Arrangements; Return of Funds</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The subscription agent will hold funds received
in payment for shares of our common stock in a segregated account pending completion of the rights offering. The subscription agent
will hold this money in escrow until the rights offering is completed or is withdrawn and canceled. If the rights offering is canceled
for any reason, all subscription payments received by the subscription agent will be returned promptly, without interest or penalty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Shareholder Rights</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You will have no rights as a holder of our
shares of common stock you purchase in the rights offering, if any, until certificates representing our shares of common stock
are issued to you or until your account at your record holder is credited with shares of common stock purchased in the rights offering.
You will have no right to revoke your subscriptions once made in accordance with the procedures set forth in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Foreign Shareholders</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will not mail this prospectus or rights
certificates to shareholders with addresses that are outside the United States or that have an army post office or foreign post
office address. The subscription agent will instead hold these rights certificates for their account. To exercise any such subscription
rights, our foreign shareholders must notify the subscription agent prior to 11:00 a.m., Minneapolis time, at least three business
days prior to the expiration of the rights offering of their exercise of such rights, and, with respect to holders whose addresses
are outside the United States, provide evidence satisfactory to us, such as a legal opinion from local counsel, that the exercise
of such subscription rights does not violate the laws of the jurisdiction of such shareholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>No Revocation or Change</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Once you submit the form of rights certificate
to exercise any subscription rights, you are not allowed to revoke or change the exercise or request a refund of monies paid. All
exercises of subscription rights are irrevocable, even if you learn information about us that you consider to be unfavorable. You
should not exercise your subscription rights unless you are certain that you wish to purchase additional common shares at the subscription
price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Material U.S. Federal Income Tax Consequences</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For U.S. federal income tax purposes, you
should not recognize income or loss upon receipt or exercise of subscription rights. For a more detailed discussion, see &ldquo;Material
U.S. Federal Income Tax Consequences&rdquo; below.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Listing</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The subscription rights are not transferable,
and we will not apply for listing of such rights on any exchange, market or listing service. Shares of our common stock are, and
we expect that the shares of common stock to be issued in the rights offering will be, traded on the over-the-counter Bulletin
Board (OCTBB) under the symbol &ldquo;WCRS.&rdquo; The last reported sales price of our common stock on the OTCBB on June 13, 2012
the last practicable date before the filing of this prospectus, was $0.10. We urge you to obtain a current market price for
the shares of our common stock before making any determination with respect to the exercise of your subscription rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Outstanding Shares of Capital Stock after the Rights Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2012, the last practicable date before the filing of this prospectus, 5,370,789 of our shares of common stock were issued and outstanding
and there were no rights to purchase shares of our common stock outstanding. As of such date there were also 10,000,000 shares
of Series A Convertible Preferred Stock issued and outstanding. Assuming no other transactions by us involving shares of our capital
stock, and no options or other convertible securities for shares of our common stock are exercised, prior to the expiration of
the rights offering, an additional of our shares of common stock will be issued and outstanding after the closing of the rights
offering if the rights offering is fully subscribed through the exercise of subscription rights, for a total of shares of common
stock outstanding. Nevertheless, there is no minimum amount of shares that must be sold in the rights offering for us to close
the offering, accept subscriptions and access related payments. Therefore, it is possible that fewer that &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock will be outstanding after completion of the rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Other Matters</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are not making the rights offering in
any state or other jurisdiction in which it is unlawful to do so, nor are we distributing or accepting any offers to purchase any
shares of our common stock from subscription rights holders who are residents of those states or other jurisdictions or who are
otherwise prohibited by federal or state laws or regulations from accepting or exercising the subscription rights. We may delay
the commencement of the rights offering in those states or other jurisdictions, or change the terms of the rights offering, in
whole or in part, in order to comply with the securities laws or other legal requirements of those states or other jurisdictions.
Subject to state securities laws and regulations, we also have the discretion to delay allocation and distribution of any shares
you may elect to purchase by exercise of your subscription privileges in order to comply with state securities laws. We may decline
to make modifications to the terms of the rights offering requested by those states or other jurisdictions, in which case, if you
are a resident in those states or jurisdictions or if you are otherwise prohibited by federal or state laws or regulations from
accepting or exercising the subscription rights you will not be eligible to participate in the rights offering. However, we are
not currently aware of any states or jurisdictions that would preclude participation in the rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following is a general discussion of
certain United States federal income tax consequences to U.S. holders, as defined below, of the receipt, ownership and exercise
of the rights distributed in the subscription rights offering and ownership of the shares of common stock that would be issued
upon an exercise of the subscription rights. This discussion is based on the Internal Revenue Code of 1986, as amended (the &ldquo;Code&rdquo;),
Treasury regulations promulgated thereunder, and applicable administrative and judicial interpretations, all as in effect as of
the date hereof and all of which are subject to change, possibly with retroactive effect. No assurance can be given that the tax
consequences described herein will not be challenged by the Internal Revenue Service (the &ldquo;IRS&rdquo;) or that such a challenge
would not be sustained by a court. No ruling has been sought from the IRS, and no opinion of counsel has been rendered, as to the
federal income tax consequences of this rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This discussion is not a comprehensive description
of the U.S. federal income taxation considerations that may be applicable to holders in light of their particular circumstances
or to holders subject to special treatment under the U.S. federal income tax laws, including but not limited to financial institutions,
brokers and dealers in securities or currencies, insurance companies, tax-exempt organizations, persons who hold their shares as
part of a straddle, hedge, conversion or other risk-reduction transaction, persons liable for the alternative minimum tax, U.S.
expatriates, persons whose functional currency is not the U.S. dollar, persons who hold their shares through &ldquo;foreign financial
institutions&rdquo; within the meaning of Section 1471 of the Code, persons that could be subject to the 3.8% Medicare tax on certain
investment income beginning in 2013, or foreign taxpayers. This discussion also does not address any aspect of state, local or
foreign income or other tax laws. This discussion is limited to U.S. holders which hold our shares of common stock or preferred
stock, and would hold the subscription rights or any shares of common stock issued on an exercise of the subscription rights, as
capital assets. For purposes of this discussion, a &ldquo;U.S. holder&rdquo; is a holder of common stock that is, for U.S. federal
income tax purposes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">a citizen or resident of the United States;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">a corporation or partnership created or organized in or under the
laws of the United States or any political subdivision thereof;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">a trust if a U.S. court is able to exercise primary supervision over
the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES TO YOU OF RECEIPT, OWNERSHIP AND EXERCISE OF THE RIGHTS, INCLUDING THE APPLICABILITY OF ANY FEDERAL
ESTATE OR GIFT TAX LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Receipt of the Subscription Rights</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You will not recognize taxable income for
U.S. federal income tax purposes in connection with the receipt of subscription rights in the rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Tax Basis and Holding Period of the Rights</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The tax basis of the subscription rights
received by you in the rights offering will be zero unless either (1) the fair market value of the subscription rights on the date
such rights are distributed is equal to at least 15% of the fair market value on such date of the shares of stock with respect
to which they are received or (2)&nbsp;you elect to allocate part of the tax basis of such shares to the subscription rights. If
either (1) or (2) is true, then, if you exercise the subscription rights, your tax basis in your shares will be allocated between
the rights and the shares with respect to which the subscription rights were received in proportion to their respective fair market
values on the date the rights are distributed. In order to comply with applicable regulations, we expect to prepare an IRS Form
8397 and either provide the same to our shareholders or post that form on our website within 45 days of the distribution of the
subscription rights. If we determine that the value of the subscription rights on the date such rights are distributed is equal
to or exceeds 15% of the fair market value on such date of the shares of stock with respect to which the rights are received, we
expect to reflect the value of the rights which we determine, and its effect on your basis in the rights and shares, on the IRS
Form 8937. If we determine that the value of the subscription rights on such date is less than 15% of the fair market value on
such date of the shares with respect to which the rights are received, we expect to reflect the value of the rights on the IRS
Form 8937, consistent with this determination (and subject to the election that you may make to allocate basis in your shares to
the rights, as discussed above) that the subscription rights do not have an effect on your basis in shares. We have not obtained,
and may not obtain, an independent appraisal of the valuation of the rights, and any determinations we reflect on an IRS Form 8937
will not be binding on the IRS. You should consult with your tax advisor to determine the proper allocation of basis between the
rights and your shares with respect to which the rights are received.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Your holding period for the rights will
include your holding period for the shares with respect to which the rights were received.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Expiration of the Rights</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If you allow subscription rights received
in the rights offering to expire, you will not recognize any gain or loss. If you have tax basis in the subscription rights which
was allocated from your shares, the tax basis of the expired rights will be restored to the tax basis of such shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Exercise of the Rights; Tax Basis and Holding Period of the
Shares</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You will not recognize any gain or loss
upon the exercise of subscription rights received in the rights offering. The aggregate tax basis of the shares acquired through
exercise of the rights should equal the sum of the exercise price for such shares and your tax basis, if any, in the rights as
described above. In determining the tax basis of the shares acquired through exercise of the rights, the price paid upon exercise
of the rights should be allocated pro rata to the shares acquired. The holding period for the shares acquired through exercise
of the rights will begin on the date the rights are exercised.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Tax Treatment of Shares received on Exercise of Subscription
Rights</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Distributions, if any, made on shares of
our common stock, including shares received on exercise of subscription rights, generally will be ordinary dividend income to the
extent of our current and accumulated earnings and profits. If you are a noncorporate holder of our shares, for taxable years beginning
before January 1, 2013, such dividends are generally taxed at a maximum U.S. federal income tax rate of 15%, provided certain holding
period requirements are satisfied. Distributions in excess of our current and accumulated earnings and profits will be treated
as a return of capital to the extent of your adjusted tax basis in the shares and thereafter as capital gain from the sale or exchange
of such shares. If you are a corporation, or are taxed as a corporation, you may be eligible for a dividends received deduction
on dividends you receive on our shares, subject to applicable limitations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Upon the sale, exchange, certain redemptions
or other taxable dispositions of shares of our common stock, you generally will recognize capital gain or loss equal to the difference
between (i) the amount of cash and the fair market value of any property received upon such taxable disposition and (ii) your adjusted
tax basis in the shares. Such capital gain or loss will be long-term capital gain or loss if your holding period in the shares
is more than one year at the time of the taxable disposition. Otherwise, such gain or loss will be short-term capital gain or loss.
If you are a noncorporate holder of our shares, any long-term capital gains you recognize will generally be subject to a maximum
U.S. federal income tax rate of 15%. This maximum tax rate is currently scheduled to increase to 20% for dispositions occurring
during taxable years beginning on or after January 1, 2013. The deductibility of capital losses is subject to limitations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Backup Withholding and Information Reporting</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In general, if you are not a corporation,
we are required to report to the IRS dividends paid to you on shares and proceeds you receive from a disposition of shares in a
transaction with the Company. Backup withholding may also apply to any payments if you fail to provide an accurate taxpayer identification
number or you are notified by the IRS that you have previously failed to report all dividends or certain other income required
to be shown on your federal income tax returns. Backup withholding is not an additional tax. Any amounts withheld under the backup
withholding rules will be allowed as a refund or credit against your United States federal income tax liability, provided the required
information is furnished to the IRS.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MARKET INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our common stock is listed for trading
on the OTC Bulletin Board, the &ldquo;OTCBB,&rdquo; under the symbol &ldquo;WCRS.&rdquo; The transfer agent and registrar for
our common stock is Corporate Stock Transfer, Inc., 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209. The following
table sets forth the high and low bid prices for our common stock as reported by the OTC Bulletin Board in 2011 and 2010. These
quotations reflect inter-dealer prices, without retail mark-up, markdown, or commission, and may not represent actual transactions.
Trading in the Company&rsquo;s common stock during the period represented was sporadic, exemplified by low trading volume and
many days during which no trades occurred. On or about March 1, 2010, our common stock also began trading on the &ldquo;OTCQB&rdquo;,
which is the OTC Markets&rsquo; middle-tier over-the-counter quotation platform. OTC Markets is the entity formerly known as &ldquo;The
Pink Sheets.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="8" STYLE="border-bottom: windowtext 1pt solid; padding: 0; vertical-align: top; text-indent: 0">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Market Price (high/low)</B></P></TD></TR>
<TR>
    <TD STYLE="border-bottom: Black 1pt solid; padding-top: 0; padding-right: 0; padding-left: 0; vertical-align: bottom; font-weight: bold; text-indent: 0">For the Fiscal Year</TD>
    <TD STYLE="vertical-align: top; padding: 0 0 1pt; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; padding-top: 0; padding-right: 0; padding-left: 0; vertical-align: bottom; font-weight: bold; text-align: center; text-indent: 0">2012</TD>
    <TD STYLE="border-top: windowtext 1pt solid; padding: 0 0 1pt; vertical-align: bottom; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-top: windowtext 1pt solid; border-bottom: Black 1pt solid; padding-top: 0; padding-right: 0; padding-left: 0; vertical-align: bottom; font-weight: bold; text-align: center; text-indent: 0">2011</TD>
    <TD STYLE="border-top: windowtext 1pt solid; padding: 0 0 1pt; vertical-align: bottom; text-indent: 0">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P></TD>
    <TD COLSPAN="2" STYLE="border-top: windowtext 1pt solid; border-bottom: Black 1pt solid; padding-top: 0; padding-right: 0; padding-left: 0; vertical-align: bottom; font-weight: bold; text-align: center; text-indent: 0">2010</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="width: 62%; vertical-align: bottom; padding: 0; text-indent: 0">First Quarter&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: bottom; padding: 0; text-indent: 0">$</TD>
    <TD STYLE="width: 12%; vertical-align: bottom; padding: 0; text-align: center; text-indent: 0">0.09 &ndash; 0.01</TD>
    <TD STYLE="width: 1%; vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: bottom; padding: 0; text-indent: 0">$</TD>
    <TD NOWRAP STYLE="width: 10%; vertical-align: bottom; padding: 0; text-align: center; text-indent: 0">0.04 &ndash; 0.02</TD>
    <TD STYLE="width: 1%; vertical-align: bottom; padding: 0; text-indent: 0">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="width: 1%; vertical-align: bottom; padding: 0; text-indent: 0">$</TD>
    <TD NOWRAP STYLE="width: 10%; vertical-align: bottom; padding: 0; text-align: center; text-indent: 0">0.30 &ndash; 0.08</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">Second Quarter&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">$</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; padding: 0; text-indent: 0">n/a</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">$</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; padding: 0; text-indent: 0">0.06 &ndash; 0.02</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">$</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; padding: 0; text-indent: 0">0.18 &ndash; 0.02</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">Third Quarter&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">$</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; padding: 0; text-indent: 0">n/a</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">$</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; padding: 0; text-indent: 0">0.03 &ndash; 0.01</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">$</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; padding: 0; text-indent: 0">0.08 &ndash; 0.02</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">Fourth Quarter&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">$</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; padding: 0; text-indent: 0">n/a</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">$</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; padding: 0; text-indent: 0">0.04 &ndash; 0.01</TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD>
    <TD STYLE="vertical-align: bottom; padding: 0; text-indent: 0">$</TD>
    <TD STYLE="vertical-align: bottom; text-align: center; padding: 0; text-indent: 0">0.19 &ndash; 0.02</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 5, 2012, the last practicable date
before the filing of this prospectus, the last reported sales price of our common stock on the OTCBB was $ per share. As of June
1, 2012, there were approximately 540 holders of record.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Holders of our common stock are entitled
to share pro rata in dividends and distributions with respect to the common stock when, as and if declared by our Board of Directors
out of funds legally available therefor. We have not paid any dividends on our common stock and intend to retain earnings, if any,
to finance the development and expansion of our business. In addition, we must first pay preferred dividends on its Series A Convertible
Preferred Stock as described under the caption &ldquo;Description of Equity Securities&rdquo; below. The current dividend payable
to the holders of Series A Convertible Preferred Stock aggregates to $525,000 on a quarterly basis. Other than with respect to
shares of Series A Convertible Preferred Stock, future dividend policy is subject to the sole discretion of our Board of Directors
and will depend upon a number of factors, including future earnings, capital requirements and our financial condition. As of March
31, 2012, we had an outstanding accrued but unpaid and cumulated dividends on our Series A Convertible Preferred Stock aggregating
to $4,075,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF SECURITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>The following is a description of the
common stock we are registering, our outstanding preferred stock, and certain material provisions of Minnesota law, our Articles
of Incorporation, and our corporate bylaws. The following is only a summary and is qualified by applicable law, our Articles of
Incorporation, and our corporate bylaws. Copies of our Articles of Incorporation and corporate bylaws are included as exhibits
to the registration statements of which this prospectus is a part and are available as set forth under &ldquo;Where You Can Find
More Information.&rdquo;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>General</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of the date of this prospectus, there
were 5,397,780 shares of our common stock issued and outstanding, and approximately 540 holders of record of our common stock,
and there were 10,000,000 shares of our Series A Convertible Preferred Stock issued and outstanding held by two holders of record.
Our authorized capital consists of 250,000,000 shares of capital stock, no par value (unless otherwise designated), of which 10,000,000
shares have been designated for issuance as preferred stock, with a par value of $0.01 per share. As of the date of this prospectus,
we had outstanding no options or warrants for the purchase of any capital shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Voting</I>. The holders of our common
stock are entitled to one vote for each outstanding share of common stock owned by that shareholder on every matter properly submitted
to the shareholders for their vote. Shareholders are not entitled to vote cumulatively for the election of directors.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Dividend Rights</I>. Subject to the dividend
rights of the holders of any outstanding series of preferred stock, holders of our common stock are entitled to receive ratably
such dividends and other distributions of cash or any other right or property as may be declared by our Board of Directors out
of our assets or funds legally available for such dividends or distributions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Liquidation Rights</I>. In the event
of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, holders of our common stock would be entitled
to share ratably in our assets that are legally available for distribution to shareholders after payment of liabilities. If we
have any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution or liquidation
preferences. In either such case, we must pay the applicable distribution to the holders of our preferred stock before we may pay
distributions to the holders of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Conversion, Redemption and Preemptive
Rights</I>. Holders of our common stock have no conversion, redemption, preemptive, subscription or similar rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Of our 250 million shares of authorized
capital, we have designated 10,000,000 for issuance as &ldquo;Series A Convertible Preferred Stock.&rdquo; Each share of Series
A Convertible Preferred Stock carries a $2.10 stated value and entitles its holders to (i) a cumulative 10% dividend, payable on
a quarterly basis; (ii) in the event of a liquidation or dissolution of the Company, a preference in the amount of all accrued
but unpaid dividends plus the stated value of such shares before any payment shall be made or any assets distributed to the holders
of any junior securities; (iii) convert their preferred shares into our common shares on a share-for-share basis, subject to adjustment;
and (iv) vote their preferred shares on an as-if-converted basis. We have the right to redeem some or all of such preferred shares,
at any time upon 60 days&rsquo; advance notice, at a price equal to $3.50 per share plus accrued but unpaid dividends thereon.
Holders of our Series A Convertible Preferred Stock have no preemptive or cumulative-voting rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Anti-Takeover Provisions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following is a description of certain
provisions of the Minnesota Business Corporation Act and our corporate bylaws that are likely to discourage any unfriendly attempt
to obtain control of the Company. This summary does not purport to be complete and is qualified in its entirety by reference to
the Minnesota Business Corporation Act and our corporate bylaws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Minnesota Business Combination Act</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are subject to the Minnesota Business
Combination Act, Section 302A.673 of the Minnesota Business Corporation Act. Subject to certain qualifications and exceptions,
the statute prohibits an &ldquo;interested shareholder&rdquo; of certain Minnesota corporations that are termed &ldquo;issuing
public corporations&rdquo; (which definition Western Capital satisfies) from effecting any &ldquo;business combination&rdquo; with
the corporation for a period of four years from the date the shareholder becomes an &ldquo;interested shareholder&rdquo; unless
the corporation&rsquo;s Board of Directors approved the business combination prior to the shareholder becoming an &ldquo;interested
shareholder&rdquo; or otherwise approved the shareholder becoming an &ldquo;interested shareholder.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">An &ldquo;interested shareholder&rdquo;
is defined to include (i) any beneficial owner of 10% or more of the voting power of the outstanding voting stock of the corporation,
or (ii) any affiliate or associate of the corporation, that, within the prior four-year period has at any time directly or indirectly
beneficially owned 10% or more of the voting power of the then-outstanding stock of the corporation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The term &ldquo;business combination&rdquo;
is defined broadly to include, among other things:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the merger, consolidation or share exchange of the corporation with
the interested shareholder or any corporation that is, or after the merger, consolidation or share exchange would be, an affiliate
or associate of the interested shareholder (subject to certain exceptions);</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the sale, lease, exchange, mortgage, pledge, transfer or other disposition
to or with an interested shareholder or any affiliate or associate of the interested shareholder, of assets of the corporation
or any subsidiary (i) having an aggregate market value of 10% or more of the corporation&rsquo;s consolidated assets, (ii) having
an aggregate market value of 10% or more of the market value of all outstanding shares of the corporation, or (iii) representing
10% or more of the earning power or net income of the corporation determined on a consolidated basis (subject to certain exceptions);
or</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the issuance or transfer to an interested shareholder or any affiliate
or associate of the interested shareholder of 5% or more of the aggregate market value of the outstanding stock of the corporation
(subject to certain exceptions).</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The statute is designed to protect minority
shareholders by prohibiting transactions in which an acquirer could favor itself at the expense of minority shareholders. The statute&rsquo;s
prohibition on the issuance or transfer to an interested shareholder of 5% or more of the aggregate market value of the outstanding
stock of a corporation is subject to an exemption for shares purchased pursuant to the exercise of rights offered on a pro rata
basis to all shareholders, such as this rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Bylaws</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Certain provisions of our corporate bylaws
could have anti-takeover effects. These provisions are intended to enhance the likelihood of continuity and stability in the composition
of our corporate policies formulated by our Board of Directors. In addition, these provisions also are intended to ensure that
our Board of Directors will have sufficient time to act in what our Board of Directors believes to be in the best interests of
us and our shareholders. However, these provisions could delay or frustrate the removal of incumbent directors or the assumption
of control of us by the holder of a large block of common stock, and could also discourage or make more difficult a merger, tender
offer, or proxy contest, even if such event would be favorable to the interest of our shareholders. These provisions are summarized
below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Advance Notice Provisions for Raising
Business or Nominating Directors</I>. Sections 3.3 and 3.6 of our bylaws contain advance-notice provisions relating to the ability
of shareholders to raise business at a shareholder meeting and make nominations for directors to serve on our Board of Directors.
These advance-notice provisions generally require shareholders to raise business within a specified period of time prior to a meeting
in order for the business to be properly brought before the meeting. Similarly, our bylaws prescribe the timing of submissions
for nominations to our Board of Directors and the certain of factual and background information respecting the nominee and the
shareholder making the nomination.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Limited Shareholder Action in Writing</I>.
Our bylaws provide that shareholder action can be taken only at an annual or special meeting of shareholders and cannot be taken
by written consent in lieu of a meeting by fewer than all shareholders entitled to vote. This provision is consistent with the
Minnesota Business Corporation Act, which does not allow for fewer than all shareholders of a public corporation to take action
other than at an actual meeting of the shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>Number of Directors and Vacancies</I>.
Our bylaws provide that the number of directors shall be determined from time to time by a vote of shareholders; provided, that
the number of directors comprising the board may be increased (but not decreased) by a majority of the directors then serving on
the board. The bylaws also provide that our board has the exclusive right, except as may be provided in the terms of any series
of preferred stock created by resolutions of the board, to fill vacancies, including vacancies created by any decision of our board
to increase the number of directors serving.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Articles of Incorporation &ndash;
Blank-Check Preferred Stock Power</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under our Articles of Incorporation, our
board has the authority to fix by resolution the terms and conditions of one or more series of preferred stock and provide by resolution
for the issuance of shares of such series.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe that the availability of our
preferred stock, in each case issuable in series, and additional shares of common stock could facilitate certain financings and
acquisitions and provide a means for meeting other corporate needs which might arise. The authorized shares of our preferred stock,
as well as authorized but unissued shares of common stock, will be available for issuance without further action by our shareholders,
unless shareholder action is required by applicable law or the rules of any stock exchange on which any series of our stock may
then be listed, or except as may be provided in the terms of any preferred stock created by resolution of our board.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">These provisions give our board the power
to approve the issuance of a series of preferred stock, or additional shares of common stock, that could, depending on its terms,
either impede or facilitate the completion of a merger, tender offer or other takeover attempt. For example, the issuance of new
shares of preferred stock might impede a business combination if the terms of those shares include voting rights which would enable
a holder to block business combinations or, alternatively, might facilitate a business combination if those shares have general
voting rights sufficient to cause an applicable percentage vote requirement to be satisfied.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PLAN OF DISTRIBUTION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As soon as practicable after the
record date for the rights offering, we will distribute the rights, rights certificates, and copies of this prospectus to
individuals who owned shares of our capital stock on , 2012. If you wish to exercise your rights and purchase shares of
common stock, you should complete the rights certificate and return it by mail, hand, express mail, courier or other
expedited service, together with payment for the shares, to the subscription agent at the following address:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Corporate Stock Transfer, Inc.</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">3200 Cherry Creek South Drive, Suite 430</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Denver, Colorado 80209</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For more information, see the section of
this prospectus entitled &ldquo;The Rights Offering.&rdquo; If you have any questions, you should contact Maslon Edelman Borman
&amp; Brand, LLP, Attn: Paul Chestovich, at (612) 672-8305.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not know of any existing agreements
between any shareholder, broker, dealer, underwriter, or agent relating to the sale or distribution of the common stock underlying
the rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DISCLOSURE OF COMMISSION POSITION </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Articles of Incorporation and our corporate
bylaws contain provisions indemnifying our directors and officers to the fullest extent permitted by Minnesota law. In addition,
and as permitted by Minnesota law, our Articles of Incorporation provide that no director will be liable to us or our shareholders
for monetary damages for breach of certain fiduciary duties as a director. The effect of this provision is to restrict our rights
and the rights of our shareholders in derivative suits to recover monetary damages against a director for breach of certain fiduciary
duties as a director, except that a director will be personally liable for:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">any breach of his or her duty of loyalty to us or our shareholders;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">acts or omissions not in good faith which involve intentional misconduct
or a knowing violation of law;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">the payment of an improper dividend or an improper repurchase of our
stock in violation of Minnesota law or in violation of federal or state securities laws; or</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">any transaction from which the director derived an improper personal
benefit.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons, we have been advised
that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore
unenforceable.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>WHERE YOU CAN FIND MORE INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We file annual, quarterly and special reports,
proxy statements and other information with the SEC. Our SEC filings, including the registration statement and exhibits, are available
to the public at the SEC&rsquo;s website at <U>http://www.sec.gov</U>. You may also read and copy any document we file at the SEC&rsquo;s
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 for information on the
operating rules and procedures for the public reference room.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We maintain an Internet site at <U>http://www.westerncapitalresources.com</U>.
We have not incorporated by reference into this prospectus the information on our website, and you should not consider it to be
a part of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This prospectus does not contain all of
the information included in the registration statement. We have omitted certain parts of the registration statement in accordance
with the rules and regulations of the SEC. For further information, we refer you to the registration statement, including its exhibits
and schedules, which may be found at the SEC&rsquo;s website referenced above. Statements contained in this prospectus and any
accompanying prospectus supplement about the provisions or contents of any contract, agreement or any other document referred to
are not necessarily complete. Please refer to the actual exhibit for a more complete description of the matters involved.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Any questions you may have regarding the
rights offering or requests for additional copies of documents may be directed to Maslon Edelman Borman &amp; Brand, LLP, Attn:
Paul Chestovich at (612) 672-8305, Monday through Friday (except bank holidays), between 9:00 a.m. and 5:00 p.m., Minneapolis time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LEGAL MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The validity of the subscription rights
and the shares of common stock offered by this prospectus have been passed upon for us by Maslon Edelman Borman &amp; Brand, LLP
of Minneapolis, Minnesota.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXPERTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The consolidated financial statements of
Western Capital Resources, Inc. and its subsidiaries as of and for the years ended December 31, 2011 and 2010, included in this
prospectus and in the related registration statement, have been audited by Lurie Besikof Lapidus LLP, an independent registered
public accounting firm. As indicated in their report with respect thereto, these consolidated financial statements are included
in this prospectus in reliance upon the authority of such firm as experts in auditing and accounting, with respect to such report.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FINANCIAL INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Western Capital Resources, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 84%">&nbsp;</TD>
    <TD STYLE="width: 16%; font-weight: bold; text-decoration: underline; text-align: right">Page No.</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Report of Independent Registered Public Accounting Firm</TD>
    <TD STYLE="text-align: right">F-2</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Consolidated Balance Sheets as of December 31, 2011 and 2010</TD>
    <TD STYLE="text-align: right">F-3</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Consolidated Statements of Income for the years ended December 31, 2011 and 2010</TD>
    <TD STYLE="text-align: right">F-4</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Consolidated Statements of Changes in Shareholder Equity for the years ended December 31, 2011 and 2010</TD>
    <TD STYLE="text-align: right">F-5</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010</TD>
    <TD STYLE="text-align: right">&nbsp;F-6</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Notes to Consolidated Financial Statements</TD>
    <TD STYLE="text-align: right">F-7</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011</TD>
    <TD STYLE="text-align: right">F-21</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Condensed Consolidated Statements of Income for the periods ended March 31, 2012 and 2011</TD>
    <TD STYLE="text-align: right">F-22</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Condensed Consolidated Statements of Cash Flows for the periods ended March 31, 2012 and 2011</TD>
    <TD STYLE="text-align: right">&nbsp;F-23</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>Notes to Condensed Consolidated Financial Statements</TD>
    <TD STYLE="text-align: right">F-24</TD></TR>
</TABLE>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><B>REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM ON CONSOLIDATED FINANCIAL&nbsp;STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Board of Directors</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Western Capital Resources, Inc.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Omaha, Nebraska</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">We have audited the accompanying
consolidated balance sheets of Western Capital Resources, Inc. and Subsidiaries as of December 31, 2011 and 2010, and the related
consolidated statements of income, shareholders&rsquo; equity, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company&rsquo;s management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&rsquo;s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the financial position of Western Capital Resources,
Inc. and Subsidiaries as of December 31, 2011 and 2010 and the results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in the United States of America.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Minneapolis, Minnesota</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">/s/ Lurie Besikof Lapidus &amp;
Company, LLP</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">March 30, 2012</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>CONSOLIDATED
BALANCE SHEETS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt"><FONT STYLE="font-size: 10pt"><B>&nbsp;</B></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">CURRENT ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; padding-left: 9pt">Cash</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,909,442</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">2,092,386</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.25in">Loans receivable (less allowance for losses of $1,001,000 and $1,165,000)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,887,813</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,743,906</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt">Inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">756,528</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">502,415</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Prepaid expenses and other</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">451,751</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">152,736</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Deferred income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">413,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">467,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">TOTAL CURRENT ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,418,534</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,958,443</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">PROPERTY AND EQUIPMENT</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">757,747</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">824,102</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>GOODWILL</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,393,869</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,458,744</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">INTANGIBLE ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">309,552</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">434,413</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">OTHER</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">142,074</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">95,180</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">TOTAL ASSETS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">22,021,776</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">20,770,882</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">LIABILITIES AND SHAREHOLDERS&rsquo; EQUITY</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">CURRENT LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts payable and accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,323,730</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,477,607</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Income tax payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">435,670</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Note payable &ndash; short-term</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Current portion long-term debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">695,123</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">769,330</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Preferred dividend payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,550,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,450,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Deferred revenue</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">314,561</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">320,021</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">TOTAL CURRENT LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,883,414</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,452,628</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>LONG-TERM LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Note payable &ndash; long-term</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,210,065</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">905,188</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Deferred income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">530,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">350,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">TOTAL LONG-TERM LIABILITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,740,065</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,255,188</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">TOTAL LIABILITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,623,479</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,707,816</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">SHAREHOLDERS&rsquo; EQUITY</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.25in">Series A convertible preferred stock 10% cumulative dividends, $0.01 par value, $2.10 stated value.&nbsp; 10,000,000 shares authorized, issued and outstanding</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.25in">Common stock, no par value, 240,000,000 shares authorized, 7,446,007 and 7,446,007 shares issued and outstanding.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,221,777</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,221,777</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,923,480</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,258,711</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">TOTAL SHAREHOLDERS&rsquo; EQUITY</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,398,297</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,063,066</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">22,021,776</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">20,770,882</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><I>&nbsp;</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><I>See notes
to consolidated financial statements.</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><I>&nbsp;</I></FONT></P>

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<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>CONSOLIDATED
STATEMENTS OF INCOME</B></FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;ended December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>REVENUES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; text-align: left; padding-left: 8.65pt">Payday loan fees</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">9,663,130</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">10,607,136</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Phones and accessories</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,585,584</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,094,049</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Cricket service fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,741,495</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,419,446</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Installment interest income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">538,273</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Check cashing fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">682,094</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">739,733</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 8.65pt">Other income and fees</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">277,344</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,118,083</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">19,487,920</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">17,978,447</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">STORE EXPENSES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Salaries and benefits</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,702,051</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,573,346</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Provisions for loan losses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,396,724</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,279,547</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Phone and accessories cost of sales</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,857,294</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,706,160</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 8.65pt">Occupancy</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,686,373</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,852,279</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 8.65pt">Advertising</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">333,453</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">363,171</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 8.65pt">Depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">275,389</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">280,250</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Amortization of intangible assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">435,861</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">517,656</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 8.65pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,417,441</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,327,611</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">14,104,586</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,900,020</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">INCOME FROM STORES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,383,334</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,078,427</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">GENERAL &amp; ADMINISTRATIVE EXPENSES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Salaries and benefits</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,735,686</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,527,797</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 8.65pt">Depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">23,741</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,677</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Interest expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">290,913</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">405,249</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 8.65pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,014,763</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,026,763</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,065,103</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,977,486</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">INCOME BEFORE INCOME TAXES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,318,231</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,100,941</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">INCOME TAX EXPENSE</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">883,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">752,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">NET INCOME</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,435,231</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,348,941</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -8.65pt; padding-left: 8.65pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -8.65pt; padding-left: 8.65pt">SERIES A CONVERTIBLE PREFERRED STOCK DIVIDENDS (assumes all paid)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,100,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,100,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">NET LOSS AVAILABLE TO COMMON STOCKHOLDERS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(664,769</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(751,059</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">NET LOSS PER COMMON SHARE -</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 8.65pt">Basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.09</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.10</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">WEIGHTED AVERAGE COMMON SHARE OUTSTANDING -</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 8.65pt">Basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,446,007</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,584,637</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><I>See notes
to consolidated financial statements.</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><I>&nbsp;</I></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><I>&nbsp;</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>CONSOLIDATED
STATEMENTS OF SHAREHOLDERS&rsquo; EQUITY</B></FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 8pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Series&nbsp;A&nbsp;Convertible <BR>Preferred&nbsp;Stock</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Common&nbsp;Stock</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; padding-bottom: 1pt">Additional <BR>Paid-In</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; padding-bottom: 1pt">Retained</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; padding-bottom: 1pt">Shareholders&rsquo;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Capital</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Deficit</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Equity</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 23%">BALANCE - December 31, 2009</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">10,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">100,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">7,996,007</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">18,478,337</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">(4,676,212</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">13,902,125</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Shares retired</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(550,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(256,560</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">168,560</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(88,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Dividends</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,100,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,100,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net income</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,348,941</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,348,941</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>BALANCE - December 31, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,446,007</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,221,777</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,258,711</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,063,066</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Dividends</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,100,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,100,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net income</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,435,231</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,435,231</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">BALANCE - December 31, 2011</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,000,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">100,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,446,007</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">18,221,777</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(5,923,480</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">12,398,297</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt"><I>See notes to
consolidated financial statements.</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>CONSOLIDATED
STATEMENTS OF CASH FLOWS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>&nbsp;</B></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year Ended December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">OPERATING ACTIVITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; text-align: left; padding-left: 9pt">Net Income</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,435,231</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,348,941</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Adjustments to reconcile net income to net cash provided by operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.25in">Depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">299,130</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">297,927</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.25in">Amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">435,861</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">517,656</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Shares received for reimbursement of expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(88,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Deferred income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">234,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">119,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Loss on disposal of property and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">28,172</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">57,650</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Changes in operating assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt">Loans receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(100,876</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">131,964</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 27pt">Inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(254,113</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(128,557</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt">Prepaid expenses and other assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(334,283</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">97,944</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 27pt">Accounts payable and accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">411,453</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">414,515</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Deferred revenue</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,460</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(25,805</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net cash provided by operating activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,149,115</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,743,235</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">INVESTING ACTIVITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Purchases of property and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(145,947</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(103,964</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Acquisition of stores, net of cash acquired</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,416,782</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net cash used by investing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,562,729</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(103,964</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">FINANCING ACTIVITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Net advances on notes payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">205,628</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Payments on notes payable &ndash; long-term</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(769,330</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(629,075</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 9pt">Dividends</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,650,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net cash used by financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(769,330</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,073,447</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">NET INCREASE (DECREASE) IN CASH</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(182,944</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">565,824</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>CASH</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 9pt">Beginning of year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,092,386</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,526,562</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 9pt">End of year</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,909,442</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,092,386</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Income taxes paid</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,094,468</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">343,103</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Interest paid</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">290,954</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">401,594</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Noncash investing and financing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Refinancing of note payable &ndash; short-term</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,636,044</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><I>See notes
to consolidated financial statements.</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">1.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Basis
                                                                                              of Presentation, Nature of Business
                                                                                              and Summary of Significant Accounting
                                                                                              Policies&nbsp;&ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Nature of Business/ Basis
of Presentation</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Western Capital Resources, Inc.
(WCR) through its wholly owned operating subsidiaries, Wyoming Financial Lenders, Inc. (WFL) and PQH, 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.&nbsp;&nbsp;The Company operated 52 &ldquo;Payday&rdquo; stores in nine states (Colorado, Iowa, Kansas,
Nebraska, North Dakota, South Dakota, Utah, Wisconsin and Wyoming) as of December 31, 2011 and 51 &ldquo;Payday&rdquo; stores
in 2010. The Company operated 45 Cricket wireless retail stores in 13 states (Arizona, Colorado, Idaho, Illinois, Indiana, Iowa,
Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon and Texas) as of December 31, 2011 and 31 Cricket wireless retail stores in
eight states (Illinois, Indiana, Iowa, Kansas, Maryland, Missouri, Nebraska and Texas) as of December 31, 2010.&nbsp;&nbsp;The
consolidated financial statements include the accounts of WCR, WFL, and PQH. All significant intercompany balances and transactions
have been eliminated in consolidation.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The Company, through its &ldquo;payday&rdquo;
division, provides non-recourse cash advance and installment loans, check cashing and other money services.&nbsp;&nbsp;The short-term
consumer loans, known as cash advance loans or &ldquo;payday&rdquo; 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&rsquo;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 a cash advance 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. Installment loans provide customers with cash in exchange for a promissory note with a maturity of generally
three to six months and are unsecured. The fee and interest rate on installment loans vary based on applicable regulations.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">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.&nbsp;&nbsp;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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Our loans and other related services
are subject to state regulations (which vary from state to state), federal regulations and local regulations, where applicable.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Use of Estimates</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The preparation of consolidated
financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that may affect certain reported amounts and disclosures in the consolidated financial statements
and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed
to be reasonable under the circumstances. Actual results could differ from those estimates. Significant management estimates relate
to the loans receivable allowance, allocation of and carrying value of goodwill and intangible assets, inventory valuation and
obsolescence and deferred taxes and tax uncertainties.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Revenue Recognition</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The Company recognizes fees on
cash advance loans on a constant-yield basis ratably over the loans&rsquo; terms. Title and installment loan fees and interest
are recognized using the interest method, except that installment loan origination fees are recognized as they become non-refundable
and installment loan maintenance fees are recognized when earned. The Company records revenue from check cashing fees, sales of&nbsp;phones,
and accessories and fees from all other services in the period in which the sale or service is completed.&nbsp;&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Loans Receivable Allowance</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">We maintain a loan loss allowance
for anticipated losses for our payday, installment 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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Included in loans receivable
are payday loans that are currently due or past due and payday loans that have not been repaid.&nbsp;&nbsp;This generally is evidenced
where a customer&rsquo;s personal check has been deposited and the check has been returned due to non-sufficient funds in the
customer&rsquo;s account, a closed account, or other reasons.&nbsp;&nbsp;Also included in loans receivable are current and delinquent
installment and title loans. Loans are carried at cost less the loans receivable allowance.&nbsp;&nbsp;The Company does not specifically
reserve for any individual loan.&nbsp;&nbsp;The Company aggregates loan types for purposes of estimating the loss allowance using
a methodology that analyzes historical portfolio statistics and management&rsquo;s judgment regarding recent trends noted in the
portfolio.&nbsp;&nbsp;This methodology takes into account several factors, including the maturity of the store location and charge-off
and recovery rates.&nbsp;&nbsp;The Company utilizes a software program to assist with the tracking of its historical portfolio
statistics.&nbsp;&nbsp;As a result of the Company&rsquo;s collection efforts, it historically writes off approximately 42% of
the returned items.&nbsp;&nbsp;Based on days past the check return date, write-offs of returned items historically have tracked
at the following approximately percentages: 1 to 30 days &ndash; 42%; 31 to 60 days &ndash; 66%; 61 to 90 days &ndash; 82%; 91
to 120 days &ndash; 88%; and 121 to 180 days &ndash; 90%.&nbsp;&nbsp;All returned items are charged-off after 180 days, as collections
after that date have not been significant.&nbsp;&nbsp;The loans receivable 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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">At December 31, 2011 and 2010
our outstanding loans receivable aging was as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%">Current</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">4,626,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">4,542,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>1-30</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">297,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">276,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>31 &ndash; 60</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">220,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">234,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>61 &ndash; 90</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">223,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">209,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>91 - 120</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">171,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">220,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>121 &ndash; 150</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">189,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">227,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">151 &ndash; 180</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">163,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">201,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,889,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,909,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Allowance for losses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,001,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,165,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,888,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,744,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">A rollforward of the Company&rsquo;s
loans receivable allowance for the years ended December 31, 2011 and 2010 is as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year Ended December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Loans receivable allowance, beginning of year</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,165,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,237,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Provision for loan losses charged to expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,397,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,280,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Charge-offs, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,561,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,352,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Loans receivable allowance, end of year</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,001,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,165,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Inventory</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Inventory, consisting of phones
and accessories, is stated at cost, determined on the specific identification and a first-in, first-out basis, respectively.&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Property and Equipment</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Property and equipment are recorded
at cost less accumulated depreciation. Depreciation is provided on the straight-line method over the estimated useful lives of
the related assets. Useful lives generally range from five to seven years for furniture, equipment, and vehicles. Leasehold improvements
are amortized using the straight-line method over the lesser of the estimated useful lives of the related assets or the leases
term, and this amortization is included with depreciation.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Goodwill</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Goodwill represents the excess
of cost over the fair value of net assets acquired using purchase accounting and is not amortized.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Intangible Assets</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Customer relationships represent
the fair values management assigned to relationships with customers acquired through business acquisitions and is amortized over
three years on an accelerated basis based on management&rsquo;s estimates of attrition of the acquired customers.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Long- Lived Assets</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The Company assesses the possibility
of impairment of long-lived and intangible assets whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Factors that could trigger an impairment review include significant underperformance relative to expected
historical or projected future cash flows, significant changes in the manner of use of acquired assets or the strategy for the
overall business, and significant negative industry events or trends. In addition, we conduct an<FONT STYLE="color: black"> annual
goodwill impairment test as of October 1 each year</FONT>. W<FONT STYLE="color: black">e assess our goodwill for impairment at
the reporting unit level by applying a fair value test. This fair value test involves a two-step process. The first step is to
compare the carrying value of our net assets to our fair value. If the fair value is determined to be less than the carrying value,
a second step is performed to measure the amount of the impairment, if any. </FONT></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Due to the effect of our capital
structure involving preferred stock and related cumulative preferred dividends, the market capitalization approach of valuing
the reporting unit as a whole is not practical. The discounted future cash flows method is utilized in estimating value. When
estimated future cash flows are less than the carrying value of the net assets and related goodwill, an impairment test is performed
to measure and recognize the amount of the impairment loss, if any. There were no impairment charges recorded in 2011 or 2010.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Concentrations of Credit Risk</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Financial instruments&nbsp;that
potentially subject the Company to concentrations of credit risk consist of cash and loans receivable. The Company&rsquo;s cash
is placed with high quality financial institutions. From time to time, cash balances exceed federally insured limits. The Company
has not experienced any significant losses with respect to its cash. Loans receivable, while concentrated in geographical areas,
are dispersed among numerous customers.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Income Taxes</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Deferred income taxes reflect
the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting
amounts, based on enacted tax laws and statutory tax rates applicable in the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected
to be realized. The provision for income taxes represents taxes paid or payable for the current year and changes during the year
in deferred tax assets and liabilities.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Net Loss Per Common Share</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">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&rsquo; by
the sum of the weighted average number of common shares outstanding plus potentially dilutive common share equivalents (convertible
preferred shares) when dilutive. The 10 million shares of potentially dilutive Series A Convertible Preferred Stock outstanding
at December 31, 2011 and 2010 were anti-dilutive and therefore excluded from the dilutive net loss per share computation:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year Ended December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left; padding-bottom: 2.5pt">Series A Convertible Preferred Stock</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 2.5pt double; text-align: right">10,000,000</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; border-bottom: Black 2.5pt double; text-align: right">10,000,000</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Fair Value of Financial Instruments</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The amounts reported in the balance
sheets for cash, loans receivable, inventory, and accounts payable are short-term in nature and their carrying values approximate
fair values. The amounts reported in the balance sheets for notes payable are both long-term and short-term and their carrying
value approximates fair value.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Recent Accounting Pronouncements
</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">In July 2010, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-20 &ldquo; <I>Receivables (Topic 310) &ndash; Disclosures
about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.&rdquo;&nbsp;&nbsp; </I>ASU 2010-20 requires
extensive new disclosures about financing receivables, including credit risk exposures and the allowance for credit losses.&nbsp;&nbsp;For
public entities, ASU 2010-20 disclosures of period-end balances are effective for interim or annual reporting periods ending on
or after June 15, 2011, as updated by ASU 2011-01.&nbsp;&nbsp;Disclosures related to activity that occurs during the reporting
period are required for interim and annual reporting periods beginning on or after December 15, 2010. The Company adopted this
standard with no material impact on its consolidated financial statements.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">In May 2011, the FASB issued
ASU No. 2011-04 &ldquo;<I>Fair Value Measurement (Topic820) &ndash; Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRS</I>.&rdquo; ASU 2011-04 results in common fair value measurement and disclosure requirements
in U.S. GAAP and IFRSs. For public entities, ASU 2011-04 is effective for interim or annual reporting periods ending on or after
December 15, 2011. We are assessing the impact of ASU 2011-04 on our consolidated financial statements.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">In September 2011, the Financial
Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-08 &ldquo;<I>Intangibles &ndash; Goodwill
and Other (Topic 350) &ndash; Testing Goodwill for Impairment.&rdquo;</I> ASU 2011-08 allows an entity the option to make a qualitative
evaluation about the likelihood of goodwill impairment to determine whether it should perform additional steps to determine if
there is goodwill impairment. The amendments are effective for annual and interim goodwill tests performed for fiscal years beginning
after December 15, 2011, early adoption being permitted. The adoption of ASU 2011-08 is not expected to have an impact on our
consolidated financial statements.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 18.05pt"><FONT STYLE="font-size: 10pt">2.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Acquisitions/Dispositions
                                                                                                 &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">In 2011 the Company purchased
the assets of various stores in separate transactions. The aggregate purchase price totaled $1,421,000.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">In September through December
2011, the Company acquired 17 retail storefronts (Arizona (2), Colorado (2), Idaho, (1), Illinois (4), Missouri (1), Nebraska
(1), Ohio (1), Oklahoma (3) and Oregon (2)) for $1,373,000. Fourteen of the storefronts were previously Cricket corporate owned
stores and 3 were acquired from another Cricket dealer.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt">In October
2011, the Company acquired one Payday store in Iowa for $48,000.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt">The Company
made no material acquisitions in 2010.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt">Under the
purchase method of accounting the assets and liabilities of the aforementioned acquisitions were recorded at their respective
fair values as of the purchase date as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year&nbsp;Ended <BR>December&nbsp;31,&nbsp;2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 85%; text-align: justify">Cash</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">4,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">Loans receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">43,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">Property and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">115,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">Intangible assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">311,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">Goodwill</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">935,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">Other non-current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify; padding-bottom: 1pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,421,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt">The results
of the operations for the acquired locations have been included in the consolidated financial statements since the date of the
acquisitions. The following table presents the unaudited pro forma results of operations for the year ended December 31, 2011
and 2010, as if the acquisitions had been consummated at the beginning of 2010. The pro forma results of operations are prepared
for comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisition occurred
at the beginning of the 2010 or the results which may occur in the future.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Year Ended December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Pro forma revenue</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">25,996,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">25,788,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Pro forma net loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(148,100</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(232,400</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Pro forma net loss per common share &ndash; basic and diluted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(0.02</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(0.03</TD><TD STYLE="text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 12pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">3.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Segment
                                                                                              Information &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The Company has grouped its operations
into two segments &ndash; Payday Operations and Cricket Wireless Retail Operations.&nbsp;&nbsp;The Payday Operations segment provides
financial and ancillary services.&nbsp;&nbsp;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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Segment information related to
the years ended December 31, 2011 and 2010:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Year Ended December 31, 2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Year Ended December 31, 2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Payday</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Cricket <BR>Wireless</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Total</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Payday</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Cricket <BR>Wireless</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Total</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 34%">Revenues</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">11,211,739</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">8,276,181</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">19,487,920</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">11,753,254</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">6,225,193</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">17,978,447</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Depreciation and amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">151,249</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">583,742</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">734,991</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">183,186</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">632,397</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">815,583</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Interest expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">290,913</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">290,913</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">144</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">405,105</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">405,249</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Income tax expense (benefit)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">963,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(80,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">883,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,009,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(257,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">752,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Net income (loss)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,575,757</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(140,526</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,435,231</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,745,791</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(396,850</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,348,941</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Total segment assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">15,037,112</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6,984,665</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">22,021,776</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">15,481,283</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5,289,599</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">20,770,882</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Expenditures for segmented assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">55,216</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,451,856</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,507,072</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">101,991</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">51,973</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">153,964</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>



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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">4.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Property and Equipment &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Property and equipment consisted
of the following:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Year Ended December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Furniture and equipment</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,076,225</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">938,535</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Leasehold improvements</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">727,570</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">705,909</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">71,766</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">71,983</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,875,561</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,716,427</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less accumulated depreciation</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,117,814</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">892,325</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">757,747</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">824,102</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Depreciation expense on all operations
for the year ended December 31, 2011 and 2010 was $299,130 and $297,927, respectively.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font-size: 10pt">5.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Intangible Assets &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Intangible assets consisted of
the follows:</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Year Ended December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Customer relationships</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">4,453,912</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">4,142,912</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less accumulated amortization</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,144,360</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,708,499</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">309,552</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">434,413</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">As of December 31, 2011, estimated
future amortization expense for the customer relationships is as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 40%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 67%; text-align: left">2012</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 30%; text-align: right">175,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">88,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">47,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">310,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">6.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Note Payable &ndash; Short Term &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The Company&rsquo;s short-term
debt is as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Note payable to WERCS with interest payable monthly at the fixed rate of 12%.&nbsp; The note was extended to April 1, 2012, is collateralized by substantially all assets of WFL and shares of stock of WFL, and contains certain financial and compliance covenants, as defined.</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 12%; border-bottom: Black 1pt solid; text-align: right">1,000,000</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 12%; border-bottom: Black 1pt solid; text-align: right">2,000,000</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,000,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,000,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">7.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Notes Payable &ndash; Long Term &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The Company&rsquo;s long-term
debt is as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Note payable (with a credit limit of $2,000,000) to River City Equity, Inc., a related party, with interest payable monthly at 12% due September 30, 2013 and upon certain events&nbsp; can be collateralized by substantially all assets of WCR.</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Note payable to a related party with interest payable monthly at 10%, due March 1, 2013 and collateralized by substantially all assets of select locations of PQH.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">449,340</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">770,638</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Note payable to a related party with interest payable monthly at 10%, due April 1, 2013 and collateralized by substantially all assets of select locations of PQH.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">440,499</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">711,140</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Note payable with interest payable monthly at 7%, amortized through January 1, 2012 and collateralized by substantially all assets of select locations of PQH.</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,349</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">192,740</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">Total</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,905,188</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,674,518</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Less current maturities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(695,123</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(769,330</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,210,065</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">905,188</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Estimated repayments are as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 40%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 67%; text-align: center">2012</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 30%; text-align: right">695,123</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center; padding-bottom: 1pt">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,210,065</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt; text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,905,188</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">8.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Income Taxes &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The Company&rsquo;s provision
for income taxes is as follows:&nbsp;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Year Ended December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Current:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%">Federal</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">549,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">525,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">State</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">100,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">108,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">649,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">633,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Deferred:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Federal</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">197,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">State</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">37,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">19,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">234,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">119,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">883,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">752,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Deferred income tax assets
(liabilities) are summarized as follows:</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"> As of December
    31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Current</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Non-Current</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Current</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Non-Current</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Deferred income tax assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 40%; text-align: left">Allowance for loan receivable</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">380,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">442,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">33,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">25,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">413,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">467,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Deferred income tax liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Property and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(163,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(194,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Goodwill and intangible assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(367,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(156,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(530,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(350,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Net</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">413,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(530,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">467,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(350,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Reconciliations from the statutory
federal income tax rate to the effective income tax rate are as follows:</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Year Ended December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Income tax expense using the statutory federal rate</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">788,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">714,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">State income taxes, net of federal benefit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">92,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">83,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Shares received for reimbursement of expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(33,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(12,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Income tax expense</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">883,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">752,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">It is the Company&rsquo;s practice
to recognize penalties and/or interest related to income tax matters in interest and penalties expense. As of December 31, 2011
and 2010, the Company had an immaterial amount of accrued interest and penalties.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The Company is subject to income
taxes in the U.S. federal jurisdiction and various states and local jurisdictions. Tax regulations within each jurisdiction are
subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. Accounting principles
generally accepted in the United States of America require management to evaluate tax positions taken by the Company and recognize
a tax liability (or asset) if the company has taken an uncertain position that more likely than not would not be sustained upon
examination by the Internal Revenue Service. Management has analyzed the tax positions taken by the Company and has concluded
that as of December 31, 2011, there are no uncertain positions taken or expected to be taken that would require recognition of
a liability (or asset) or disclosure in the financial statements. The Company is subject to routine audits by taxing jurisdictions;
however, there are currently no audits for any tax periods in progress. Management believes it is no longer subject to income
tax examinations for years prior to 2008.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">9.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Shareholders&rsquo; Equity &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>Capitalization</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">At December 31, 2011, the Company&rsquo;s
authorized capital stock consists of 250,000,000 shares of no par value capital stock. All shares have equal voting rights and
are entitled to one vote per share.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Of the 250,000,000 shares of
authorized capital, 240,000,000 have been designated as common stock and 10,000,000 as Series A Convertible Preferred Stock. The
Series A Convertible Preferred Stock has a 10% cumulative dividend and can be converted on a share-for-share basis into common
stock. The Company has the right to redeem some or all of the Series A Convertible Preferred Stock at any time, upon 60 days notice,
at $3.50 per share, plus any cumulative unpaid dividends.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><U>2008 Stock Incentive Plan</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">On February 2, 2008, the Board
of Directors of the Company approved and adopted the Company&rsquo;s 2008 Stock Incentive Plan, pursuant to which an aggregated
of 2,000,000 shares of common stock have been reserved for issuance.&nbsp;&nbsp;No options under this plan have been granted as
of December 31, 2011.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The Company had no stock options
or stock warrants outstanding at December 31, 2011. &nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">10.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Preferred Stock Dividend &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Reconciliations of the cumulative
preferred stock dividend payable are as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">   As of  December
    31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Balance due, beginning of year</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,450,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Current year preferred dividends payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,100,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Preferred dividends paid</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,650,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Balance due, end of year</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,550,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,450,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">In addition, the Company has
$525,000 of fourth quarter unaccrued cumulative preferred dividends at December 31, 2011 and 2010 that became due and payable
January 15, 2012 and 2011, respectively.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">11.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Operating Lease Commitments &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The Company leases its facilities
under operating leases with terms ranging from month to month to six years, with rights to extend for additional periods. Rent
expense on all operations&nbsp;was approximately $1,704,000 and $1,863,000 in 2011 and 2010, respectively.&nbsp;&nbsp;Future minimum
lease payments are approximately as follows:&nbsp;&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 60%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Year Ending December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 75%; text-align: center">2012</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 22%; text-align: right">1,411,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center">2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">899,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">548,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center">2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">234,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center; padding-bottom: 1pt">2016 and thereafter</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">70,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,162,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">12.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Related Party Transactions &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The Company leases two properties
from an officer of the Company and another related party under operating leases, one that extends through October, 2016 requiring
monthly lease payments of $1,680 and one that extends through June, 2015 requiring monthly lease payments of $1,200.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">On August 31, 2011, the Company
entered into two operating leases for property owned by Ladary, Inc.&nbsp;&nbsp;Ladary, which acquired the two properties in foreclosure
sales, is a corporation partially owned by the Chief Executive Officer of the Company, two directors and two employees of the
management company that manages the Company&rsquo;s largest shareholder.&nbsp;&nbsp;The new leases, one of which replaced an earlier
lease that the Company had entered into with the prior landlord, have four-year terms, require aggregate monthly rental payments
of $6,000, and are on terms and conditions substantially similar to those contained in the replaced leases.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">On October 18, 2011 the Company
entered into a long-term Promissory Note with River City Equity, Inc. River City Equity, Inc. is a related party due to the relationship
of one of its minority shareholders to the Company&rsquo;s CEO. Terms of the note are for up to $2,000,000 of principal to be
loaned at a rate of 12% with interest payable on a monthly basis. The note matures and all accrued and unpaid interest and the
unpaid principal is due and payable on September 30, 2013. The note includes a prepayment penalty and terms providing a security
interest, under certain circumstances, in substantially all assets of the Company.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Mr. Richard Miller is the
Company&rsquo;s Board Chairman. Mr. Miller provides management consulting services to the Company in addition to his services
as Chairman of the Board. In accordance with the consulting agreement, his compensation is $100,000 per year. He was paid
$100,000 and $75,000 in 2011 and 2010, respectively, under this consulting agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Rent expense to related parties
for 2011 and 2010 was approximately $57,000 and $33,000, respectively.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Interest expense for 2011 and
2010 on the related party notes payable was approximately $139,000 and $176,000, respectively.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">At the time of executing the
credit facility with WERCS, the CEO was a non-controlling and non-affiliate (under 10%) shareholder of WERCS. As of December 31,
2010, the CEO was no longer a shareholder of WERCS.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">13.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Stock Purchase and Sale &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">On February 23, 2010, WERCS,
a Wyoming <FONT STYLE="text-underline-style: none; color: windowtext; letter-spacing: 0pt">corporation</FONT> (&ldquo;WERCS&rdquo;)<FONT STYLE="text-underline-style: none; color: windowtext; letter-spacing: 0pt">,
</FONT>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 <FONT STYLE="text-underline-style: none; color: windowtext; letter-spacing: 0pt">common
stock</FONT> and Series A Convertible Preferred Stock of the Company owned by WERCS. The parties later <FONT STYLE="text-underline-style: none; color: windowtext; letter-spacing: 0pt">amended
the Stock Purchase and Sale Agreement to substitute</FONT> WCR, LLC, a Delaware limited liability company, <FONT STYLE="text-underline-style: none; color: windowtext; letter-spacing: 0pt">as
the buyer of Company stock from WERCS</FONT>. The sale of the shares of <FONT STYLE="text-underline-style: none; color: windowtext; letter-spacing: 0pt">common
stock</FONT> and Series A Convertible Preferred Stock was consummated <FONT STYLE="text-underline-style: none; color: windowtext; letter-spacing: 0pt">on
</FONT>March 31, 2010. WCR, LLC purchased the <FONT STYLE="text-underline-style: none; color: windowtext; letter-spacing: 0pt">common
stock</FONT> and the Series A Convertible Preferred Stock for aggregate consideration of approximately $4,770,000.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">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&rsquo;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&rsquo;s shares.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">14.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Employment Agreement /Management Bonus
                                                          Pool &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">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 an annual performance-based
cash bonus pool for management.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The performance-based bonus provisions
permit management to receive annual bonus payments in cash based on adjusted EBITDA and other targets established by the Board
of Directors annually. The Employment Agreement sets the 2011 and 2010 adjusted EBITDA target at $4 million. If the Company&rsquo;s
actual adjusted EBITDA performance for a particular annual period ranges from 85-100% of the established adjusted EBITDA target,
the cash bonus pool will be 7.5% of adjusted EBITDA. If the Company&rsquo;s actual EBITDA performance for a particular annual
period exceeds 100% of the established adjusted EBITDA target, 15% of adjusted EBITDA over the established target will be added
to the cash bonus pool. The cash bonus pool for 2010 is limited to 75% of the calculated annual amount due to the mid-year implementation
of the agreement. The Board approved modifications to the threshold calculations for 2011 by modifying them to exclude from the
capital expenditures and working capital requirement calculations the Cricket store acquisition transactions and related long-term
debt. The bonus pool for 2011 is approximately $334,000. Certain targets were not achieved for 2010 due to transactions approved
by the Board. The Board did, however, approve a bonus pool for management of approximately $215,000 for 2010, the amount that
would have been earned under this plan had all the targets been achieved.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">15.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Management and Advisory Agreement
                                                          &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">Effective April 1, 2010, the
Company entered into a Management and Advisory Agreement with Blackstreet Capital Management, LLC (&ldquo;Blackstreet&rdquo;),
to provide certain financial, managerial, strategic and operating advice and assistance. Blackstreet employs two of the Company&rsquo;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 (increased by 5% annually effective April 1, 2011). Management and advisory
fees for 2011 and 2010 were $311,250 and $225,000, respectively.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">16.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Risks Inherent in the Operating Environment
                                                          &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The Company&rsquo;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&rsquo;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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">The Federal Trade Commission
has issued an FTC Consumer Alert&nbsp;(Federal Trade Commission, March 2008, Consumer Alert entitled &ldquo;Payday Loans Equal
Very Costly Cash: Consumers Urged to Consider the Alternatives&rdquo;) 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.&nbsp;&nbsp;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 exceeds 36%. This limitation effectively
prohibits us from utilizing our present business model for cash advance or &ldquo;payday&rdquo; 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 &ldquo;predatory.&rdquo; 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.&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">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&rsquo;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&rsquo;s authority will nonetheless be broad, and it is expected that
the Bureau will address issues such as rollovers or extensions of payday loans and compliance with federal rules and regulations.
Future restrictions on the payday lending industry could have serious consequences for the Company.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">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 became effective August 11, 2010 and modified 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 limited the amount and type
of fees that can be charged on these loans, effectively reducing by one-half the fees that can be charged and when the fees may
be realized. The Company continues to operate its sole store in Colorado offering short-term installment loans.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">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 are 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. In 2011 we introduced
an installment loan product in Wisconsin.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">On November 2, 2010, voters in
Montana passed Petition Initiative I-164. Effective January 1, 2011, Petition Initiative I-164 capped fees on payday loans at
an imputed interest rate of 36%. The Company discontinued its payday loan operations in that state on December 31, 2010.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">For the years ended December
31, 2011 and 2010, the Company had significant revenues by state (shown as a percentage of applicable division&rsquo;s revenue
when 10% or more) as follows:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 93%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="7" NOWRAP STYLE="border-bottom: windowtext 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">Payday&nbsp;Division</FONT></TD>
    <TD NOWRAP><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" NOWRAP STYLE="text-align: center"><FONT STYLE="font-size: 10pt">Cricket&nbsp;Wireless&nbsp;Division</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="width: 24%"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="width: 1%"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="width: 10%; border-bottom: black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">2011</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">%&nbsp;of</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">Revenues</FONT></P></TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD>
    <TD NOWRAP STYLE="width: 1%"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="width: 10%; border-bottom: black 1pt solid; text-align: center"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-size: 10pt">2010</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-size: 10pt">%&nbsp;of</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-size: 10pt">Revenues</FONT></P></TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD>
    <TD NOWRAP STYLE="width: 3%"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="width: 26%; border-top: windowtext 1pt solid"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD NOWRAP STYLE="width: 1%">&nbsp;</TD>
    <TD NOWRAP STYLE="width: 10%; border-top: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: center"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-size: 10pt">2011</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-size: 10pt">%&nbsp;of</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-size: 10pt">Revenues</FONT></P></TD>
    <TD NOWRAP STYLE="width: 1%; border-top: windowtext 1pt solid">&nbsp;</TD>
    <TD NOWRAP STYLE="width: 10%; border-top: windowtext 1pt solid; border-bottom: windowtext 1pt solid; text-align: center"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-size: 10pt">2010</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-size: 10pt">%&nbsp;of</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><FONT STYLE="font-size: 10pt">Revenues</FONT></P></TD>
    <TD NOWRAP STYLE="width: 1%; border-top: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 10pt">Nebraska</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">28%</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">28</FONT>%</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Missouri</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">25%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">31%</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Wyoming</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">15</FONT>%</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">14</FONT>%</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Nebraska</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">18</FONT>%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">16</FONT>%</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 10pt">North Dakota</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">18</FONT>%</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">16</FONT>%</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Texas</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">11</FONT>%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">12</FONT>%</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Iowa</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">12</FONT>%</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">12</FONT>%</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">Indiana</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">22</FONT>%</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">28</FONT>%</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">17.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Other Expenses &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">A breakout of other expense is
as follows:</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Year Ended December 31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="text-align: center">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-decoration: underline; text-align: left">Store expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; text-align: left">Bank fees</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">273,868</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">223,757</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Collection costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">386,230</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">408,180</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Repair and Maintenance</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">155,579</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">178,825</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Supplies</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">248,011</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">167,624</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Telephone</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">133,945</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">142,592</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Utilities and network lines</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">486,355</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">503,703</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">733,453</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">702,930</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,417,441</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,327,611</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-decoration: underline; text-align: left">General &amp; administrative expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Professional fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">235,380</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">452,244</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Management and consulting fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">411,250</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">300,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">368,133</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">274,519</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,014,763</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,026,763</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">18.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Litigation Matter &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">On March 26, 2010, the
Company and all of the then-current members of its Board of Directors, among others, were sued by our former Chief Financial Officer
and another former member of management, Messrs. Steven Staehr and David Stueve, respectively. 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. After the filing of the lawsuit, the Company
removed the lawsuit to federal court and the plaintiffs sought to remand the case back to state court. On October 26, 2010, the
plaintiffs&rsquo; motion to remand the case to state court was denied by the federal court. On July 6, 2011, the U.S. District
Court for the District of Minnesota granted the Company&rsquo;s motion to dismiss the action brought by Messrs. Steven Staehr
and David Stueve. The lawsuit was dismissed without prejudice. The Company obtained a full and complete release from Steven Staehr
pursuant to a Stock Redemption Agreement entered into on March 1, 2012, effective as of February 28, 2012. The redemption transaction
contemplated by the agreement was consummated on March 12, 2012.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt">19.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Special Committee of the Board of
                                                          Directors</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">In June 2011, the Board
of Directors appointed Mr. Ellery Roberts to a special committee of the board.&nbsp; The appointment was made for a period of
six months.&nbsp; In November 2011 this appointment was extended through August 2012. In consideration for his additional service
on the committee, the Company will pay Mr. Roberts $13,000 per month from June 2011 through November 2011 and $10,000 per month
from December 2011 through November 2012.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt"><FONT STYLE="font-size: 10pt; color: black">20.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Subsequent
                                                                                            Events &ndash;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt"><I>TX store acquisition</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt"><I>&nbsp;</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">In February, 2012, the
Company acquired three additional Cricket corporate owned stores for approximately $350,000. Two of the stores are located in
McAllen, Texas and one in Laredo, Texas.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt"><I>Common Stock Repurchase</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">Also in February-March,
2012, the Company repurchased an aggregate of 2,048,227 shares of its common stock from four shareholders at $0.15 per share for
a total repurchase cost of $307,234.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt"><I>Credit Facility</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">On March 14, 2012, the
Company paid the remaining principal balance and all accrued and unpaid interest owing under the WERCS credit facility.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt"><I>Related-Party Consulting
Agreement</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">On March 7, 2012, a
consulting agreement with Mr. Richard Miller was approved by the Company&rsquo;s Board of Directors. The agreement provides for
consulting fees in the amount of $100,000 and the same terms and conditions as the agreement that expires March 31, 2012.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;</FONT></P>

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<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">ITEM 9&nbsp;&nbsp;&nbsp;&nbsp;CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">None.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">ITEM 9A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CONTROLS
AND PROCEDURES</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><B>EVALUATION OF DISCLOSURE CONTROLS
AND PROCEDURES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">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&rsquo;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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">As of December 31, 2011, 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 December
31, 2011.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0"><B>CONDENSED CONSOLIDATED BALANCE SHEETS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; vertical-align: top">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center; vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid; vertical-align: top">March&nbsp;31,&nbsp;2012 (Unaudited)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center; vertical-align: top">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: center; vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid; vertical-align: top"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December&nbsp;31,&nbsp;2011</B>&nbsp;</P></TD><TD STYLE="padding-bottom: 1pt; text-align: center; vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">CURRENT ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; padding-left: 9pt">Cash</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,486,834</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,909,442</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Loans receivable (less allowance for losses of $864,000 and $1,001,000)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,825,508</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,887,813</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt">Inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">660,786</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">756,528</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Prepaid expenses and other</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">517,245</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">451,751</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Deferred income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">361,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">413,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">TOTAL CURRENT ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,851,373</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,418,534</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">PROPERTY AND EQUIPMENT</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">739,167</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">757,747</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt">GOODWILL</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,632,569</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,393,869</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">INTANGIBLE ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">328,151</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">309,552</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 9pt">OTHER</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">110,744</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">142,074</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">TOTAL ASSETS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">21,662,004</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">22,021,776</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">LIABILITIES AND&nbsp; SHAREHOLDERS&rsquo; EQUITY</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">CURRENT LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts payable and accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,475,506</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,323,730</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Note payable &ndash; short-term</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Current portion long-term debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">696,910</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">695,123</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Preferred dividend payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,075,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,550,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Deferred revenue</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">250,205</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">314,561</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">TOTAL CURRENT LIABILITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,497,621</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,883,414</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>LONG-TERM LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 9pt">Notes payable &ndash; long-term</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,229,278</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,210,065</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 9pt">Deferred income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">580,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">530,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">TOTAL LONG-TERM LIABILITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,809,278</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,740,065</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">TOTAL LIABILITES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,306,899</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,623,479</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">SHAREHOLDERS&rsquo; EQUITY</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.25in">Series A convertible preferred stock 10% cumulative dividends, $0.01 par value, $2.10 stated value, 10,000,000 shares authorized, issued and outstanding</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.25in">Common stock, no par value, 240,000,000 shares authorized, 5,397,780 and 7,446,007 shares issued and outstanding</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,914,543</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,221,777</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,659,438</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,923,480</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">TOTAL SHAREHOLDERS&rsquo; EQUITY</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,355,105</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,398,297</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">TOTAL LIABILITIES AND SHAREHOLDERS&rsquo; EQUITY</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">21,662,004</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">22,021,776</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>See notes to condensed consolidated financial statements.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt"><B>WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt"><B>CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three&nbsp;months&nbsp;ended</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March&nbsp;31,&nbsp;2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March&nbsp;31,&nbsp;2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>REVENUES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; text-align: left; padding-left: 8.65pt">Payday loan&nbsp;fees</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,307,901</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,325,747</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Phones and accessories</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,741,696</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,586,915</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Cricket service fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,995,025</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">554,696</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Installment interest income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">196,509</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Check cashing fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">195,812</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">232,542</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 8.65pt">Other income and fees</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">79,827</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">338,731</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,516,770</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,038,631</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">STORE EXPENSES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Phones and accessories cost of sales</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,835,075</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">957,897</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Provisions for loan losses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">276,390</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">178,873</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Salaries and benefits</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,687,392</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,112,045</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 8.65pt">Occupancy</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">552,308</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">418,063</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 8.65pt">Advertising</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">77,121</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">81,600</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 8.65pt">Depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">69,245</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">64,093</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Amortization of intangible assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">59,401</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">115,605</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 8.65pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">752,278</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">609,977</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,309,210</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,538,153</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">INCOME FROM STORES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,207,560</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,500,478</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">GENERAL &amp; ADMINISTRATIVE EXPENSES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 8.65pt">Salaries and benefits</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">527,732</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">445,927</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 8.65pt">Depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,492</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,020</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 8.65pt">Interest expense</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">78,121</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">93,192</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 8.65pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">304,173</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">289,970</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">915,518</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">833,109</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">INCOME BEFORE INCOME TAXES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,292,042</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">667,369</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">INCOME TAX EXPENSE</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">503,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">255,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">NET INCOME</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">789,042</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">412,369</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.13in; text-indent: -0.13in">SERIES A CONVERTIBLE PREFERRED STOCK DIVIDENDS <BR>(assumes all paid)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(525,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(525,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">264,042</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(112,631</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">NET INCOME (LOSS) PER COMMON SHARE</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 8.65pt">Basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.04</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.02</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 8.65pt">Basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,512,273</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,446,007</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>See notes to condensed consolidated financial statements.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three Months Ended</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March&nbsp;31,&nbsp;2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March&nbsp;31,&nbsp;2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">OPERATING ACTIVITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; text-align: left; padding-left: 9pt">Net Income</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">789,042</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">412,369</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Adjustments to reconcile net income to net cash provided by operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.25in">Depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">74,737</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">68,113</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.25in">Amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">59,401</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">115,605</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Deferred income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">102,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">106,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Loss on disposal of property and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27,342</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Changes in operating assets and liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 27pt">Loans receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,062,305</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,028,362</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 27pt">Inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">95,742</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">99,433</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 27pt">Prepaid expenses and other assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(29,764</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,651</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt">Accounts payable and accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">151,776</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(698,227</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Deferred revenue</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(64,356</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(106,228</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net cash provided by operating activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,240,883</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,065,420</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">INVESTING ACTIVITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Purchase of property and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(21,157</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(13,574</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Acquisitions, net of cash acquired</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(356,100</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net cash used by investing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(377,257</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(13,574</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">FINANCING ACTIVITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Payments on notes payable &ndash; short-term</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,000,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,000,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Payments on notes payable &ndash; long-term</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(179,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(172,162</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Advances from notes payable &ndash; long-term</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">200,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Common stock redemption</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(307,234</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net cash used by financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,286,234</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,172,162</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">NET INCREASE (DECREASE) IN CASH</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">577,392</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(120,316</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>CASH</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 9pt">Beginning of period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,909,442</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,092,386</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 9pt">End of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,486,834</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,972,070</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Income taxes paid</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">18,966</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">447,084</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Interest paid</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">87,728</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">94,361</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>See notes to condensed consolidated financial
statements.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt">&nbsp; &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">1.</TD><TD>Basis of Presentation, Nature of Business and Summary of Significant Accounting Policies&nbsp;&ndash;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><U>Basis of Presentation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">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 (&ldquo;GAAP&rdquo;) have
been omitted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three
month period ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December
31, 2012. 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, 2011. The condensed consolidated balance sheet at December 31, 2011, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><U>Nature of Business</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">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 &ldquo;Company,&rdquo; provides retail financial services and retail cellular phone sales to individuals primarily in
the Midwestern United States.&nbsp;&nbsp;As of March 31, 2012, the Company operated 52 &ldquo;payday&rdquo; stores in nine states
(Colorado, Iowa, Kansas, Nebraska, North Dakota, South Dakota, Utah, Wisconsin and Wyoming) and operated 48 Cricket wireless retail
stores in 13 states (Arizona, Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon and
Texas).&nbsp;&nbsp;The condensed consolidated financial statements include the accounts of WCR, WFL, and PQH. All significant intercompany
balances and transactions have been eliminated in consolidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">The Company, through its &ldquo;payday&rdquo; division,
provides non-recourse cash advance and installment loans, check cashing and other money services.&nbsp;&nbsp;The short-term consumer
loans, known as cash advance loans or &ldquo;payday&rdquo; 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&rsquo;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 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. Installment
loans provide customers with cash in exchange for a promissory note with a maturity of generally three to six months. The fee and
interest rate on installment loans vary based on applicable regulations. Like cash advance or &ldquo;payday&rdquo; loans, installment
loans are unsecured.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">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.&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">Our loans and other related services are subject to
state regulations (which vary from state to state), federal regulations and local regulations, where applicable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">The Company also operates a Cricket Wireless Retail
division that is a premier dealer for Cricket Communications, Inc., reselling cellular phones and accessories and accepting service
payments from Cricket customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><U>Use of Estimates</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">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 loans receivable allowance, allocation of and carrying value of goodwill and intangible assets, inventory valuation and
obsolescence, and deferred taxes and tax uncertainties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><U>Revenue Recognition</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">The Company recognizes fees on cash advance loans on
a constant-yield basis ratably over the loans&rsquo; terms. Title and installment loan fees and interest are recognized using the
interest method except that installment loan origination fees are recognized as they become non-refundable and installment loan
maintenance fees are recognized when earned. The Company records revenue from check cashing fees, sales of&nbsp;phones, and accessories
and fees from all other services in the period in which the sale or service is completed.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><U>Loans Receivable Allowance</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">We maintain a loan loss allowance for anticipated losses
for our payday, installment 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">Included in loans receivable are payday loans that
are currently due or past due and payday loans that have not been repaid.&nbsp;&nbsp;This generally is evidenced where a customer&rsquo;s
personal check has been deposited and the check has been returned due to non-sufficient funds in the customer&rsquo;s account,
a closed account, or other reasons.&nbsp;&nbsp;Also included in loans receivable are current and delinquent installment and title
loans. Loans are carried at cost less the loans receivable allowance.&nbsp;&nbsp;The Company does not specifically reserve for
any individual loan.&nbsp;&nbsp;The Company aggregates loan types for purposes of estimating the loss allowance using a methodology
that analyzes historical portfolio statistics and management&rsquo;s judgment regarding recent trends noted in the portfolio.&nbsp;&nbsp;This
methodology takes into account several factors, including the maturity of the store location and charge-off and recovery rates.&nbsp;&nbsp;The
Company utilizes a software program to assist with the tracking of its historical portfolio statistics.&nbsp;&nbsp;As a result
of the Company&rsquo;s collection efforts, it historically writes off approximately 41% of the returned items.&nbsp;&nbsp;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 &ndash; 42%; 31 to 60 days &ndash; 66%; 61 to 90 days &ndash; 82%; 91 to 120 days &ndash; 87%; and 121 to 180 days
&ndash; 90%.&nbsp;&nbsp;All returned items are charged off after 180 days, as collections after that date have not been significant.&nbsp;&nbsp;The
loans receivable 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><U>Net Income (Loss) Per Common Share</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">Basic net income (loss) per common share is computed
by dividing the income (loss) available to common shareholders by the weighted average number of common shares outstanding for
the year. Diluted net income (loss) per common share is computed by dividing the net income (loss) available to common shareholders
by the sum of the weighted average number of common shares outstanding plus potentially dilutive common share equivalents (convertible
preferred shares) when dilutive. The 10 million shares of potentially dilutive Series A Convertible Preferred Stock outstanding
at March 31, 2012 and 2011 were anti-dilutive and therefore excluded from the dilutive net income (loss) per share computation.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><U>Recent Accounting Pronouncements</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">In September 2011, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update (ASU) No. 2011-08 &ldquo;<I>Intangibles &ndash; Goodwill and Other (Topic 350)
&ndash; Testing Goodwill for Impairment.&rdquo;</I> ASU 2011-08 allows an entity the option to make a qualitative evaluation about
the likelihood of goodwill impairment to determine whether it should perform additional steps to determine if there is goodwill
impairment. The amendments are effective for annual and interim goodwill tests performed for fiscal years beginning after December
15, 2011, early adoption being permitted. The Company adopted this standard with no material impact on its consolidated financial
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">In May 2011, the FASB issued ASU No. 2011-04 &ldquo;<I>Fair
Value Measurement (Topic820) &ndash; Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP
and IFRS</I>.&rdquo; ASU 2011-04 results in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. For
public entities, ASU 2011-04 is effective for interim or annual reporting periods ending on or after December 15, 2011. The Company
adopted this standard with no material impact on its consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt; text-align: left">2.</TD><TD STYLE="text-align: justify">Loans Receivable and Loans Receivable Allowance &ndash;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">At March 31, 2012 and December 31, 2011 our outstanding
loans receivable aging was as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March&nbsp;31,&nbsp;2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December&nbsp;31,&nbsp;2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 66%">Current</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">3,609,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">4,626,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>1-30</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">233,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">297,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>31 &ndash; 60</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">176,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">220,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>61 &ndash; 90</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">203,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">223,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>91 &ndash; 120</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">146,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">171,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>121 &ndash; 150</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">156,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">189,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">151 &ndash; 180</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">167,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">163,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,690,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,889,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Allowance for losses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(864,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,001,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,826,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,888,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">A rollforward of the Company&rsquo;s loans receivable
allowance for the three months ended March 31, 2012 and 2011 is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 75%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended<BR>
 March 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Loans receivable allowance, beginning of period</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,001,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,165,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Provision for loan losses charged to expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">276,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">179,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Charge-offs, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(413,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(423,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Loans receivable allowance, end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">864,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">921,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt; text-align: left">3.</TD><TD STYLE="text-align: justify">Segment Information &ndash;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">The Company has grouped its operations into two segments
&ndash; 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 Communications, Inc., reselling cellular phones
and accessories and serving as a payment center for Cricket customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">Segment information related to the three months ended
March 31, 2012 and 2011 is set forth below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 25pt">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="text-align: center; border-bottom: Black 1pt solid">Three&nbsp;Months&nbsp;Ended<BR> March 31, 2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended<BR> March 31, 2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Payday</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Cricket<BR> Wireless</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Payday</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Cricket<BR> Wireless</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 22%; text-align: left">Revenues from external customers</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,789,116</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">4,727,654</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">7,516,770</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,640,997</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2,397,634</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">5,038,631</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">368,771</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">420,271</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">789,042</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">379,568</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">32,801</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">412,369</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Total segment assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">14,677,536</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6,984,468</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">21,662,004</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">14,283,393</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4,937,241</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">19,220,634</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt; text-align: left">4.</TD><TD STYLE="text-align: justify">Notes Payable &ndash;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">On January 26, 2011, WERCS extended the maturity of
the promissory note made by WERCS to WFL, pursuant to the Business Loan Agreement dated April 1, 2010 and an accompanying $2,000,000
promissory note to WFL, to April 1, 2012. In March 2011, as required by the terms of the note extension, the Company paid $1,000,000
toward the principal balance on the WERCS promissory note. On March 14, 2012, the Company repaid the remaining principal balance
and all accrued and unpaid interest under the WERCS credit facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">The Company drew an additional $200,000 on the existing
note payable with River City Equity, Inc, a related party, during the first quarter 2012. Total advanced on the $2,000,000 credit
facility as of March 31, 2012 was $1,200,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">5.</TD><TD>Risks Inherent in the Operating Environment&nbsp;&ndash;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">The Company&rsquo;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&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">The Federal Trade Commission has issued an FTC
Consumer Alert&nbsp;(Federal Trade Commission, March 2008, Consumer Alert entitled &ldquo;Payday Loans Equal Very Costly
Cash: Consumers Urged to Consider the Alternatives&rdquo;) 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&nbsp;
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 exceeds 36%. This limitation effectively prohibits us from utilizing our present
business model for cash advance or &ldquo;payday&rdquo; 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 &ldquo;predatory.&rdquo; 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.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">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&rsquo;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&rsquo;s authority will nonetheless be broad, and it is expected that the Bureau will address issues such as rollovers
or extensions of payday loans and compliance with federal rules and regulations. Future restrictions on the payday lending industry
could have serious consequences for the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">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 became effective August 11, 2010 and modified 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 limited the amount and type of fees that can
be charged on these loans, effectively reducing by one-half the fees that can be charged and when the fees may be realized. At
present, the Company continues to operate its sole store in Colorado while the impact to profitability of this new law is being
assessed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">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 are only allowed to renew a payday loan once, and then lenders
are required to offer a 60-day, interest free, payment plan to consumers. As a result of these changes, we introduced an installment
loan product in Wisconsin in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><FONT STYLE="color: black">On November 2, 2010, voters
in Montana passed Petition Initiative I-164. Effective January 1, 2011, Petition Initiative I-164 capped fees on payday loans
at an imputed interest rate of 36%. </FONT>The Company discontinued its operations in that state on December 31, 2010.<SUP></SUP></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">For the three months ended&nbsp;March 31, 2012 and
2011, the Company had significant revenues by state (shown as a percentage of applicable division&rsquo;s revenue) as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 93%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="5" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding: 0; text-indent: 0">Payday Division</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD COLSPAN="5" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding: 0; text-indent: 0">Cricket Wireless Division</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD><TD NOWRAP STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid; padding: 0">2012 <BR>%&nbsp;of&nbsp;Revenues</TD><TD NOWRAP STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid; padding: 0; text-indent: 0">2011 <BR>%&nbsp;of&nbsp;Revenues</TD><TD NOWRAP STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD NOWRAP STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD><TD NOWRAP STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid; padding: 0; text-indent: 0">2012 <BR>%&nbsp;of&nbsp;Revenues</TD><TD NOWRAP STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD NOWRAP STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid; padding: 0; text-indent: 0">2011 <BR>%&nbsp;of&nbsp;Revenues</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 26%; font-size: 10pt; padding: 0; text-indent: 0">Nebraska</TD><TD STYLE="width: 1%; font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 10%; font-size: 10pt; text-align: center; padding: 0">26%</TD><TD STYLE="width: 1%; font-size: 10pt; padding: 0; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; font-size: 10pt; text-align: center; padding: 0">28%</TD><TD STYLE="width: 3%; font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 26%; font-size: 10pt; padding: 0; text-indent: 0">Missouri</TD><TD STYLE="width: 1%; font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="width: 10%; font-size: 10pt; text-align: center; padding: 0">18%</TD><TD STYLE="width: 1%; font-size: 10pt; padding: 0; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; font-size: 10pt; text-align: center; padding: 0">29%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">Wyoming</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">15%</TD><TD STYLE="font-size: 10pt; padding: 0; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">15%</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">Nebraska</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">13%</TD><TD STYLE="font-size: 10pt; padding: 0; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">18%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding: 0; text-indent: 0">North Dakota</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">18%</TD><TD STYLE="font-size: 10pt; padding: 0; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">17%</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">Texas</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">11%</TD><TD STYLE="font-size: 10pt; padding: 0; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">14%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">Iowa</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">12%</TD><TD STYLE="font-size: 10pt; padding: 0; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">12%</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">Indiana</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">12%</TD><TD STYLE="font-size: 10pt; padding: 0; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">27%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">&nbsp;</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">Oklahoma</TD><TD STYLE="font-size: 10pt; padding: 0; text-indent: 0">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">10%</TD><TD STYLE="font-size: 10pt; padding: 0; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; padding: 0">&nbsp;&nbsp;-%</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt; text-align: left"><FONT STYLE="font-size: 10pt">6.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Preferred Stock</FONT> <FONT STYLE="font-size: 10pt">Dividend
&ndash;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">Reconciliations of the cumulative preferred stock dividend
payable are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Three&nbsp;Months&nbsp;Ended&nbsp; <BR>March 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 76%; text-align: left">Balance due, beginning of the period</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">3,550,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">1,450,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Current quarter preferred dividends payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">525,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">525,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Preferred dividends paid</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Balance due, end of the period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,075,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,975,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">In addition, the Company has $525,000 of first quarter
unaccrued cumulative preferred dividends from March 31, 2012 and 2011 that became due and payable April 15, 2012 and 2011, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt; text-align: left"><FONT STYLE="font-size: 10pt">7.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Other Expense &ndash;</FONT></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">A breakout of other expense is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 68%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Three&nbsp;Months&nbsp;Ended<BR>March 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">Store expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 76%; text-align: left">Bank fees</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">81,620</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">75,329</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Collection costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">128,698</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">107,954</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Repairs &amp; maintenance</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">34,191</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">47,295</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Supplies</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">87,925</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">34,404</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Telephone</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">33,834</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">33,654</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Utilities and network lines</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">176,172</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">127,424</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">209,838</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">183,917</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">752,278</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">609,977</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">General &amp; administrative expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Professional fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">85,923</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">123,515</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Management and consulting fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">133,750</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">84,500</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">66,455</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">304,173</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">289,970</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt; text-align: left">8.</TD><TD STYLE="text-align: justify">Acquisitions &ndash;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">In February 2012, the Company acquired three Cricket
corporate-owned stores for approximately $355,000. Two of the stores are located in McAllen, Texas and one in Laredo, Texas.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 67%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Fair&nbsp;Value</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 88%; text-align: justify">Property and equipment</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">35,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">Intangible assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">78,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">Goodwill</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">238,700</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt">Other non-current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,400</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">356,100</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">The results of the operations for the acquired locations
have been included in the condensed consolidated financial statements since the date of the acquisitions. The following table presents
the unaudited pro forma results of continuing operations for the three months ended March 31, 2012 and 2011, as if the acquisitions
had been consummated at the beginning of each period presented. The pro forma results of continuing operations are prepared for
comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisitions occurred at
the beginning of the year presented or the results which may occur in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 67%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Three&nbsp;Months&nbsp;Ended <BR>March 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 76%; text-align: left">Pro forma revenue</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">7,670,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">5,481,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Pro forma net income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">813,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">482,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Pro forma net&nbsp;income (loss) per common share&nbsp;&ndash; basic and diluted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">.04</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(0.01</TD><TD STYLE="text-align: left">)</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt; text-align: left">9.</TD><TD STYLE="text-align: justify">Consulting Agreement &ndash;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">On March 7, 2012, a consulting agreement with Mr. Richard
Miller, the Chairman of the Board, was approved by the Company&rsquo;s Board of Directors. The agreement provides for consulting
fees in the amount of $100,000 and contains the same terms and conditions as the earlier agreement that expired March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt; text-align: left">10.</TD><TD STYLE="text-align: justify">Common Stock Repurchases &ndash;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">In February and March 2012, the Company repurchased
an aggregate of 2,048,227 shares of its common stock from four shareholders at $0.15 per share for a total repurchase cost of $307,234.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt; text-align: left">11.</TD><TD STYLE="text-align: justify">Subsequent Events &ndash;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><I>Acquisitions</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">The Company entered into three Asset Purchase Agreements
between April 1 and May 15, 2012 to acquire three Cricket retail storefronts for a combined purchase price of approximately $260,000.
Among other things, those agreements require the Company to open two new Cricket retail storefronts and relocate one existing Cricket
retail storefront.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>$4,500,000</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><IMG SRC="image_002.jpg" ALT=""></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>WESTERN CAPITAL RESOURCES, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 18pt"><B>Common
Stock</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<HR STYLE="color: Black; width: 20%">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 16pt"><B>PROSPECTUS</B></FONT></P>
<HR STYLE="color: Black; width: 20%">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; border-bottom: Black 1.5pt double">, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PART II</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INFORMATION NOT REQUIRED IN PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Set forth below are expenses we expect to
incur in connection with the issuance and distribution of the securities registered hereby. With the exception of the Securities
and Exchange Commission registration fee, the amounts set forth below are estimates and actual expenses may vary considerably from
these estimates depending upon how long the notes are offered and other factors:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="RIGHT" STYLE="border-collapse: collapse; width: 95%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 86%; font-size: 10pt; text-align: left; padding-left: 0">Securities and Exchange Commission registration fee</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">516</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Accounting fees and expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">10,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Legal fees and expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">55,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Blue sky fees and expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">10,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Printing and mailing expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">10,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0">Subscription agent fees and expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">10,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0">Miscellaneous</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">5,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE><BR STYLE="clear: both">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;The registrant is subject to Minnesota
Statutes, Chapter&nbsp;302A, the Minnesota Business Corporation Act (the&nbsp;&ldquo;Corporation Act&rdquo;). Section&nbsp;302A.521
of the Corporation Act provides in substance that, unless prohibited by its articles of incorporation or bylaws, a Minnesota corporation
must indemnify an officer or director who is made or threatened to be made a party to a proceeding by reason of the former or present
official capacity of the person against judgments, penalties, fines, including, without limitation, excise taxes assessed against
the person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorneys&rsquo; fees and
disbursements, incurred by such person in connection with the proceeding, if certain criteria are met. These criteria, all of which
must be met by the person seeking indemnification, are as follows: (a)&nbsp;such person has not been indemnified by another organization
or employee benefit plan for the same judgments, penalties, fines, including, without limitation, excise taxes assessed against
the person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorneys&rsquo; fees and
disbursements, incurred by the person in connection with the proceeding with respect to the same acts or omissions; (b)&nbsp;such
person must have acted in good faith; (c)&nbsp;no improper personal benefit was obtained by such person and such person satisfied
certain statutory conflicts of interest provisions, if applicable; (d) in the case of a criminal proceeding, such person had no
reasonable cause to believe that the conduct was unlawful; and (e) in the case of acts or omissions occurring in such person&rsquo;s
performance in an official capacity, such person must have acted in a manner such person reasonably believed was in the best interests
of the corporation or, in certain limited circumstances, not opposed to the best interests of the corporation. In addition, Section&nbsp;302A.521,
subd. 3, requires payment by the registrant, upon written request, of reasonable expenses in advance of final disposition in certain
instances. A decision as to required indemnification is made by a majority of the disinterested board of directors present at a
meeting at which a disinterested quorum is present, or by a designated committee of disinterested directors, by special legal counsel,
by the disinterested shareholders, or by a court.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The registrant also maintains a director
and officer insurance policy to cover the registrant, its directors and its officers against certain liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">None.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(a) Exhibits. The exhibits listed below
are filed as a part of this registration statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 12%; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">Exhibit No.</TD>
    <TD STYLE="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 86%; border-bottom: black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Description</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">2.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Stock Purchase Agreement with PQH Wireless, Inc., John Quandahl, Mark Houlton&nbsp; and Charles Payne, dated October 15, 2008 (incorporated by reference to Exhibit 2.3 to the registrant&rsquo;s registration statement on Form S-1/A filed with the SEC on November 24, 2008).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">3.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Amended and Restated Articles of Incorporation, filed with the Minnesota Secretary of State on May 25, 2007 (incorporated by reference to Exhibit 3.1 to the registrant&rsquo;s annual report on Form 10-K filed on April 7, 2008) (see also Exhibits 3.2, 3.3, 3.4, 3.6 and 3.7 below).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">3.2</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Amendment to Amended and Restated Articles of Incorporation, filed with the Minnesota Secretary of State on December 27, 2007 (incorporated by reference to Exhibit 3.2 to the registrant&rsquo;s annual report on Form 10-K filed on April 7, 2008).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">3.3</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Certificate of Designation for Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.2 to the registrant&rsquo;s current report on Form 8-K filed on January 7, 2008).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">3.4</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Amendment to Articles of Incorporation, filed with the Minnesota Secretary of State on March 18, 2008 (incorporated by reference to Exhibit 3.5 to the registrant&rsquo;s annual report on Form 10-K filed on April 7, 2008).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">3.5</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the registrant&rsquo;s current report on Form 8-K filed on June 23, 2008).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">3.6</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Amendment to Articles of Incorporation, filed with the Minnesota Secretary of State on July 29, 2008 (incorporated by reference to the registrant&rsquo;s current report on Form 8-K filed on July 29, 2008).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">3.7</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Amendment to Articles of Incorporation, filed with the Minnesota Secretary of State on March 30, 2010 (incorporated by reference to the registrant&rsquo;s current report on Form 8-K filed on April 2, 2010).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">4.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Form of Subscription Rights Certificate (<I>filed herewith</I>).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">5.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Opinion of Maslon Edelman Borman &amp; Brand, LLP (with regard to legality of securities offered) (<I>filed herewith</I>).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">10.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">2008 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the registrant&rsquo;s annual report on Form 10-K filed on April 7, 2008).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">10.2</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Term Promissory Note in principal amount of $1,000,000 in favor of John Quandahl (incorporated by reference to Exhibit 10.7 to the registrant&rsquo;s registration statement on Form S-1/A filed with the SEC on November 24, 2008).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">10.3</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Term Promissory Note in principal amount of $1,000,000 in favor of Mark Houlton (incorporated by reference to Exhibit 10.8 to the registrant&rsquo;s registration statement on Form S-1/A filed with the SEC on November 24, 2008).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">10.4</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Form of Security Agreement with Charles Payne, John Quandahl and Mark Houlton (incorporated by reference to Exhibit 10.9 to the registrant&rsquo;s registration statement on Form S-1/A filed with the SEC on November 24, 2008).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">10.5</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Employment Agreement with John Quandahl dated as of March 31, 2010 (incorporated by reference to Exhibit 10.4 to the registrant&rsquo;s quarterly report on Form 10-Q filed on May 13, 2010).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">10.6</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Management and Advisory Agreement with Blackstreet Capital Management, LLC, dated as of May 10, 2010 (incorporated by reference to Exhibit 10.4 to the registrant&rsquo;s quarterly report on Form 10-Q filed on August 13, 2010).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">10.7</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Promissory Note delivered in favor of River City Equity, Inc. dated as of October 18, 2011 (incorporated by reference to Exhibit 10.11 to the registrant&rsquo;s annual report on Form 10-K filed on March 30, 2012).</TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; width: 12%">10.8</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; width: 2%">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt; width: 86%">Security Agreement delivered in favor of River City Equity, Inc. dated as of October 18, 2011 (incorporated by reference to Exhibit 10.12 to the registrant&rsquo;s annual report on Form 10-K filed on March 30, 2012).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">10.9</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Consulting Agreement with Ric Miller Consulting, Inc. dated as of April 1, 2012 (incorporated by reference to Exhibit 10.17 to the registrant&rsquo;s annual report on Form 10-K filed on March 30, 2012).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">21</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the registrant&rsquo;s annual report on Form 10-K filed on March 30, 2012).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">23.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Consent of Lurie Besikof Lapidus &amp; Co, LLP (<I>filed herewith</I>).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">23.2</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Consent of Maslon Edelman Borman &amp; Brand, LLP (included in exhibit 5.1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">99.1</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Form of Instructions for Use of Western Capital Resources, Inc. Subscription Rights Certificate (<I>filed herewith</I>).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">99.2</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Forms of Notice of Guaranteed Delivery (<I>filed herewith</I>).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">99.3</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Form of letter to shareholders who are record holders (<I>filed herewith</I>).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">99.4</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Form of letter to beneficial holders of shares (<I>filed herewith</I>).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">99.5</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Form of letter to clients (<I>filed herewith</I>).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">99.6</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Form of Beneficial Owner Election Form (<I>filed herewith</I>).</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">99.7</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-bottom: 6pt; padding-left: 5.4pt">Form of Nominee Holder Certification (<I>filed herewith</I>).</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 17. UNDERTAKINGS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The undersigned registrant hereby undertakes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(1)</TD><TD>To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:</TD></TR>                                                                                                                                                                                                           <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"></TD><TD></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">(i)</TD><TD>to include any prospectus required by section 10(a)(3) of the Securities Act of 1933;</TD></TR>                                                                                                                                                                <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in"></TD><TD></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">(ii)</TD><TD>to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the foregoing, an increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the &ldquo;Calculation of Registration Fee&rdquo; table in the effective registration statement;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: -0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">(iii)</TD><TD>to include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(2)</TD><TD>That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(3)</TD><TD>To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(4)</TD><TD>[intentionally omitted]</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(5)</TD><TD>For the purpose of determining any liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or
other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior
to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of
the registration statement or made in any such document immediately prior to such date of first use.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(6)</TD><TD>That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned
registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser,
if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant
will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">(i)</TD><TD>Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant
to Rule 424;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">(ii)</TD><TD>Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">(iii)</TD><TD>The portion of any other free writing prospectus relating to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned registrant; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.5in">(iv)</TD><TD>Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Omaha, State of Nebraska.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">WESTERN CAPITAL RESOURCES, INC.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 55%">&nbsp;</TD>
    <TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 42%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By: </TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ John Quandahl</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Executive Officer</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">Dated:&nbsp; June 15, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>POWER OF ATTORNEY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each person whose signature appears below
hereby constitutes and appoints John Quandahl and Richard Miller, and each of them, as his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to
be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated
below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 34%; padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline">Signature</TD>
    <TD STYLE="width: 33%; padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline">Title</TD>
    <TD STYLE="width: 33%; padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline">Date</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>/s/ John Quandahl&#9;</U></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">John Quandahl</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Director, Chief Executive Officer</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(principal executive officer)</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">June 15, 2012</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>/s/ Richard Miller&#9;&#9;</U></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Richard Miller</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Chairman of the Board</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">June 15, 2012</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>/s/ Steve Irlbeck&#9;&#9;&#9;</U></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Steve Irlbeck</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Chief Financial Officer</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(principal accounting and financial officer)</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">June 15, 2012</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>/s/ Angel Donchev&#9;</U></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Angel Donchev</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Director</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">June 15, 2012</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>/s/ Ellery Roberts&#9;</U></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Ellery Roberts</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Director</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">June 15, 2012</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>/s/&nbsp;Thomas H. Ripley</U></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Thomas H. Ripley</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Director</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">June 15, 2012</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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[{"type": "S-1", "sequence": "1", "filename": "v315595_s1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1156302}]
{"company-data": {"conformed-name": "WESTERN CAPITAL RESOURCES, INC.", "cik": "0001363958", "assigned-sic": "6141", "irs-number": "470848102", "state-of-incorporation": "MN", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-182190", "film-number": "12912185"}, "business-address": {"street1": "2201 WEST BROADWAY", "city": "COUNCIL BLUFFS", "state": "IA", "zip": "51501", "phone": "712-322-4020"}, "mail-address": {"street1": "2201 WEST BROADWAY", "city": "COUNCIL BLUFFS", "state": "IA", "zip": "51501"}, "former-company": {"former-conformed-name": "URON INC", "date-changed": "20060524"}}
As filed with the Securities and Exchange Commission on June 18, 2012
Registration No. 333-
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
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
Telephone: (402) 551-8888
(Address, including Zip Code, and Telephone
        Number, including
Area Code, of Registrant's Principal Executive
        Offices)
John Quandahl
Chief Executive Officer
11550 "I" Street, Suite 150
Omaha, Nebraska 68137
Telephone: (402) 551-8888
(Name, Address, Including Zip Code, and
        Telephone Number,
Including Area Code, of Agent for Service)
Copy to
:
Paul D. Chestovich, Esq.
Maslon Edelman Borman & Brand, LLP
3300 Wells Fargo Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Telephone: (612) 672-8305
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of the registration statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box.
þ
If
this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement number of the earlier effective registration statement for
the same offering.
o
If
this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
o
If
this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
o
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 the definitions of "large accelerated
filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (check
one):
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
(Do not check if a smaller reporting company)
Smaller reporting company
þ
CALCULATION
OF REGISTRATION FEE
Title of Each Class of Securities to
        be Registered
Amount to be Registered
Proposed Maximum Offering Price Per Unit
Proposed Maximum Aggregate Offering Price
Amount of
Registration Fee (1)
Rights to purchase common stock
—
—
—
— (2)
Common stock, no par value per share
$4,500,000 (3)
$515.70 (4)
_____________
(1)
This registration statement relates to (a) non-transferable subscription rights to purchase our common stock, par value $0.01
per share and (b) shares of our common stock deliverable upon the exercise of such subscription rights.
(2)
The rights are being issued to our shareholders pro rata for no consideration. Pursuant to Rule 457(g) under the Securities
Act of 1933, as amended, no separate registration fee is payable.
(3)
Represents gross proceeds from the sale of shares of our common stock assuming the exercise of all subscription rights to be
distributed up to the maximum amount contemplated in this registration statement.
(4)
Registration calculated pursuant to Rule 457(o).
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in
this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting
an offer to buy these securities in any state where the offer or sale is prohibited.
SUBJECT TO COMPLETION, DATED
JUNE 18, 2012
PROSPECTUS
WESTERN CAPITAL RESOURCES, INC.
Subscription Rights to Purchase up to
             Shares
of Common Stock at $       per Share
We are distributing, at no charge, to holders
of our capital stock non-transferable subscription rights (consisting of a basic subscription privilege and an over-subscription
privilege, as described below) to purchase up to       shares of our common stock. We refer to this offering
as the "rights offering." In this rights offering, you will receive       subscription rights
for every share of capital stock owned at 5:00 p.m., Minneapolis time, on             ,
2012, the record date.
Each whole subscription right
will entitle you to purchase one share of our common stock at a subscription price of $      per
share, which we refer to as the "basic subscription privilege." A special committee of our Board of Directors
determined the per-share subscription price for the rights offering. We will not issue fractional shares of common stock in
the rights offering, and holders will only be entitled to purchase a whole number of shares of common stock, rounded to the
nearest whole number a holder would otherwise be entitled to purchase (with halves rounded down). If you fully exercise
your basic subscription privilege and other shareholders do not fully exercise their basic subscription privileges, then you
may also exercise an "over-subscription privilege" to purchase additional shares of common stock that
remain unsubscribed at the expiration of this rights offering. If all subscription rights are exercised, the aggregate
gross purchase price of the shares purchased in the rights offering would be approximately $4,500,000.
The subscription rights will expire and
be void and worthless if they are not exercised by 5:00 p.m., Minneapolis time, on           ,
2012, unless we extend the rights offering period. Nevertheless, our Board of Directors reserves the right to cancel the rights
offering at any time, for any reason. If the rights offering is cancelled, all subscription payments received by the subscription
agent will be returned promptly without interest or deduction.
Shares of our common stock are, and we expect
that the shares of common stock issued in the rights offering will be, traded on the OTCBB quotation system under the symbol "WCRS."
The last reported sales price of our common stock on the OTCBB on June 13, 2012 was $0.10. We urge you to obtain a current market
price for the shares of our common stock before making any determination with respect to the exercise of your subscription rights.
You should carefully consider whether to
exercise your subscription rights before the expiration of the rights offering. Any exercise of subscription rights is irrevocable.
Our Board of Directors is making no recommendation regarding your exercise of the subscription rights. This is not an underwritten
offering. The shares of common stock are being offered directly by us without the services of an underwriter or selling agent.
Exercising the rights and investing in our
common stock involves a high degree of risk. We urge you to carefully read the section entitled "Risk Factors" beginning
on page 13 of this prospectus, and all other information included in this prospectus in its entirety before you decide whether
to exercise your subscription rights.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.
TABLE OF CONTENTS
Page
ABOUT THIS PROSPECTUS
ii
INDUSTRY AND MARKET DATA
ii
QUESTIONS AND ANSWERS RELATING TO THE RIGHTS OFFERING
1
PROSPECTUS SUMMARY
7
RISK RELATING TO FORWARD-LOOKING STATEMENTS
12
RISK FACTORS
13
USE OF PROCEEDS
23
DILUTION
23
CAPITALIZATION
24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATION
25
BUSINESS
34
MANAGEMENT
49
EXECUTIVE COMPENSATION
52
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
55
THE RIGHTS OFFERING
57
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
65
MARKET INFORMATION
67
DESCRIPTION OF SECURITIES
67
PLAN OF DISTRIBUTION
70
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
    LITIGATION
70
WHERE YOU CAN FIND MORE INFORMATION
71
LEGAL MATTERS
71
EXPERTS
71
FINANCIAL INFORMATION
F-1
i
ABOUT THIS PROSPECTUS
Unless otherwise stated or the context otherwise
requires, the terms "we," "us," "our," "Western Capital" and the "Company"
refer to Western Capital Resources, Inc. and its subsidiaries.
You should rely only on the information
contained in this prospectus. We have not authorized anyone to provide you with additional or different information. If anyone
provides you with additional, different, or inconsistent information, you should not rely on it. We are not making an offer to
sell securities in any jurisdiction in which the offer or sale is not permitted. You should assume that the information in this
prospectus is accurate only as of the date on the front cover of this prospectus regardless of the time of delivery of this prospectus
or any exercise of the rights. Our business, financial condition, results of operations, and prospects may have changed since that
date. If there is a material change in the affairs of our Company, we will amend or supplement this prospectus.
No information contained herein, nor in
any prior, contemporaneous or subsequent communication should be construed by a prospective investor as legal or tax advice. Each
prospective investor should consult its, his or her own legal, tax and financial advisors to ascertain the merits and risks of
the transactions described herein prior to exercising your subscription rights. This written communication is not intended to be
issued as a "reliance opinion" or a "marketed opinion," as defined under Section 10.35 of Circular 230
published by the U.S. Treasury Department, so as to avoid any penalties that could be assessed under the Internal Revenue Code
of 1986, as amended (the "Code"), or its applicable Treasury Regulations. Accordingly, (a) any information contained
in this written communication is not intended to be used, and cannot be used or relied upon for purposes of avoiding any penalties
that may be imposed on a prospective investor by the Code or applicable Treasury Regulations; (b) this written communication has
been written to support the promotion or marketing of the transactions or matters addressed by this written communication; and
(c) each prospective investor should seek advice based on the prospective investor's particular circumstances from an independent
tax advisor.
INDUSTRY AND MARKET DATA
The industry, market and data used throughout
this prospectus have been obtained from our own research, surveys or studies conducted by third parties and industry or general
publications. Industry publications and surveys generally state that they have obtained information from sources believed to be
reliable, but do not guarantee the accuracy and completeness of such information. We believe that each of these studies and publications
is reliable.
ii
QUESTIONS AND ANSWERS RELATING TO THE
RIGHTS OFFERING
The following are what we anticipate will
be common questions about the rights offering. The answers are based on selected information from this prospectus. The following
questions and answers do not contain all of the information that may be important to you and may not address all of the questions
that you may have about the rights offering. This prospectus contains more detailed descriptions of the terms and conditions of
the rights offering and provides additional information about us and our business, including potential risks related to the rights
offering, our common stock, and our business.
Exercising you subscription rights and investing
in our common stock involves a high degree of risk. We urge you to carefully read the section entitled "Risk Factors"
beginning on page 13 of this prospectus, and all other information included in this prospectus in its entirety before you decide
whether to exercise your subscription rights.
What is a rights offering?
A rights offering is a distribution of subscription
rights on a pro rata basis to all shareholders of a company. We are distributing to holders of our capital stock as of 5:00 p.m.,
Minneapolis time, on , 2012, the "record date," at no charge, non-transferable subscription rights to purchase shares
of our common stock. You will receive       subscription rights (rounded to the nearest whole subscription
right, with halves rounded down) for every share of our capital stock you owned as of 5:00 p.m., Minneapolis time, on the record
date. The subscription rights will be evidenced by rights certificates. Each subscription right consists of a basic subscription
privilege and an over-subscription privilege.
What is the basic subscription privilege?
Each whole subscription right gives our
shareholders the opportunity to purchase one share of our common stock for $ per share. We determined the ratio of subscription
rights to distribute per our outstanding shares by dividing $4.5 million by the subscription price of $ to determine the number
of shares to be issued in the rights offering and then dividing that number of shares to be offered by the number of capital shares
outstanding on the record date.
What is the over-subscription privilege?
We do not expect all of our
shareholders to exercise all of their basic subscription privileges. The over-subscription privilege provides shareholder
that do exercise their entire basic subscription privileges the opportunity to purchase the shares that are not purchased by
other shareholders who do not participate in the rights offering. If you fully exercise your basic subscription privilege and
other shareholders do not fully exercise their basic subscription privileges, then you may also exercise an over-subscription
privilege to purchase additional shares of common stock that remain unsubscribed at the expiration of the rights offering,
subject to the availability and pro rata allocation of such shares among persons exercising this over-subscription privilege.
To the extent that the number of the unsubscribed shares are not sufficient to satisfy all of the properly exercised
over-subscription privilege requests, then the available shares will be prorated among those who properly exercise their
over-subscription privileges based on the number of shares each shareholder subscribed for under his, her or its basic
subscription privilege (i.e., pro rata in accordance with each such shareholder's respective shareholdings. If this pro rata allocation results in any shareholder
potentially receiving a greater number of common shares than the he, she or it subscribed for pursuant to the exercise of
his, her or its over-subscription privilege, then such shareholder will be allocated only that number of shares for which the
shareholder subscribed, and the remaining common shares will again be allocated among all other shareholders exercising the
over-subscription privilege on the same pro rata basis described above. This proration process will be repeated until all
common shares have been allocated or all exercises of over-subscription privileges have been fulfilled, whichever occurs
earlier.
In order to properly exercise your over-subscription
privilege, you must deliver the subscription payment related to your over-subscription privilege prior to the expiration of the
rights offering. Because we will not know the total number of unsubscribed shares prior to the expiration of the rights offering,
if you wish to maximize the number of shares you purchase pursuant to your over-subscription privilege, you will need to deliver
payment in an amount equal to the aggregate subscription price for the maximum number of shares of our common stock available to
you, assuming that no shareholder other than you has purchased any shares of our common stock pursuant to their basic subscription
privilege and over-subscription privilege. See "The Rights Offering—Over-Subscription Privilege."
1
How many shares may I purchase if I exercise my subscription
rights?
Each subscription right entitles you
to purchase one whole share of our common stock for $ per share. We will not issue fractional subscription rights or shares of
common stock in the rights offering, and holders will only be entitled to purchase a whole number of shares of common stock.
You may exercise any number of your subscription rights (including the over-subscription privilege), or you may choose not to
exercise any subscription rights. As explained elsewhere in this prospectus, there is no limit on the number of offered
shares that may be purchased pursuant to your over-subscription privilege.
If you hold your shares in street name through
a broker, bank, or other nominee who uses the services of the Depository Trust Company, or "DTC," then DTC will issue
      subscription rights to your nominee for every share of our common stock you own at the close of
business on the record date. Each subscription right can then be used to purchase one share of common stock for $ per share pursuant
to the basic subscription privilege. For more information, see the question "
What should I do if I want to participate
in the rights offering, but my shares are held in the name of my broker, dealer, custodian bank or other nominees (commonly referred
to as "street name")?
" below.
Will fractional subscription rights or shares be issued in
the rights offering?
No. We will not issue fractional subscription
rights or subscription rights to purchase fractional shares of common stock in the rights offering. In allocating subscription
rights among our shareholders, each share of capital stock held of record at the close of business on the record date will entitle
the holder of such share to receive       subscription rights (rounded to the nearest whole subscription
right, with halves rounded down), and each subscription right granted in the rights offering may only be exercised for a full share
of our common stock.
Are there any limits on the number of shares I may purchase
in this rights offering?
Yes. The total number of offered shares
in this rights offering represents the maximum number of shares you may potentially purchase. In all cases, you are entitled (but
not required) to purchase all shares available to you under your basic subscription privilege. Shares in excess of those available
to you under your basic subscription privilege must be purchased pursuant to your over-subscription privilege. As explained elsewhere
in this prospectus, other shareholders may also exercise their over-subscription privilege. If this occurs, the number of shares
available for purchase by you will be reduced accordingly.
Am I required to exercise the subscription rights I receive
in the rights offering?
No. You may exercise any number of your
subscription rights, or you may choose not to exercise any subscription rights. However, if you choose not to exercise your subscription
rights in full, the relative percentage of our shares of common stock that you own will decrease, and your voting and other rights
will be diluted. Furthermore, if you fail to exercise your full basic subscription privilege, you will not be eligible to exercise
your over-subscription privilege. For more information, see the question "
How many shares of capital stock will be outstanding
after the rights offering?
" below.
Will our officers, directors and significant shareholders
be exercising their subscription rights?
Our officers, directors and greater than
5% beneficial shareholders may participate in this offering at the same subscription price per share as all other purchasers, but
none of our officers, directors or greater-than-5% beneficial shareholders are obligated to so participate. Certain executive officers
and directors (who are also shareholders), and our controlling shareholder, WCR, LLC, have indicated that they will purchase shares
that are subject to their subscription rights, at the same subscription price offered to our shareholders. Nevertheless, these
shareholders have not executed agreements to purchase shares and there is no guarantee or commitment that they will subscribe for
shares in the offering. In the case of our directors, officers and WCR, any shares purchased in the rights offering will be deemed
"control securities" under federal securities rules and will likely not be eligible for public resale unless sold in
accordance with the limitations of Rule 144 or the public resale of such shares are registered with the SEC.
2
Has our Board of Directors made a recommendation to our shareholders
regarding the exercise of rights under the rights offering?
No. Our Board of Directors is making no
recommendation regarding your exercise of the subscription rights. Shareholders who exercise their subscription rights risk loss
on their investment. We cannot assure you that the market price of our common stock will be above the subscription price or that
anyone purchasing shares at the subscription price will be able to sell those shares in the future at the same price or a higher
price. You are urged to make your decision based on your own assessment of our business and the rights offering. Please see the
"Risk Factors" section of this prospectus for a discussion of some of the risks involved in investing in our common
stock.
Why are we conducting a rights offering?
A rights offering provides eligible shareholders
the opportunity to participate in a capital raise on a pro rata basis and minimizes the dilution of their ownership interest in
our Company. Assuming all the shares of common stock offered are sold, we expect that the gross proceeds from the rights offering
will be approximately $4.5 million. We estimate that our offering-related expenses will be approximately $100,000. We are conducting
the rights offering to raise capital for the Company to be used in making acquisitions that grow or are otherwise complementary
to our current business. In this regard, you should understand that our Board of Directors will have a great deal of discretion
in determining what acquisition opportunities to pursue.
How was the subscription price of $      per share determined?
The subscription price was determined by
a special committee of our Board of Directors. Factors considered by the committee included the strategic alternatives to our Company
for raising capital, the price at which our shareholders might be willing to participate in the rights offering, historical and
current trading prices of our common stock, our business prospects, the condition of the trading market for our common stock, and
the condition of the securities and capital markets in general. We cannot assure you that the market price for our common stock
during the rights offering will be equal to or above the subscription price or that a subscribing owner of rights will be able
to sell the shares of common stock purchased in the rights offering at a price equal to or greater than the subscription price.
How soon must I act to exercise my rights?
If you received a rights certificate and
elect to exercise any or all of your subscription rights, the subscription agent must receive your completed and signed rights
certificate and related payment prior to the expiration of the rights offering, which is , 2012, at 5:00 p.m., Minneapolis time.
If you hold your shares in the name of a custodian bank, broker, dealer or other nominee, your custodian bank, broker, dealer or
other nominee may establish a deadline prior to 5:00 p.m. Minneapolis time, on , 2012, by which you must provide it with your instructions
to exercise your subscription rights and pay for your shares.
Although we will make reasonable attempts
to provide this prospectus to all holders of subscription rights, the rights offering and all subscription rights will expire at
5:00 p.m., Minneapolis time on , 2012 (unless extended), whether or not we have been able to locate each person entitled to receive
subscription rights. Although we reserve the right to extend the expiration of the rights offering, we currently do not intend
to do so.
May I transfer my subscription rights?
No. You may not sell or transfer your subscription
rights to anyone.
Are we requiring a minimum aggregate subscription to complete
and close the rights offering?
No. There is no minimum subscription requirement
in the rights offering. Nevertheless, our Board of Directors reserves the right to cancel the rights offering for any reason or
no reason, including if our board believes that there is insufficient participation by our shareholders.
Are there any conditions to completing the rights offering?
No.
3
Can the Board of Directors cancel, terminate, amend or extend
the rights offering?
Yes. We have the option to extend the rights
offering and the period for exercising your subscription rights, although we do not presently intend to do so. Our Board of Directors
may cancel the rights offering at any time for any reason. If the rights offering is cancelled, all subscription payments received
by the subscription agent will be returned promptly, without interest or penalty. Our Board of Directors reserves the right to
amend or modify the terms of the rights offering at any time, for any reason.
When will I receive my subscription rights certificate?
Promptly after the date of this
prospectus, the subscription agent will send a subscription rights certificate to each registered holder of our common stock
as of the close of business on the record date, based on our shareholder register maintained by the transfer agent for our
common stock (and the shareholder register maintained by the Company for our preferred stock). If you hold your shares of common
stock through a brokerage account, bank, or other nominee, you will not receive an actual subscription rights certificate.
Instead, as described in this prospectus, you must instruct your broker, bank or nominee whether or not to exercise rights
on your behalf. If you wish to obtain a separate subscription rights certificate, you should promptly contact your broker,
bank or other nominee and request a separate subscription rights certificate. If you hold your shares of common stock
through a brokerage account, bank, or other nominee, it is not necessary to have a physical subscription rights certificate
in order to exercise your subscription rights.
What will happen if I choose not to exercise my subscription
rights?
If you do not exercise any subscription
rights, the number of our shares of common stock you own will not change. Nevertheless, due to the fact that other shareholders
may purchase shares in the rights offering, your percentage ownership of our Company will be diluted after the completion of the
rights offering unless you do exercise your subscription rights. For more information, see the question "
How many shares
of capital stock will be outstanding after the rights offering?
" below.
How do I exercise my subscription rights?
If you wish to participate in the rights
offering, you must take the following steps:
·
deliver payment to the subscription agent; and
·
deliver your properly completed and signed rights certificate, and
any other subscription documents, to the subscription agent.
Please follow the payment and delivery instructions
accompanying the rights certificate. Do not deliver documents to Western Capital. You are solely responsible for completing delivery
to the subscription agent of your subscription documents, rights certificate, and related payment on or prior to the deadline for
receipt of such items. We urge you to allow sufficient time for delivery of your subscription materials to the subscription agent
so that they are received by the subscription agent by 5:00 p.m., Minneapolis time, on           ,
2012. We are not responsible for subscription materials sent directly to our offices. If you cannot deliver your rights certificate
to the subscription agent prior to the expiration of the rights offering, you may follow the guaranteed delivery procedures described
under the "The Rights Offering—Guaranteed Delivery Procedures" section of this prospectus.
If you send a payment that is insufficient
to purchase the number of shares you requested, or if the number of shares you requested is not specified in the forms, the payment
received will be applied to exercise your subscription rights to the fullest extent possible based on the amount of the payment
received, subject to the elimination of any fractional shares. Any excess subscription payments received by the subscription agent
will be returned promptly, without interest or penalty, following the expiration of the rights offering.
4
What should I do if I want to participate in the rights offering
but my shares are held in the name of my broker, dealer, custodian bank or other nominee (commonly referred to as "street
name")?
If you hold your shares of common stock
in the name of a broker, dealer, custodian bank or other nominee, then your broker, dealer, custodian bank or other nominee is
the record holder of the shares you own. Consequently, you will not receive a rights certificate. Instead, the record holder (i.e.,
your broker, dealer, custodian bank or other nominee) must exercise the subscription rights on your behalf for the shares of common
stock you wish to purchase.
If you hold your shares of our common stock
in the name of a broker, dealer, custodian bank or other nominee and you wish to purchase shares in the rights offering, please
promptly contact your broker, dealer, custodian bank or other nominee as record holder of your shares. For our part, we will ask
your record holder to notify you of the rights offering. Nevertheless, if your broker, dealer, custodian bank or other nominee
does not contact you regarding the rights offering, you should promptly initiate contact with that intermediary if you wish to
participate in the offering. Your broker, dealer, custodian bank or other nominee may establish a deadline prior to the 5:00 p.m.
Minneapolis time on , 2012, which we have established as the expiration date of the rights offering.
When will I receive my new shares?
If you purchase shares in the rights offering
by submitting a rights certificate and payment, we will mail you a share certificate as soon as practicable after the completion
of the rights offering. One share certificate will be generated for each rights certificate processed. Until your share certificate
is received, you may not be able to sell the shares of our common stock acquired in the rights offering. If your shares as of the
record date were held by a custodian bank, broker, dealer or other nominee, and you participate in the rights offering, you will
not receive share certificates for your new shares. Instead, your custodian bank, broker, dealer or other nominee will be credited
with the shares of common stock you purchase in the rights offering as soon as practicable after the completion of the rights offering.
After I send in my payment and rights certificate, may I
change or cancel my exercise of rights?
No. All exercises of subscription rights
are irrevocable, even if you later learn information that you consider to be unfavorable to the exercise of your subscription rights.
You should not exercise your subscription rights unless you are certain that you wish to purchase additional shares of our common
stock at a subscription price of $ per share.
How many shares of capital stock will be outstanding after
the rights offering?
As of June 8, 2012, there
were 5,397,780 shares of our common stock issued and outstanding, and 10,000,000 shares of Series A Convertible Preferred
Stock issued and outstanding. Assuming that, prior to the expiration of the rights offering, no other transactions by us
involving shares of our capital stock, and no options or other convertible securities for shares of our common stock are
exercised, then if the rights offering is fully subscribed through the exercise of the subscription rights, an
additional             shares of our common stock will be issued
upon the closing of the rights offering, for a total
of                 shares of common
stock outstanding. As a result of the rights offering, the ownership interests and voting interests of the existing
shareholders that do not fully exercise their basic subscription privilege will be diluted. Notwithstanding the foregoing,
there is no minimum amount of shares that must be sold in the rights offering for us to close the offering, accept
subscriptions and access related payments. Therefore, it is possible that fewer
that              shares of common stock will be
outstanding after completion of the rights offering. The rights offering will have no effect on the number of issued and
outstanding shares of preferred stock.
Are there risks in exercising my subscription rights?
Yes. The exercise of your subscription rights
involves risks. Exercising your subscription rights involves the purchase of additional shares of common stock and should be considered
as carefully as you would consider any other equity investment. Among other things, you should carefully consider the risks described
in the section of this prospectus entitled "Risk Factors."
If the rights offering is not completed, will my subscription
payment be refunded to me?
Yes. The subscription agent will hold all
funds it receives in a segregated bank account until completion of the rights offering. If the rights offering is not completed,
all subscription payments received by the subscription agent will be returned promptly, without interest or penalty. If you own
shares in "street name," it may take longer for you to receive payment because the subscription agent will return payments
through the record holder of your shares (i.e., through your custodian bank, broker, dealer or other nominee).
5
Will the subscription rights be listed on a stock exchange
or national market?
No.
How do I exercise my rights if I live outside the United
States?
We will not mail this prospectus
or the rights certificates to shareholders whose addresses are outside the United States or who have an army post office
or foreign post office address. The subscription agent will instead hold rights certificates for the account of these shareholders. To
exercise subscription rights, our foreign shareholders must notify the subscription agent and timely follow other procedures
described in the section of this prospectus entitled "The Rights Offering—Foreign Shareholders."
What fees or charges apply if I purchase the shares of common
stock?
We are not charging any fee or sales commission
to issue subscription rights to you or to issue shares to you if you exercise your subscription rights. If, however, you exercise
your subscription rights through your broker, dealer, custodian bank or other nominee, you are responsible for paying any fees
your nominee may charge you.
What are the material U.S. federal income tax consequences
of exercising my subscription rights?
For U.S. federal income tax purposes, you
should not recognize income or loss upon receipt or exercise of subscription rights. You should consult your tax advisor as to
your particular tax consequences resulting from the rights offering. For a more detailed discussion, see the "Material U.S.
Federal Income Tax Consequences" section of this prospectus.
To whom should I send my forms and payment?
If your shares are held in the name
of a custodian bank, broker, dealer or other nominee, then you should send your subscription documents, rights certificate
(if any), notices of guaranteed delivery, and related subscription payment to that record holder. If you are the record holder,
then you should send your subscription documents, rights certificate, notices of guaranteed delivery, and subscription
payment by hand delivery, first-class mail or courier service to:
Corporate Stock Transfer, Inc.
3200 Cherry Creek South Drive, Suite 430
Denver, Colorado 80209
Your payment of the subscription price must
be made in United States Dollars for the full number of shares of our common stock for which you are subscribing, by (i) cashier's
check or (ii) certified check, in either case drawn upon a United States bank and payable to the subscription agent at the address
set forth above.
You are solely responsible for completing
delivery to the subscription agent of your subscription materials. The subscription materials must be received by the subscription
agent on or prior to 5:00 p.m., Minneapolis time, on , 2012. We urge you to allow sufficient time for delivery of your subscription
materials to the subscription agent.
Whom should I contact if I have other questions?
If you have any questions about the rights
offering or wish to request another copy of a document, please contact Paul D. Chestovich of the law firm Maslon Edelman Borman
& Brand, LLP at (612) 672-8305.
For a more complete description of the rights
offering, see "The Rights Offering" beginning on page 57 of this prospectus.
6
PROSPECTUS SUMMARY
This summary highlights information contained
elsewhere in this prospectus. This summary is not complete and may not contain all of the information that you should consider
before deciding whether or not you should exercise your rights. You should read the entire prospectus carefully, including the
section entitled "Risk Factors" beginning on page 13 of this prospectus and all other information included in this
prospectus in its entirety before you decide whether to exercise your rights.
Our Company
Western Capital Resources, Inc. is a Minnesota
corporation that maintains two operating segments: one provides short-term consumer loans, commonly referred to as cash advance
or "payday" loans, and the other operates Cricket retail cellular wireless stores.
Payday operations are conducted under our
wholly owned subsidiary Wyoming Financial Lenders, Inc. The Federal Trade Commission describes these loans as "small, short-term
high-rate loans." Our payday loans generally are offered and made in exchange for fees that, if treated as interest, are
at a rate extraordinarily higher than prime and are made to individuals who do not typically qualify for prime rate loans. As a
consequence, our loans may be considered a type of subprime loan. In Wisconsin and Colorado, the Payday division provides short-term
installment loans. The installment loan product has a rate of interest significantly higher than traditional financial institutions.
At March 31, 2012, we operated 52 payday lending stores in nine states, including Colorado, Iowa, Kansas, Nebraska, North Dakota,
South Dakota, Utah, Wisconsin and Wyoming. Our provision of payday and installment loans is typically heavily regulated by the
various states in which we operate, and our payday lending and installment loan business is extremely susceptible to the adverse
effects of any changes in federal or state laws and regulations that may further restrict or flatly prohibit payday lending.
Through our payday segment, we also provide
title and ancillary consumer financial products and services that are complementary to our payday and installment lending business,
such as check-cashing services, money transfers and money orders. Our check-cashing services involve the cashing of checks for
a fee; money-transfer services involve the transfer of money by wire for a fee; and our money-orders services involve the issuing
of money orders for a fee. We believe these services are complementary since customers typically come to our stores for financial
reasons and to procure financial services (i.e., obtain a loan). Once the loan has been obtained, a customer may, for instance,
decide to wire a payment of money or obtain a money order to satisfy a debt or other obligation. Our loans and other services are
subject to state regulations (which vary from state to state), and federal and local regulations, where applicable.
Our second segment operates retail stores
selling Cricket cellular phones and accessories. Cricket phones are prepaid cellular phones that function for a period of time
for a flat fee, without usage limitations and without any long-term contract or commitment required from the consumer. At March
31, 2012 we owned and operated 48 Cricket wireless retail stores in 13 states, including Arizona, Colorado, Idaho, Illinois, Indiana,
Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon and Texas. While there are state regulations that affect our provision
of Cricket phone products and services, our Cricket phone business is not highly susceptible to the adverse effects of changes
in federal or state laws and regulations.
For the fiscal year ended December 31, 2011,
each of our major lines of business (i.e., our payday and installment lending, and Cricket phone businesses) generated associated
revenues. In 2011, we generated approximately:
·
$10.20 million in payday lending revenues representing approximately
52.3% of our total revenues,
·
$4.59 million in phone and accessory sales representing approximately
23.6% of our total revenues, and
·
$3.74 million in Cricket related sales and service fees representing
approximately 19.2% of our total revenues.
The tables below summarize our financial
results and condition as of March 31, 2012 and 2011 (unaudited) and as of December 31, 2011 and 2010 (audited).
7
March 31, 2012
March 31, 2011
Revenues
$
7,516,770
$
5,083,631
Net income (loss) to common shareholders
$
264,042
$
(112,631
)
Current assets
$
7,851,373
$
8,418,534
Current liabilities
$
7,497,621
$
7,883,414
Total assets
$
21,662,004
$
22,021,776
Total liabilities
$
9,306,899
$
9,623,479
Shareholder equity
$
12,355,105
$
12,398,297
December 31, 2011
December 31, 2010
Revenues
$
19,487,920
$
17,978,447
Net loss to common shareholders
$
664,769
$
751,059
Current assets
$
8,418,534
$
7,958,443
Current liabilities
$
7,883,414
$
6,452,628
Total assets
$
22,021,776
$
20,770,882
Total liabilities
$
9,623,479
$
7,707,816
Shareholder equity
$
12,398,297
$
13,063,066
The above figures include an assumed preferred
stock dividend relating to our Series A Convertible Preferred Stock in the amount of $2.1 million in 2011 and 2010.
Corporate Organization
Our principal offices are located at 11550
"I" Street, Suite 150, Omaha, Nebraska 68137, and our telephone number at that office is (402) 551-8888.
We were originally incorporated and organized
as a Minnesota corporation under the name URON Inc. in November 2001. From our incorporation until August 2006, we were wholly
owned by Multiband Corporation, a publicly traded Minnesota corporation. Multiband spun us off (as "URON") to Multiband's
shareholders in August 2006 and caused us to become a public reporting corporation as part of the spinoff process. At that time,
our principal business was the provision of dial-up internet service to residential and commercial customers, principally in the
midwestern United States, Texas, South Carolina and Florida. In December 2007, we engaged in a merger transaction with Wyoming
Financial Lenders, Inc., a Wyoming corporation. In the merger transaction, we acquired the payday lending business we currently
operate through Wyoming Financial Lenders. Shortly after our merger with Wyoming Financial Lenders, we changed our corporate name
from URON Inc. to "Western Capital Resources, Inc."
Our fiscal year ends December 31. Neither
us nor any of our predecessors have been in bankruptcy, receivership or any similar proceeding. Our corporate structure, including
our principal operating subsidiaries, is as follows:
8
The Rights Offering
The following summary describes the principal
terms of the rights offering, but is not intended to be complete. See the information in the section entitled "The Rights
Offering" in this prospectus for a more detailed description of the terms and conditions of the rights offering.
Securities offered
We are distributing to you, at no charge,         non-transferable subscription rights for each share of our capital stock that you own as of 5:00 p.m., Minneapolis time, on the record date, either as a holder of record or, in the case of shares held of record by brokers, dealers, custodian banks or other nominees on your behalf, as a beneficial owner of such shares.
Subscription Price
$            per share.  To be effective, any payment related to the exercise of subscription rights must clear prior to the expiration of the rights offering.
Basic Subscription Privilege
The basic subscription privilege component of each subscription right will entitle you to purchase one  share of our common stock.
Over-Subscription Privilege
If you fully exercise your entire basic subscription privilege and other shareholders do not fully exercise their entire
    basic     subscription privileges, you may also exercise the over-subscription privilege component of your subscription
    rights.      The over-subscription privilege permits you to purchase additional shares of common stock that remain
    unsubscribed at the     expiration of the rights offering, subject to the availability and pro rata allocation of shares
    among other shareholders     exercising their over-subscription privilege. To the extent there are not enough shares to
    satisfy all of the properly     exercised over-subscription requests, then the shares available will be prorated among those
    who properly exercising their     over-subscription privilege based on the number of shares each such shareholder subscribed
    for under their basic subscription     right. If this method of allocation results in any shareholder receiving a greater
    number of common shares than the     shareholder subscribed for pursuant to the exercise of his, her or its over-subscription
    privilege, then such shareholder     will be allocated only that number of shares for which the shareholder subscribed, and
    the remaining common shares will be     allocated among all other shareholders exercising their over-subscription privilege
    on the same pro rata basis described     above.  This pro rata allocation process will be repeated until all common
    shares have been allocated or the exercise of     all over-subscription privileges have been fulfilled, whichever occurs
    earlier.
Record Date
5:00 p.m., Minneapolis time, on              , 2012.
Expiration Date
5:00 p.m., Minneapolis time, on              , 2012, unless we extend the rights offering period in our sole discretion.
Use of Proceeds
We intend to use the proceeds of the rights offering primarily to provide capital for acquisitions to grow our current business or expand into new and complementary businesses, and to provide additional liquidity for working capital and general corporate purposes.
Transferability of Rights
The subscription rights are not transferable.
9
No Board Recommendation
Our Board of Directors makes no recommendation to you about whether you should exercise any subscription rights. You are urged to make an independent investment decision about whether to exercise your rights based on your own assessment of our business and the rights offering.  Please see the section of this prospectus entitled "Risk Factors" for a discussion of some of the risks involved in investing in our common stock.
No Revocation
Any exercise of subscription rights is irrevocable, even if you later learn information that you consider to be unfavorable to the exercise of your rights. Consequently, you should not exercise your subscription rights unless you are certain that you wish to purchase additional shares of common stock at a subscription price of $          per share.
No Purchase Commitments
Although our officers, directors and greater-than-5% beneficial shareholders, including our controlling shareholder,
    WCR, LLC, may participate in this offering at the same subscription price per share as all other purchasers, none of our
    officers, directors or greater-than-5% beneficial shareholders are obligated to so participate.  In fact, certain
    officers and directors (who are also shareholders), and our controlling shareholder, WCR, LLC, have indicated that they will
    purchase shares that are subject to their subscription rights, at the same subscription price offered to our
    shareholders.  Nevertheless, none of these shareholders have executed any agreements to purchase shares and there is no
    guarantee or enforceable commitment that they will subscribe for shares in the offering.
Material U.S. Federal Income Tax
Considerations
For U.S. federal income tax purposes, you should not recognize income or loss upon receipt or exercise of subscription rights.  Nevertheless, you should consult your own tax advisor as to your particular tax consequences resulting from the rights offering. For a detailed discussion, see "Material U.S. Federal Income Tax Considerations."
Extension, Cancellation and Amendment
We have the option to extend the rights offering and the period for exercising your subscription rights, although we do not presently intend to do so. Our Board of Directors may cancel the rights offering at any time for any reason. In the event that the rights offering is cancelled, all subscription payments received by the subscription agent will be returned promptly, without interest or penalty. We also reserve the right to amend or modify the terms of the rights offering.
Procedure for Exercising Rights
To exercise your subscription rights, you must take the following steps:
·
If you are a registered holder of our shares of capital stock, you
may deliver payment and a properly completed rights certificate to the subscription agent before 5:00 p.m., Minneapolis time, on
, 2012.  Payment should be made for all shares you wish to purchase upon exercise of your basic subscription privilege and
your over-subscription privilege, if any. You may deliver the documents and payments by hand, mail or commercial carrier. If regular
mail is used for this purpose, we recommend using registered mail, properly insured, with return-receipt requested.
10
·
If you are a beneficial owner of shares that are registered in the
name of a broker, dealer, custodian bank or other nominee, or if you would rather an institution conduct the transaction on your
behalf, you should instruct your broker, dealer, custodian bank or other nominee or to exercise your subscription rights on your
behalf and deliver all documents and payments (including payment for the exercise of your over-subscription privilege, if any)
before 5:00 p.m., Minneapolis time, on , 2012.
·
If you cannot deliver your rights certificate to the subscription
agent prior to the expiration of the rights offering, you may follow the guaranteed delivery procedures described under "The
Rights Offering—Guaranteed Delivery Procedures."
Subscription Agent
Corporate Stock & Transfer, Inc.
Capital Shares Outstanding
Before Rights Offering
5,397,780 common shares, and 10 million shares of Series A Convertible Preferred Stock, as of June 13, 2012.
Capital Shares Outstanding
After Rights Offering
Assuming no outstanding options or other convertible securities for our common shares are exercised prior to the
    expiration of the rights offering and the full $4.5 million is subscribed for, we
    expect                shares of common stock will
    be outstanding immediately after completion of the rights offering. There will be no change in the number of issued and
    outstanding preferred shares as a result of the rights offering.
Fees and Expenses
We will pay the fees and expenses relating to the rights offering.
Trading Symbol
Shares of our common stock are, and we expect that the shares of common stock to be issued in the rights offering will be, traded on the over-the-counter Bulletin Board (OCTBB) under the symbol "WCRS."
Risk Factors
Shareholders considering exercising their subscription rights should carefully consider the risk factors described in the section of this prospectus entitled "Risk Factors," beginning on page 13.
Questions
Questions regarding the rights offering should be directed to Maslon Edelman Borman & Brand, LLP, Attn: Paul Chestovich at (612) 672-8305.
11
RISK RELATING TO FORWARD-LOOKING STATEMENTS
Certain matters discussed in this prospectus
are forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions about our
operations and the investments we make, including, among other things, factors discussed under the heading "Risk Factors"
in this prospectus and the following:
·
changes in federal, state and local laws and regulations governing
lending practices, or in the interpretation of such laws and regulations;
·
potential litigation and regulatory actions directed toward our industry
in general;
·
our potential need for additional financing in the future;
·
our concentration of revenues in certain states where laws or regulations
may change;
·
our historic and current reliance on debt financing, and any potential
default under borrowing arrangements;
·
our capital structure, and any attempt by our preferred shareholders
to strictly enforce the rights and privileges of their preferred stock relating to dividends and other matters;
·
the ultimate control of our management and our Board of Directors
by our controlling shareholder, WCR, LLC;
·
any failure to maintain effective internal controls effective at detecting
and preventing fraud;
·
our reliance on information management systems and exposure to cyber
incidents;
·
unpredictability in financing markets that could affect our ability
finance or grow our business;
·
disruptions in the availability of information systems we use to operate
and manage our businesses;
·
competition in the markets in which we operate;
·
our reliance on certain key personnel in the management of our businesses;
·
our relative lack of product and business diversification;
·
general economic conditions and outlook;
·
any failure by us to accurately forecast loan losses;
·
theft, including employee theft;
·
employee and management turnover;
·
the fact that goodwill and other intangible assets represent approximately
58% of our total asset value; and
·
the fact that our common stock is presently thinly traded in an illiquid
market.
Some of the statements in this prospectus
that are not historical facts are "forward-looking" statements. Forward-looking statements can be identified by the
use of words like "believes," "could," "possibly," "probably," "anticipates,"
"estimates," "projects," "expects," "may," "will," "should,"
"seek," "intend," "plan," "consider" or the negative of these expressions or other
variations, or by discussions of strategy that involve risks and uncertainties. All forward-looking statements involve both known
and unknown risks, uncertainties and other factors that may cause our actual transactions, results, performance or achievements
to be materially different from any future transactions, results, performance or achievements expressed or implied by such forward-looking
statements.
We base the forward-looking statements we
use or include in this prospectus on current expectations and projections about future events and the information currently available
to us. Although we believe that the assumptions for these forward-looking statements are reasonable, any of the assumptions could
prove to be inaccurate. Consequently, no representation or warranty can be given that the estimates, opinions, or assumptions made
in or referenced by this prospectus will prove to be accurate. We caution you that the forward-looking statements in this prospectus
are only estimates and predictions. Actual results could differ materially from those anticipated in the forward-looking statements
due to risks, uncertainties or actual events differing from the assumptions underlying these statements. These risks, uncertainties
and assumptions include, but are not limited to, those discussed in this prospectus.
Although federal securities laws provide
a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this
safe harbor is not available to certain issuers, including issuers that do not have their equity traded on a recognized national
exchange or the Nasdaq Capital Market. Our common stock does not trade on any recognized national exchange or the Nasdaq Capital
Market. As a result, we will not have the benefit of this safe harbor protection in the event of any legal action based upon a
claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because
of our failure to include any statements necessary to make the statements not misleading.
12
RISK FACTORS
Investing in our securities
involves a high degree of risk. You should carefully consider the specific risks described below, the risks described in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2012, and any risks described in our other filings with the Securities and Exchange Commission, pursuant to
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, before making an investment decision. See the
section of this prospectus entitled "Where You Can Find More Information." Any of the risks we describe below
could cause our business, financial condition, results of operations or future prospects to be materially and adversely
affected. The market price of our common stock could decline if one or more of these risks and uncertainties develop into
actual events and you could lose all or part of your investment. Additional risks and uncertainties not currently known to us
or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition,
results of operations or future prospects. In addition, some of the statements in this section of the prospectus are
forward-looking statements. For more information about forward-looking statements, please see the section of this prospectus
entitled "Risk Relating to Forward-Looking Statements" above
.
Risks Related to the Rights Offering
The price of our common stock is volatile and may decline
before or after the subscription rights expire.
The market price of our common stock is
subject to fluctuations in response to numerous factors, including factors that have little or nothing to do with us or our performance,
and these fluctuations could materially reduce our stock price. These factors include, among other things:
·
governmental legislation or regulation;
·
business conditions in our markets and the general state of the securities
markets and the market for similar stocks;
·
changes in capital markets that affect the perceived availability
of capital to companies in our industry;
·
general economic and market conditions, such as recessions;
·
actual or anticipated variations in our operating results and cash
flow; and
·
the
number of shares of our common stock outstanding or issuable
.
In addition, the stock market historically
has experienced significant price and volume fluctuations. These fluctuations are often unrelated to the operating performance
of particular companies. These broad market fluctuations may cause declines in the market price of our common stock.
When the rights offering is completed, your ownership
interest will be diluted if you do not exercise the basic subscription privilege component of your subscription rights.
To the extent that you do not exercise the
basic subscription privilege component of your subscription rights and shares are purchased by other shareholders in the rights
offering, your proportionate economic and voting interest in the Company will be reduced, and the percentage that your original
shares represent of our expanded equity after the rights offering will be diluted.
The subscription price determined for the rights offering
is not necessarily an indication of the fair value of our common stock.
The subscription price is $       per share. The
subscription price was determined by a special committee of our Board of Directors. Factors considered by the committee included
the strategic alternatives available to us for raising capital, the price at which our shareholders might be willing to participate
in the rights offering, historical and current trading prices of our common stock, the business prospects of our Company, and the
general condition of the securities and capital markets. We cannot assure you that the market price for our common stock during
the rights offering will be equal to or above the subscription price or that a subscribing owner of rights will be able to sell
the shares of common stock purchased in the rights offering at a price equal to or greater than the subscription price.
13
You may not revoke your subscription exercise and you
could be committed to buying shares above the prevailing market price.
Once you exercise your subscription rights,
you may not revoke the exercise of such rights. This irrevocability applies to both your basic subscription privilege and your
over-subscription privilege. The public trading market price of our common stock may decline before the subscription rights expire.
If you exercise subscription rights and, afterwards, the public trading market price of our common stock decreases below the subscription
price, you will have committed to buying shares of our common stock at a price above the prevailing market price, in which case
you will have an immediate unrealized loss. Furthermore, after your exercise of subscription rights, you may not be able to sell
your shares of common stock at a price equal to or greater than the subscription price, and you may lose all or part of your investment
in our common stock.
If you do not act promptly and follow the subscription
instructions, you may lose your right to exercise your subscription rights or your exercise of subscription rights may be rejected.
Subscription rights holders who desire to
purchase shares in the rights offering must act promptly to ensure that all required forms and payments are actually received by
the subscription agent before 5:00 p.m. Minneapolis time on           , 2012,
the expiration date of the rights offering, unless extended. If you are a beneficial owner of shares, but not a record holder,
you must act promptly to ensure that your broker, bank, or other nominee acts for you and that all required forms and payments
are actually received by the subscription agent before the expiration date of the rights offering. We will not be responsible if
your broker, custodian, or nominee fails to ensure that all required forms and payments are actually received by the subscription
agent before the expiration date of the rights offering.
If you fail to complete and sign the required
subscription forms, send an incorrect payment amount or otherwise fail to follow the subscription procedures that apply to your
exercise in the rights offering, the subscription agent may, depending on the circumstances, reject your subscription or accept
it only to the extent of the payment received. Importantly, neither we nor our subscription agent undertakes to contact you concerning
an incomplete or incorrect subscription form or payment, nor are we under any obligation to correct such forms or payment. We have
the sole discretion to determine whether a subscription exercise properly follows the subscription procedures.
The rights offering does not have a minimum amount of
proceeds that must be raised for us to accept subscriptions and access proceeds. Therefore, if you exercise your subscription rights
and if less than the entire offering amount is subscribed for, you may be investing in a company that continues to desire additional
capital.
There is no assurance that any shareholders
will exercise their subscription rights. Further, there is no minimum amount of proceeds required for us to accept subscriptions
and access proceeds at the completion of the rights offering. In addition, all exercises of subscription rights are irrevocable,
even if you later learn information that you consider to be unfavorable to the exercise of your subscription rights and even if
the rights offering is extended by our Board of Directors. Based on the foregoing, if you exercise any subscription rights but
we do not raise the desired amount of capital in this rights offering, you may be investing in a company that continues to desire
additional capital to grow its current business or expand into new and complementary businesses.
Significant issuances of our common stock, or the perception
that significant issuances may occur in the future, could adversely affect the market price for our common stock.
The substantial number of
subscription rights involved in the rights offering, and other actual or perceived potential future issuances of our common
stock, could adversely affect the market price of our common stock. Generally, issuances of substantial amounts of common
stock in the public market, and the availability of shares for future sale, including up to             shares of our common
stock that may be issued in the rights offering, could adversely affect the prevailing market price of our common stock
and could cause the market price of our common stock to remain low for a substantial amount of time. Additional options and
other equity awards may also be granted under our incentive plans.
14
We cannot foresee the impact of the rights
offering and such potential securities issuances on the market for our common stock, but it is possible that the market for our
shares may be adversely affected. It is also unclear whether or not the market for our common stock could absorb a large number
of attempted sales in a short period of time, regardless of the price at which they might be offered. Even if a substantial number
of sales do not occur within a short period of time, the mere existence of this "market overhang" could have a negative
impact on the market for our common stock and our ability to raise additional equity capital.
Our officers, directors and greater-than-5% shareholders,
including our controlling shareholder, WCR, LLC, may significantly increase their relative ownership and voting interest in the
Company to the extent our other shareholders do not exercise their basic subscription privileges.
On June 13, 2012, the last practicable date
before the filing of this prospectus:
·
WCR, LLC beneficially owned approximately 71.5% of our common stock
·
John Quandahl, our Chief Executive Officer, beneficially owned
                                                                                                              approximately 3.7% of our common stock
·
Steve Irlbeck, our Chief Financial Officer, beneficially owned approximately
3.7% of our common stock
·
Richard Miller, our Chairman of the Board, beneficially owned approximately
5.9% of our common stock, and
·
Rich Horner, the Treasurer of our subsidiary Wyoming Financial Lenders,
Inc., beneficially owned approximately 1.9% of our common stock.
Collectively, the above-identified shareholders
possess beneficial ownership of approximately 75.5% of our common stock. We have been advised that WCR intends to participate in
the rights offering but WCR has not committed or entered into any agreement that would require it to do so. The same is true for
our officers and directors who are also shareholders. To the extent that other shareholders do not participate in the rights offering,
our officers, directors, greater-than-5% shareholders and WCR will necessarily increase their relative percentage of ownership
in the Company if they do in fact participate in the rights offering by exercising their subscription rights.
We may use the proceeds of this rights offering in ways
with which you may disagree.
We intend to use the net proceeds of this
offering primarily to provide capital for the growth of our business through acquisitions and to potentially add new businesses
that are complementary to our current business, and to provide additional liquidity for working capital and general corporate purposes.
Accordingly, we will have significant discretion in the use of the net proceeds of this offering, and it is possible that we may
allocate the proceeds differently than investors in this offering desire, or that we will fail to maximize our return on these
proceeds. You will be relying on the judgment of our management with regard to the use of the proceeds from the rights offering,
and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately.
For more information, see the section entitled "Use of Proceeds."
We may cancel the rights offering at any time, and neither
we nor the subscription agent will have any obligation to you except to return your exercise payments.
We may, in our sole discretion, decide not
to continue with the rights offering or cancel the rights offering. If the rights offering is cancelled, all subscription payments
received by the subscription agent will be returned promptly, without interest or penalty.
Risks Relating to Our Business and Company
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 38 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 laws permitting
payday lending could expire.
15
For example, recent legislation has been
passed in Colorado, Wisconsin and Montana that restricts certain payday lending practices. In particular:
·
During 2010, Colorado House Bill 10-1351 was passed into law effective
August 11, 2010. This law changed the single payment advance (with no minimum term) into a single or multiple payment loan with
a minimum six-month term. It also limited the amount and type of fees that can be charged on these loans, effectively reducing
by one-half the fees that can be charged, and when the fees may be realized. We restructured our lending in Colorado to replace
payday advances with a short-term installment loan product. Our 2011 gross profit from Colorado operations was negatively affected
by these developments, decreasing 22% from 2010 gross profit.
·
In Wisconsin, new legislation effective January 1, 2011 limited payday
loans to the lesser of $1,500 or 35% of the applicant's monthly income, permits borrowers to cancel loans within 24 hours
and roll their loans over only one time. In addition, payday lenders are required to offer a 60-day, interest free, payment plan
to consumers upon maturity of their payday loans. Our 2011 gross profit from Wisconsin operations was negatively affected by these
developments, decreasing 41% from 2010 gross profit.
·
Finally, on November 2, 2010, voters in Montana passed Petition Initiative
I-164. Effective January 1, 2011, Petition Initiative I-164 capped fees on payday loans at an imputed interest rate of 36%. We
discontinued our operations and closed all four stores in Montana due to this law change. In 2010, approximately 3.87% of our payday
division revenues were generated in Montana.
In addition, legislation banning payday
loans was introduced in Nebraska in 2008 but eventually was dropped. Nevertheless, since we derive approximately 28% 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.
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)
could 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.
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 occasionally been introduced in the U.S. Congress. For example:
·
the interest rate and fees that may be charged on any loans, including
payday loans, to any person in the military are limited to the equivalent of 36% per annum.
·
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 that 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 and compliance with federal rules and regulations. Future restrictions on the payday lending industry could have serious
consequences for us.
16
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.
Changes in local regulations could have a material adverse
effect on our business, results of operations and financial condition.
In addition to state and federal laws and
regulations, our business is subject to various local rules and regulations such as local zoning regulations and permit licensing.
We are aware of increasing efforts by local jurisdictions to restrict payday lending through the use of local zoning and permitting
laws. Any actions taken in the future by local zoning boards or other governing bodies to require special use permits for, or impose
other restrictions on, payday lenders could have a material adverse effect on the growth of our business and business prospects
primarily by restricting any efforts to grow our business "organically" by opening more payday lending store locations.
Litigation and regulatory actions directed toward our
industry or us could adversely affect our operating results, particularly in certain key states.
During the last few years, our industry
has been subject to regulatory proceedings, class action lawsuits and other litigation regarding the offering of payday loans,
and we could suffer losses resulting from interpretations of state laws in those lawsuits or regulatory proceedings, even if we
are not a party to those proceedings. Thus, the losses we could suffer could be directly incurred through our involvement in litigation
or regulatory proceedings, or could be indirectly incurred through negative publicity regarding the industry in general that is
generated by litigation on regulatory proceedings involving third parties.
In addition, regulatory actions taken with
respect to a particular non-payday lending financial service that we offer could negatively affect our ability to offer such other
financial services. For example, if we were the subject of regulatory action related to our check-cashing business, that regulatory
action could adversely affect our ability to maintain our payday lending licenses. Moreover, the suspension or revocation of our
license or other authorization in one state could adversely affect our ability to maintain licenses in other states. Accordingly,
a violation of a law or regulation with respect to otherwise unrelated products or in other jurisdictions could affect other parts
of our business and adversely affect our business and operations as a whole.
We may need additional financing in the future and any
such financing may dilute our existing shareholders.
We anticipate that we will continue to experience
growth in our income and expenses for the foreseeable future and that our operating expenses will be a material use of cash resources.
Presently, we believe we have cash sufficient to maintain operations. In the event that our income does not meet our expectations,
we may sooner require additional financing for working capital. In addition, if we determine to grow our business through acquisitions,
any acquisitions we consummate will likely involve additional financing. Any additional financing, for whatever purpose and for
whatever reason, may dilute our existing shareholders.
Additional financing could be sought from
a number of sources, including but not limited to additional sales of equity or debt securities (including equity-linked or convertible
debt securities), loans from banks, loans from our affiliates or other financial institutions. We may not, however, be able to
sell any securities or obtain any such additional financing when needed, or do so on terms and conditions acceptable or favorable
to us, if at all. If financing is not available, we may be forced to consider strategic alternatives, such as (but not limited
to) curtailing certain aspects of our operations or closing certain operating locations. If we successfully enter into a financing
transaction, any additional equity or equity-linked financing would be dilutive to shareholders, and additional debt financing,
if available, may involve restrictive covenants and above-market interest rates.
17
The concentration of our revenues in certain states could
adversely affect us.
We currently provide payday lending services
in nine states. For the year ended December 31, 2011, revenues from our locations in Nebraska represented approximately 28% of
our total payday revenues. For the foreseeable future, we expect that a material and significant portion of our revenues will continue
to be generated in Nebraska. We operate Cricket stores in 13 states as of March 31, 2012. For the year ended December 31, 2011,
revenues from our Missouri and Indiana stores represented approximately 25% and 22% of our total Cricket revenues, respectively.
As a result, changes to prevailing economic, demographic, competitive, regulatory or any other conditions, including the legislative,
regulatory or litigation risks mentioned above, in the markets in which we operate, and in Nebraska and Missouri in particular,
could lead to a reduction in demand for our services and result in a decline in our revenues or an increase in our provision for
doubtful accounts, or even an outright legal prohibition on the conduct of our business. Any of these outcomes could in turn result
in a material and swift deterioration of our financial condition and business prospects principally by impairing our revenues and
affecting our ability to obtain financing and operating liquidity.
Our controlling shareholder possesses controlling voting
power with respect to our common stock and voting preferred stock, which will limit your influence on corporate matters.
Our controlling shareholder, WCR, LLC, has
beneficial ownership of 10,791,250 shares (9,700,000 of which are issuable upon conversion of Series A Convertible Preferred Stock).
These shares represent beneficial ownership of approximately 71.5% of our common stock as of the date of this report. As a result,
WCR has the ability to outrightly control our management and affairs through the election and removal of our entire Board of Directors
and all other matters requiring shareholder approval, including the future merger, consolidation or sale of all or substantially
all of our assets. This concentrated control could discourage others from initiating any potential merger, takeover or other change-of-control
transaction that may otherwise be beneficial to our shareholders. Furthermore, this concentrated control will limit the practical
effect of your participation in Company matters, through shareholder votes and otherwise.
Our articles of incorporation grant our Board of Directors
the power to issue additional shares of common and preferred stock and to designate other classes of preferred stock, all without
shareholder approval.
Our authorized capital consists of 250 million
shares of capital stock. Pursuant to authority granted by our articles of incorporation, our Board of Directors, without any action
by our shareholders, may designate and issue shares in such classes or series (including other classes or series of preferred stock)
as it deems appropriate and establish the rights, preferences and privileges of such shares, including dividends, liquidation and
voting rights, provided it is consistent with Minnesota law. The rights of holders of other classes or series of stock that may
be issued could be superior to the rights of holders of our common shares. The designation and issuance of shares of capital stock
having preferential rights could adversely affect other rights appurtenant to shares of our common stock. Furthermore, any issuances
of additional stock (common or preferred) will dilute the percentage of ownership interest of then-current holders of our capital
stock and may dilute our book value per share.
A default under our borrowing arrangement could require
us to seek financing on a short-term basis that may be disadvantageous to us.
On October 18, 2011, we entered in a borrowing
arrangement with River City Equity, Inc. Under this arrangement, we may borrow up to $2,000,000 at an interest rate of 12% per
annum, with interest payable on a monthly basis. The note we delivered to River City Equity matures on September 30, 2013, on which
date all unpaid principal and accrued but unpaid interest thereon is due and payable. The note includes a prepayment penalty and,
under certain circumstances, permits River City Equity to obtain a security interest in substantially all of our assets. As of
March 31, 2012, $1,200,000 has been advanced under this arrangement.
If we are unable to comply with the terms
of our promissory note with River City Equity, we may need to seek additional financing. We may not be able to obtain financing
on a short-term basis. Furthermore, even if we are able to obtain needed short-term financing, we may be unable to do so on terms
that are favorable.
18
A significant portion of our assets consists of goodwill
and other intangible assets.
As of December 31, 2011, 58% of our assets
consisted of goodwill and other intangible assets. Under generally accepted accounting principles, the carrying value of goodwill
is subject to periodic review and testing to determine if it is impaired. The value of our assets will depend on market conditions,
regulatory environment, the availability of buyers and similar factors. While the value of these assets is based on management
projections and assumptions and is determined by using the discounted cash flow method for purposes of our impairment testing,
those values may differ from what could ultimately be realized by us in a sales transaction or otherwise and that difference, while
not affecting cash flow, could have a material adverse impact on our operating results and financial position.
Unpredictability in financing markets could impair our
ability to grow our business through acquisitions.
We anticipate that opportunities to acquire
similar businesses will materially depend on the availability of financing alternatives with acceptable terms. As a result, poor
credit and other market conditions or uncertainty in the financing markets or the payday lending business in particular could materially
limit our ability to grow through acquisitions since such conditions and uncertainty make obtaining financing more difficult.
Public perception of payday lending as being predatory
or abusive could adversely affect our business.
Recently, consumer advocacy groups and media
reports have advocated governmental action to prohibit or severely restrict payday loans. The consumer groups and media reports
typically focus on the cost to a consumer for this type of loan, which is higher than the interest typically charged by credit
card issuers. The consumer groups and media reports typically characterize these transactions as predatory or abusive toward consumers.
If this negative characterization of our business becomes widely accepted by consumers, demand for our payday loans could significantly
decrease, which could adversely affect our results of operations primarily by decreasing our revenues. Negative perception of our
business activities could also result in our industry being subject to more restrictive laws and regulations and greater exposure
to litigation.
Any disruption in the availability of our information
systems could adversely affect our operations.
We rely upon our information systems to
manage and operate our business. Each location is part of an information network that permits us to maintain adequate cash inventory,
reconcile cash balances daily, and report revenues and loan losses in a timely manner. Our security measures could fail to prevent
a disruption in the availability of our information systems or our back-up systems could fail to operate properly. Any disruption
in the availability of our information systems could adversely affect our results of operations by impairing our ability to efficiently
effect transactions.
If we lose key managers or are unable to attract and retain
the talent required for our business, our operating results could suffer.
Our future success depends to a significant
degree upon the members of our executive management, particularly John Quandahl, who is our Chief Executive Officer. Accordingly,
the loss of these services would likely materially and adversely affect our business. We have an employment agreement with Mr.
Quandahl effective through March 31, 2013. Nevertheless, we cannot be certain that Mr. Quandahl will continue providing services
to us for any particular period of time. Our continued growth will also depend upon our ability to attract and retain additional
skilled management personnel. Competition for highly skilled and experienced management is intense and likely to continue and increase.
To the extent that we are unable to attract and retain the talent required for our business, our operating results could suffer.
19
We lack product and business diversification with a customer
base primarily in urban areas, which creates a risk that our future revenues and earnings will be susceptible to fluctuations.
Our primary payday business activity is
offering and servicing payday loans. We also provide certain related and other services, such as check cashing, money transfers
and money orders. The payday segment accounted for approximately 58% of our total revenues in 2011. Our Cricket retail segment
accounted for the remaining approximately 42% of our total revenues in 2011. If we are unable to further diversify our business
products and services and expand our customer base outside of urban areas, we may experience fluctuations in our revenues and earnings,
which may be significant, relating to our payday lending business and wireless cellular sales. Such fluctuations could also result
from legal or regulatory changes in one or more jurisdictions, changes in economic conditions in the jurisdictions where we provide
services, or result from other risks or adverse events befalling us. Our susceptibility to fluctuations or the actual happening
of significant fluctuations in our revenues or earnings could cause our Company to be perceived as a less stable and therefore
less attractive investment in general, which would likely negatively affect the market price of our common stock and our ability
to obtain additional financing an acceptable terms.
Competition in the retail financial services industry
is intense and could cause us to lose market share and revenues.
We believe that the primary competitive
factors in the payday loan industry are store location and customer service. We face intense competition in the payday loan industry,
and we believe that the payday lending market is becoming more competitive as this industry matures and begins to consolidate.
The payday loan industry has low barriers to entry, and new competitors, such as Wal-Mart, may enter the market easily. We currently
compete with certain related services, such as overdraft protection offered by traditional financial institutions, and with other
payday loan and check cashing stores and other financial service entities and retail businesses that offer payday loans or other
similar financial services, as well as a rapidly growing Internet-based payday loan market. Some of our competitors have larger
and more established customer bases and substantially greater financial, marketing and other resources than we have. As a result,
we could lose market share and our revenues could decline, thereby affecting our earnings and potential for growth.
We face significant wireless cellular competition that
may reduce our market share and lower our profits.
We face significant competition in the market
in which our Cricket wireless division operates. We currently compete with resellers of our size including US Cellular and Metro
PCS. We also compete with the four national wireless service providers (AT&T, Sprint Nextel, T-Mobile and Verizon Wireless)
and with Walmart's Straight Talk and Family Mobile plans. Our ability to compete effectively will depend on, among other
things, the pricing of Cricket services and equipment, the quality of our customer service, the reach and quality of our sales
and distribution channels and our capital resources. It will also depend on how successfully we anticipate and respond to various
factors affecting our industry, including new technologies and business models, changes in consumer preferences, demographic trends
and economic conditions. Finally, operating solely as a Cricket reseller, we are dependent upon pricing, channel strategies, product
supply, credit terms, dealer compensation structure, and up-to-date wireless technologies and infrastructure of Cricket Wireless.
If the business of Cricket Wireless itself were to suffer, become threatened or fail to effectively compete against its competitors,
our Cricket wireless division would correspondingly be adversely affected, perhaps materially.
Present participants in the wireless industry
also faces competition from other communications and technology companies seeking to capture customer revenue and brand dominance
with respect to the provision of wireless products and services. For example, Apple Inc. is packaging software applications and
content with its handsets, and Google Inc. has developed and deployed an operating system and related applications for mobile devices.
Our results of operations could be adversely affected
by higher loan losses resulting from a general economic slowdown or other negative economic conditions such as high unemployment.
Provision for loan losses, net of recoveries,
is one of our largest operating expenses, constituting approximately 7% of total revenues for the fiscal year ended December 31,
2011, and 3.7% of total revenues for the period ended March 31, 2012, with payday loan losses comprising most of the losses. Any
changes in economic factors that adversely affect our customers, such as an economic downturn or high unemployment, could result
in higher loan loss experiences than anticipated, which could in turn adversely affect our loan charge-offs and operating results.
20
If estimates of our loan losses are not adequate to absorb
actual losses, our financial condition and results of operations may be adversely affected.
We maintain an allowance for loan losses
at levels to cover the estimated incurred losses in the collection of our loan portfolio outstanding at the end of each applicable
period. At the end of each period, management considers recent collection history to develop expected loss rates, which are used
to establish the allowance for loan losses. Our allowance for loan losses was $1.0 million at December 31, 2011 and $.9 million
at March 31, 2012. Our allowance for loan losses is an estimate, and if actual loan losses are materially greater than our allowance
for losses, our financial condition and results of operations could be adversely affected.
Because we maintain a significant supply of cash in our
locations, we may experience losses due to employee error and theft.
Because our business requires us to maintain
a significant supply of cash in our stores, we are subject to the risk of cash shortages resulting from employee error and theft.
We periodically experience employee error and theft in stores, which can significantly increase the operating losses of those stores
for the period in which the employee error or theft is discovered. We self-insure for employee error and theft at the store level.
If our controls to limit our exposure to employee error and theft at the store level and at our corporate headquarters do not operate
effectively or are structured ineffectively, our operating margins could be adversely affected, including by costs associated with
increased security and preventative measures.
Failure to achieve and maintain effective internal controls
could limit our ability to detect and prevent fraud and thereby adversely affect our business and stock price.
Effective internal controls are necessary
for us to provide reliable financial reports. Nevertheless, all internal control systems, no matter how well designed, have inherent
limitations. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation. Our most recent evaluation of our internal controls resulted in our conclusion that our disclosure
controls and procedures were effective. Our inability to maintain an effective control environment may cause investors to lose
confidence in our reported financial information, which could in turn have a material adverse effect on our stock price.
Our reliance on information management and transaction
systems to operate our business exposes us to cyber incidents and hacking of our sensitive information if our outsourced service
provider experiences a security breach.
Effective information security internal
controls are necessary for us to protect our sensitive information from illegal activities and unauthorized disclosure in addition
to denial of service attacks and corruption of our data. In addition, we rely on the information security internal controls maintained
by our outsourced service provider. Despite utilization of a service provider that maintains the highest level of security around
our information systems, the sophistication of hackers continues to increase. Our most recent evaluation of ours and our service
providers' internal controls resulted in a conclusion that our disclosure controls and procedures were effective. Nevertheless,
our inability to maintain effective controls or a relationship with an information technology provider that itself maintains effective
controls may increase our vulnerability to cyber attacks. Breaches of our information management system could also adversely affect
our business reputation and we could be subject to third-party lawsuits relating to the unauthorized disclosure of personal information.
Finally, significant information system disruptions could adversely affect our ability to effectively manage operations or reliably
report results.
Regular turnover among our location managers and employees
makes it more difficult for us to operate our locations and increases our costs of operation.
We experience a relatively stable workforce
among our location managers and employees. Turnover interferes with implementation of operating strategies. Increases in our workforce
turnover in the future would likely increase our operating pressures and operating costs and could restrict our ability to grow.
Additionally, high turnover would create challenges for us in maintaining high levels of employee awareness of and compliance with
our internal procedures and external regulatory compliance requirements. In sum, high turnover would increase our training and
supervisory costs, and result in decreased earnings with corresponding greater risks of regulatory non-compliance.
21
Because we became public by means of a reverse merger,
we may not be able to attract the attention of major brokerage firms.
Additional risks to our investors may exist
since we became public through a "reverse merger." Security analysts of major brokerage firms may not provide coverage
of our Company since, because we became public through a reverse merger, there is no incentive to brokerage firms to recommend
the purchase of our common stock. In addition, because of past abuses and fraud concerns stemming primarily from a lack of public
information about newly public businesses, there are many people in the securities industry and business in general who view reverse
merger transactions with suspicion. This may be the case even though our reverse merger transaction occurred in 2007. Without brokerage
firm and analyst coverage, there may be fewer people aware of us and our business, resulting in fewer potential buyers of our securities,
less liquidity, and lower stock prices for our investors than would be the case if we had become a public reporting company in
a more traditional manner.
Our common stock trades only in an illiquid trading market.
Trading of our common stock is conducted
on the OTC Bulletin Board (OTCBB: WCRS). This has an adverse effect on the liquidity of our common stock, not only in terms of
the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and reduction
in security analysts' and the media's coverage of us and our common stock. This may result in lower prices for our
common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our
common stock.
In addition, there has typically been very
little trading activity in our common stock. During 2011, the average daily trading volume (as reported by Google Finance) was
approximately 5,000 shares with the 52-week trading prices ranging from $0.01 to $0.06 per share. The trade volume was as low as
2,000 shares for all of March and April 2011. During the three-month period ended March 31, 2012, the average daily trading volume
was approximately 12,720 shares. The small trading volume will likely make it difficult for our shareholders to sell their shares
as and when they choose. Furthermore, small trading volumes generally depress market prices. As a result, you may not always be
able to resell shares of our common stock publicly at the time and prices that you feel are fair or appropriate.
There is not now and there may not ever be an active market
for shares of our common stock.
In general, there has been minimal trading
volume in our common stock. The small trading volume will likely make it difficult for our shareholders to sell their shares as
and when they choose. Furthermore, small trading volumes are generally understood to depress market prices. As a result, you may
not always be able to resell shares of our common stock publicly at the time and prices that you feel are fair or appropriate.
We do not intend to pay dividends on our common stock
for the foreseeable future. We will, however, pay dividends on our convertible preferred stock.
When permitted by Minnesota law, we are
required to pay dividends to the holders of our Series A Convertible Preferred Stock, each share of which carries a $2.10 stated
value. There are 10 million shares of Series A Convertible Preferred Stock outstanding. Our Series A Convertible Preferred Stock
entitles its holders to (i) a cumulative 10% dividend, compounded and payable on a quarterly basis; (ii) in the event of a liquidation
or dissolution of the Company, a preference in the amount of all accrued but unpaid dividends plus the stated value of such shares,
before any payment shall be made or any assets distributed to the holders of any junior securities; (iii) convert their preferred
shares into our common stock on a share-for-share basis, subject to adjustment; and (iv) vote their preferred shares on an as-if-converted
basis.
We have the right to redeem some or all
such preferred shares, at any time upon 60 days' advance notice, at a per-share price of $3.50 plus accrued but unpaid dividends.
Holders of Series A Convertible Preferred Stock have no preemptive or cumulative-voting rights.
We do not anticipate that we will pay any
dividends for the foreseeable future on our common stock. Accordingly, any return on an investment in us will be realized only
when you sell shares of our common stock. When legally permitted, we must expect to pay dividends to our preferred shareholders.
22
USE OF PROCEEDS
We expect that the gross proceeds from the
rights offering will be approximately $4,500,000, and that our offering and related expenses will be approximately $100,000. We
intend to use the net proceeds of the rights offering primarily to provide capital to grow our current business through acquisitions
or to add new and complementary businesses, and to provide additional liquidity for working capital and general corporate purposes.
DILUTION
Purchasers of our common stock in the rights
offering will experience an immediate and substantial dilution of the net tangible book value of the shares purchased. At March
31, 2012, we had a net tangible book value of approximately $ , or $ per share of our common stock. After giving effect to the
sale of shares of our common stock in the rights offering and assuming the sale of the total gross amount of shares for gross proceeds
of $4,500,000, and after deducting estimated transaction and offering expenses of $100,000, the pro forma net tangible book value
at March 31, 2012, attributable to common shareholders would have been $ , or $ per share of our common stock. This amount represents
an immediate dilution to purchasers in the rights offering of $ . The following table illustrates this per share dilution.
Subscription Price
$
Net tangible book value per share at March 31, 2011, before the rights offering
$0.073
Net increase in pro forma tangible book value per share attributable to the rights offering
$
Pro forma net tangible book value per share after giving effect to the rights offering
$
Dilution in pro forma net tangible book value per share to purchasers
$
23
CAPITALIZATION
The following table describes capitalization
as of March 31, 2012, on an actual basis and as adjusted to give effect to the rights offering, assuming gross proceeds from the
rights offering of $4,500,000 million and before deducting our estimated offering expenses of $100,000. As-adjusted balances are
subject to change based upon final participation in the rights offering. You should read this table together with the information
under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition" and
our unaudited consolidated financial statements and related notes and other financial information in this prospectus.
As of March 31, 2012
Actual
As Adjusted
(in thousands)
Cash and cash equivalents
$
2,486,834
Current liabilities:
Accounts payable
2,475,506
Current portion long-term debt
696,910
Preferred dividends payable
4,075,000
Deferred revenue
250,205
Total current liabilities
7,497,621
Long-term liabilities:
Notes payable, long-term
1,229,278
Deferred income taxes
580,000
Total long-term liabilities
1,809,278
Total liabilities
9,306,899
Shareholders' Equity:
Series 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
Common stock no par value, 240,000,000 shares authorized, 5,397,780 shares issued and outstanding
-
Additional paid-in capital
17,914,543
Accumulated deficit
(5,659,438
)
Total shareholders' equity
12,355,105
Total capitalization
$
21,662,004
24
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The following discussion should be read
in conjunction with the financial statements and related notes that appear elsewhere in this prospectus. This discussion contains
forward-looking statements that involve significant uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including those discussed in "Risk Factors" elsewhere
in this report. For further information, see "Risk Relating to Forward-Looking Statements" above.
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 and installment loans, check cashing and other money services, including title loans. At the close
of business on March 31, 2012, we owned and operated 52 stores in nine states, including Colorado, Iowa, Kansas, 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
the cash advance 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. Installment loans provide customers with cash in exchange for a promissory note with
a maturity of generally three to six months. The fee and interest rate on installment loans vary based on applicable regulations.
Like cash advance or payday loans, installment loans are unsecured. All of our payday loans, installment loans and other services
are subject to state regulations (which vary from state to state), federal regulations and local regulation, where applicable.
We also operate (through PQH Wireless, Inc.)
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. As of March 31, 2012, we operated 48 Cricket wireless retail stores in 13 states (Arizona, Colorado,
Idaho, Illinois, Indiana, Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon and Texas).
Our expenses primarily relate to the operations
of our various stores. The most significant expenses include salaries and benefits for our store employees, phones and accessories,
provisions for payday loan losses and occupancy expenses for our leased real estate. Our other significant expenses are general
and administrative, which includes compensation of employees, professional fees for accounting, audit and legal services, and management
/ consulting fees.
With respect to our cost structure, phone
and accessory cost of sales and salaries and benefits are two of our largest costs and are driven primarily by the number of storefronts
operated throughout the period and seasonal fluctuation in sales volumes. Occupancy costs make up our third largest expense item.
Our provision for losses is also a significant expense. We have experienced seasonality in our Cricket 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, for the payday segment, is losses as a percentage of revenues), with
consideration given to the length of time the storefront has been open and its geographic location. We evaluate changes in comparable
storefront financial and other measures on a routine basis to assess operating efficiency. We define comparable storefronts as
those that are open during the full periods for which a comparison is being made. For example, comparable storefronts for the annual
analysis we undertook as of December 31, 2011 have been open at least 24 months on that date. We monitor newer storefronts for
their progress toward profitability and rate of loan growth or units sold.
25
The payday loan industry is significantly
affected by 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
28% of our 2011 total payday segment 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.
With payday loan industry growth and fragmentation,
we believe there are opportunities to grow our business, primarily through acquisitions as opposed to organic growth. We continually
evaluate opportunities in numerous states in which we currently operate and evaluate the regulatory environment and market potential
in the various states in which we currently do not have stores. In addition to expanding our geographic reach, our strategic expansion
plans also 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
will also explore growth opportunity through the conversion (or partial conversion) of payday stores into pawn 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 concentrated geographically.
We have 10,000,000 shares of Series A Convertible
Preferred Stock (10% cumulative dividends, $0.01 par value, $2.10 stated value) authorized, issued and outstanding. One-fourth
of the $2.1 million annual preferred dividend accrues each quarter, whether paid or not. Our Board of Directors votes to approve
payment of dividends when appropriate and as permitted by Minnesota law. The dividend can be paid either in cash or in shares of
our common stock at the discretion of the preferred shareholder. This preferred dividend is included in the net income or loss
available to common shareholders. As a result, we had a net loss available to common shareholders in 2011 and 2010.
Our obligation to pay preferred dividends
significantly impacts our cash flow and our ability to grow through acquisitions, which is the most significant way in which we
expect to grow. For instance, our use of cash in satisfaction of the dividend-payment obligations prevents us from using that cash
as part of acquisition transactions. The present condition of the credit markets available to businesses in our industry also makes
it difficult for us to surmount this obstacle through borrowing. In addition, our use of cash in satisfaction of the dividend-payment
obligations requires us to manage our cash in ways that we will ensure the availability of cash for lending to our payday loan
customers during the fall and winter months, which is typically the busiest time of year for payday lending.
The preferred dividend obligation also significantly
affects our net income available to common shareholders. For example, absent the 2011 preferred dividend of $2.1 million, our net
income available to common shareholders would have been approximately $1.44 million. For this reason, we are continuing to explore
ways in which we may be able to retire or redeem the Series A Convertible Preferred Stock. During 2011, we had engaged in discussions
with WCR, LLC regarding the conversion of preferred stock on terms more favorable than those contained in the Certificate of Designation
for the preferred stock, but we were unable to reach a definitive agreement in this regard. It is difficult for us to forecast
what success, if any, we may have in this endeavor since the preferred shareholders are not obligated to surrender their shares,
exchange them, or engage in any sort of recapitalization transaction.
RESULTS OF OPERATIONS:
THREE MONTHS ENDED MARCH 31, 2012 COMPARED TO THREE MONTHS
ENDED MARCH 31, 2011
For the three-month period ended March 31,
2012, net income was $.79 million compared to net income of $.41 million for the three months ended March 31, 2011. During the
three months ended March 31, 2012, income from operations before income taxes was $1.29 million compared to $.67 million for the
three months ended March 31, 2011. The major components of revenues, store expenses, general and administrative expenses, and income
tax expense are discussed below.
26
Revenues
Revenues totaled $7.52 million for the three
months ended March 31, 2012, compared to $5.04 million for the three months ended March 31, 2011. The increase in total revenues
resulted primarily from higher Cricket division revenue which can be attributed to our recent acquisitions. During the three-month
periods ended March 31, 2012 and 2011, we originated approximately $15.8 million and $15.2 million in cash advance loans, respectively.
Our average loan (including fees) totaled approximately $383 and $378 during the three-month periods ended March 31, 2012 and 2011,
respectively. Our average fee for the three-month periods ended March 31, 2012 and 2011 was $54 and $55, respectively.
The following table summarizes our revenues
for the three months ended March 31, 2012 and 2011, respectively:
Three Months Ended
March 31,
Three Months Ended
March 31,
2012
2011
2012
2011
(percentage of revenues)
Payday loan fees
$
2,307,901
$
2,325,747
30.7
%
46.2
%
Phones and accessories
2,741,696
1,586,915
36.5
%
31.5
%
Cricket service fees
1,995,025
554,696
26.5
%
11.0
%
Installment interest income
196,509
-
2.6
%
-
%
Check cashing fees
195,812
232,542
2.6
%
4.6
%
Other income and fees
79,827
338,731
1.1
%
6.7
%
Total
$
7,516,770
$
5,038,631
100.0
%
100.0
%
Store Expenses
Total expenses associated with store operations
for the three months ended March 31, 2012 were $5.31 million, compared to $3.54 million for the three months ended March 31, 2011,
or a 50% increase 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 relating to our store leaseholds, advertising
expenses, depreciation of store equipment and leasehold improvements, amortization of intangible assets and other expenses associated
with store operations.
Overall, our most significant store expenses
for the three months ended March 31, 2012 and 2011 related to phone and accessory costs, salaries and benefits for our store employees,
occupancy costs and provision for loan losses. A discussion and analysis of the various components of our store expenses appears
below.
Phone and Accessories Cost of Sales
.
For the three months ended March 31, 2012, our costs of sales were $1.84 million compared to $.96 million for the same period in
2011. The increase in our Cricket Wireless segment phone and accessory costs resulted from operating additional storefronts in
2012 and from a change in the structure of dealer compensation from Cricket, which change decreased our margins while increasing
fees to dealers.
Salaries and Benefits
. Payroll and
related costs at the store level were $1.69 million compared to $1.11 million for the three-month periods ended March 31, 2012
and 2011, respectively. Year over year, we operated one additional payday store and 17 additional Cricket storefronts.
Provisions for Loan Losses
. For the
three months ended March 31, 2012, our provisions for loan losses were $.28 million compared to $.18 million for the three months
ended March 31, 2011. Our provisions for loan losses represented approximately 12.0% and 7.7% of our loan fee revenue for the three
months ended March 31, 2012 and 2011, respectively. The increase can be attributed to our introduction of an installment loan product
in Wisconsin, which has higher default rates than payday loans. Due to our inability to foretell the scope and duration of the
current economic recovery, we believe there are currently uncertainties in how significant our total 2012 loan losses may be and
how they may differ from 2011.
27
Occupancy Costs
. Occupancy expenses,
consisting mainly of store leases, were $.55 million for the three months ended March 31, 2012 versus $.42 million for the three
months ended March 31, 2011.
Advertising
. Advertising and marketing
expenses remained consistent at $.08 million for the three months ended March 31, 2012 and 2011. In general, we expect that our
marketing and advertising expenses for 2012 will increase due to our acquisition of additional Cricket storefronts.
Depreciation
. Depreciation, relating
to store equipment and leasehold improvements, increased to $.07 million for the three months ended March 31, 2012 compared to
$.06 million for the three months ended March 31, 2011.
Amortization of Intangible Assets
.
Amortization of intangible assets decreased from $.12 million for the three months ended March 31, 2011 to $.06 million.
Other Store Expenses
. Other expenses
increased to $.75 million for the three months ended March 31, 2012 from $.61 million for the three months ended March 31, 2011.
General and Administrative Expenses
Total general and administrative costs for
the three months ended March 31, 2012 were $.92 million compared to $.83 million for the period ended March 31, 2011. For the three
months ended March 31, 2012, 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 and analysis of the various
components of our general and administrative costs appears below:
Salaries and Benefits
. Salaries and
benefits expenses for the three months ended March 31, 2012 were $.53 million, a $.08 million increase from the $.45 million in
such expenses during period ended March 31, 2011.
Interest
. Interest expense for the
three months ended March 31, 2012 was $.08 million compared to $.09 million for the three months ended March 31, 2011.
Other General and Administrative Expenses
.
Other general and administrative expenses, such as professional fees, management and consulting fees, utilities, office supplies,
and other minor costs associated with corporate headquarters activities, increased $.01 million to $.30 million for the three months
ended March 31, 2012 compared to $.29 million from the three months ended March 31, 2011.
Income Tax Expense
Income tax expense for the three months
ended March 31, 2012 was $.50 million compared to income tax expense of $.26 million for the three months ended March 31, 2011,
an effective rate of 39% and 38%, respectively.
RESULTS OF OPERATIONS:
YEAR ENDED DECEMBER 31, 2011 COMPARED TO YEAR ENDED DECEMBER
31, 2010
For the year ended December 31, 2011, net
income was $1.44 million compared to a net income of $1.35 million in 2010. Income from continuing operations before income taxes
was $2.32 million in 2011 compared to $2.10 million in 2010. The major components of each of revenues, store expenses, general
and administrative expenses, total operating expenses and income tax expense are discussed below.
Revenues
Revenues totaled $19.49 million in 2011
compared to $17.98 million in 2010, an increase of $1.51 million or 8.40%. The increase in total revenues resulted primarily from
the following factors impacting the Cricket Wireless division: an increase in the number of Cricket storefronts in the last four
months of 2011 compared to 2010 and a higher per unit selling price of phones. We originated approximately $67.5 million in payday
loans during 2011 compared to $71.88 million in payday loans during the prior year. The average loan (including fee) totaled $382
in 2011 versus $367 in the prior year. Our average fee for 2011 was $55 compared to $54 for 2010. We closed four payday storefronts
in Montana late in the fourth quarter of 2010 because of recent state legislation. Revenues from Cricket phone sales totaled $4.59
million in 2011 compared to $4.09 million in 2010. Cricket service fee revenue totaled $3.74 million in 2011 compared to $1.42
million in 2010, an increase related primarily to a change in dealer compensation arrangement in 2011. We had 49 Cricket retail
storefronts open and operating during at least some part of fiscal 2011 compared to 37 storefronts during fiscal 2010. During 2011,
we added 18 Cricket storefronts and closed four. In comparison, during 2010, we added four Cricket storefronts and closed six.
Other revenues, including installment interest income, check cashing, title loans, service change fees and other sources, totaled
$1.50 million and $1.86 million for 2011 and 2010, respectively.
28
The following table summarizes our revenues:
Year Ended December 31,
Year Ended December 31,
2011
2010
2011
2010
(percentage of revenues)
Payday loan fees
$
9,663,130
$
10,607,136
49.6
%
59.0
%
Phones and accessories
4,585,584
4,094,049
23.5
%
22.8
%
Cricket service fees
3,741,495
1,419,446
19.2
%
7.9
%
Installment interest income
538,273
-
2.8
%
-
Check cashing fees
682,094
739,733
3.5
%
4.1
%
Other income and fees
277,344
1,118,083
1.4
%
6.2
%
Total
$
19,487,920
$
17,978,447
100
%
100
%
We expect that our sources of revenue for
2012 may continue to diversify as we continue to improve and increase sales in our Cricket retail operations and look to open new
Cricket retail and pawn storefronts.
Store Expenses
Total expenses associated with store operations
for 2011 were $14.10 million compared to $12.90 million for 2010, an increase of $1.20 million or 9.30%. 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 from 2011 to 2010 related to salaries and benefits for our store employees, the provision for loan losses, and
phones and accessories. Our most significant decrease in store expenses over that same period relates to our costs of occupancy.
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 $4.70 million in 2011 compared to $4.58 million in 2010, an increase of $.13 million. This
increase is a result of an increase in the number of storefronts operating throughout 2011. As a result of additional Cricket retail
storefronts in 2011, we expect that salaries and benefits for 2012 will increase because the additional storefronts will be operating
the entire year. Our salaries and benefits expenses will further increase if we add additional storefronts in 2012.
Provisions for Loan Losses
. Our provision
for losses for 2011 totaled $1.40 million and $1.28 million for 2010. Our provision for loan losses as a percentage of loan fee
revenue was 14.5% during 2011 versus 12.1% during 2010. The less favorable loss ratio is due primarily to higher loss percentages
with installment lending. Due to our inability to foretell the speed and scope of the current economic recovery or the economy
in general, we believe there are currently uncertainties in what loan losses for 2012 may be.
Phone and Accessories Cost of Sales.
The
increase in our Cricket Wireless phone and accessory revenues resulted in corresponding increase in costs of sales.  For
the year ended December 31, 2011, our costs of sales were $2.86 million compared to $1.71 million in 2010.  Also contributing
to the increase was a 2011 change in the dealer compensation arrangement with Cricket that resulted in lower margins, partially
offset by increased fees income.
Occupancy Costs
. Occupancy expenses,
consisting primarily of store leases were $1.69 million during 2011 compared to $1.85 million in 2010, a decrease of $.16 million
primarily resulting from a higher number of storefront days (number of storefronts times days leased for year) in 2010 compared
to 2011. Occupancy expenses as a percentage of revenues decreased from 10.3% in 2010 to 8.65% in 2010.
29
Advertising
.  Advertising
and marketing related expense was $.33 million in 2011 compared to $.36 million in 2010. We believe that our advertising expenses
in 2012 may increase slightly over those in 2011, mainly as a result of the need to increase advertisement of our Cricket wireless
cellular segment and for pawn stores we open in 2012.
Depreciation
. Depreciation decreased
by $.01 million in 2011. Depreciation was $.27 million for 2011 and $.28 million for 2010.
Amortization of Intangible Assets
.
Amortization of the customer relationship and other intangible assets was $.44 million for 2011 and $.52 million for
2010. This has been decreasing as intangibles become fully amortized.
Other Store Expenses
. Other store
expenses increased from $2.33 million in 2010 to $2.42 million in 2011. Other store expenses include bank fees, collection costs,
repair and maintenance, supplies, telephone, utilities and network lines, and others. The increase in these expenses during 2011
was primarily due to increased supplies related to our Cricket store acquisitions.
General and Administrative Expenses
Total general and administrative costs for
2011 were $3.07 million compared to $2.98 million for 2010. The major components of these costs for 2011 are salaries and benefits
for our corporate headquarters operations and executive management, interest expense, and other general and administrative expenses.
Salaries and Benefits
. Salaries and
benefits expenses for 2011 were $1.74 million compared to $1.53 million for 2010, with the increase being mainly attributable to
an increase in the management bonus pool established pursuant to the employment agreement with the Company's CEO. The Company
expects that during 2012 salaries and benefits expenses associated with executive management and corporate headquarters will remain
consistent with their 2011 levels.
Interest Expense
. The Company had
$.29 million of interest expense in 2011 compared to $.41 million in 2010, a 29.3% decrease due to a reduction in notes payable
balances.
Other General and Administrative Expenses
.
Other general and administrative expenses, such as professional fees, management / consulting fees, utilities, office supplies,
and other minor costs associated with corporate headquarters activities were $1.01 million in 2011 compared to $1.03 million during
2010. The decrease in these expenses is mainly attributable to a decrease in nonrecurring professional fees, partially offset by
management / consulting fees.
Total Operating Expenses
Total operating expenses for 2011 and 2010
were $17.17 million and $15.88 million, respectively. We anticipate our total operating expenses in 2012 to increase compared to
2011 due to the increase in number of storefronts during 2011 and 2012.
Income Tax Expense
Income tax expense on continuing operations
increased to $.88 million in 2011 compared to $.75 million in 2010 for an effective rate of 38% and 36%, respectively.
30
LIQUIDITY AND CAPITAL RESOURCES
Summary cash flow data is as follows:
Three Months Ended March 31,
2012
2011
Cash flows provided (used) by:
Operating activities
$
2,240,883
$
1,065,420
Investing activities
(377,257
)
(13,574
)
Financing activities
(1,286,234
)
(1,172,162
)
Net increase (decrease) in cash
577,392
(120,316
)
Cash, beginning of period
1,909,442
2,092,386
Cash, end of period
$
2,486,834
$
1,972,070
At March 31, 2012, we had cash of $2.49
million compared to cash of $1.91 million on December 31, 2011. 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 March 31, 2013. Our
expected short-term uses of available cash include the funding of operating activities (including anticipated increases in payday
loans), the financing of expansion activities, including new store openings or store acquisitions and the repayment of long-term
debt.
Because of the constant threat of regulatory
changes to the payday lending industry, we believe it will be difficult for us to obtain debt financing from traditional financial
institutions. Financing we may obtain from alternate sources is likely to involve higher interest rates.
On October 18, 2011, we entered into a borrowing
arrangement with River City Equity, Inc. and delivered a related long-term promissory note in favor of River City Equity. The borrowing
arrangement allows us to borrow up to $2,000,000 at an interest rate of 12% per annum, with interest payable on a monthly basis.
The note matures on September 30, 2013, on which date all unpaid principal and accrued but unpaid interest thereon is due and payable.
The note includes a prepayment penalty and, under certain circumstances, permits River City Equity to obtain a security interest
in all of the Company's assets. As of March 31, 2011, $1,200,000 had been advanced under this arrangement.
Our overall cash and liquidity position
has been significantly enhanced by the past and current willingness of the holders of our Series A Convertible Preferred Stock
to not insist that the Company pay dividends to those shareholders to the greatest extent permitted by Minnesota state law. Minnesota
state law indicates that a corporation can only pay a dividend in circumstances where the corporation will be able to pay its debts
in the ordinary course of business after making the dividend. If our preferred shareholders were to insist that the Company pay
dividends to the greatest extent permitted by state law (as required by the terms of the preferred stock), our liquidity position
would likely be negatively affected, perhaps materially, such that we would be required to arrange for or engage in additional
borrowing to ensure that we would have capital available to fund cash advance loans and otherwise.
CRITICAL ACCOUNTING POLICIES
Our 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 consolidated
financial statements included in this prospectus. We believe that the following critical accounting policies affect the more significant
estimates and assumptions used in the preparation of our consolidated financial statements:
31
Loans Receivable Allowance
We maintain a loan loss allowance for anticipated
losses for our payday, installment 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. We also periodically perform
a look-back analysis on our loan loss allowance to verify the historical allowance established tracks with the actual subsequent
loan write-offs and recoveries. We are aware that as conditions change, we may also need to make additional allowances in future
periods.
Included in loans receivable are payday
loans that are currently due or past due and payday 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. Also included in loans receivable are current and delinquent installment and title loans. Loans
are carried at cost less the loans receivable allowance. We do not specifically reserve for any individual loan. We aggregate loan
types for purposes of estimating the loss allowance using a methodology that analyzes historical portfolio statistics and management's
judgment regarding recent trends noted in the portfolio. This methodology takes into account several factors, including the maturity
of the store location and charge-off and recovery rates. We utilize 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 42%
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 – 42%; 31 to 60 days – 66%; 61 to 90 days –
82%; 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 loans receivable
allowance as a result of historical loan performance, current and expected collection patterns and current economic trends is recorded.
At December 31, 2011 and 2010 our outstanding
loans receivable aging was as follows:
December 31,
2011
2010
Current
$
4,626,000
$
4,542,000
1-30
297,000
276,000
31 – 60
220,000
234,000
61 – 90
223,000
209,000
91 - 120
171,000
220,000
121 – 150
189,000
227,000
151 – 180
163,000
201,000
5,889,000
5,909,000
Allowance for losses
(1,001,000
)
(1,165,000
)
$
4,888,000
$
4,744,000
A rollforward of our loans receivable allowance
for the years ended December 31, 2011 and 2010 is as follows:
Year Ended December 31,
2011
2010
Loans receivable allowance, beginning of year
$
1,165,000
$
1,237,000
Provision for loan losses charged to expense:
1,397,000
1,280,000
Charge-offs, net
(1,561,000
)
(1,352,000
)
Loans receivable allowance, end of year
$
1,001,000
$
1,165,000
32
Valuation of Long-lived and Intangible
Assets
The Company assesses the possibility of
impairment of long-lived and intangible assets whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. Factors that could trigger an impairment review include significant underperformance relative to expected historical
or projected future cash flows, significant changes in the manner of use of acquired assets or the strategy for the overall business,
and significant negative industry events or trends. In addition, we conduct an
annual goodwill impairment
test as of October 1 each year
. W
e assess our goodwill for impairment at the reporting unit level
by applying a fair value test. This fair value test involves a two-step process. The first step is to compare the carrying value
of our net assets to our fair value. If the fair value is determined to be less than the carrying value, a second step is performed
to measure the amount of the impairment, if any.
A reporting unit is an operating segment,
or under certain circumstances, a component of an operating segment that constitutes a business. Our reporting units consist of
multiple state and multi-state based operations and therefore the cessation of operations in any particular state does not imply
that goodwill for the relevant reporting unit will be impaired.
Due to the effect of our capital structure
involving preferred stock and related cumulative preferred dividends, the market capitalization approach of valuing the reporting
unit as a whole is not practical. The discounted future cash flows method is utilized in estimating value. When estimated future
cash flows are less than the carrying value of the net assets and related goodwill, an impairment test is performed to measure
and recognize the amount of the impairment loss, if any. Impairment losses, which are limited to the carrying value of goodwill,
represent the excess of the carrying amount of a reporting unit's goodwill over the implied fair value of that goodwill.
In determining the estimated future discounted
cash flows, we consider current and projected future levels of income, as well as strategic plans, business trends, prospects,
and market and economic conditions. Impairment tests involve the use of judgments and estimates related to the fair market value
of the business operations with which goodwill is associated, taking into consideration both historical operating performance and
anticipated financial position and future earnings. We believe that the estimates of future cash flows and fair value determined
as of October 1, 2011 are reasonable. Changes in estimates of those cash flows and fair value, however, could affect the evaluation.
Based upon this evaluation, we concluded that the fair value exceeded the carrying value of net assets
and there was no impairment.
As of December 31, 2011, we evaluated
whether any triggering events or changes in circumstances had occurred subsequent to our annual impairment test. As part of this
evaluation, we considered additional qualitative factors, including whether there had been any significant adverse changes in legal
factors or in our business climate, adverse action or assessment by a regulator, unanticipated competition, loss of key personnel
or likely sale or disposal of all or a significant portion of our reporting unit. This analysis resulted in a determination that
no triggering events or changes in circumstances had occurred.
OFF BALANCE SHEET ARRANGEMENTS
We have no off balance
sheet arrangements.
33
BUSINESS
OVERVIEW
Western Capital Resources, Inc. is a Minnesota
corporation that maintains two operating segments: one provides short-term consumer loans, commonly referred to as cash advance
or "payday" loans, and the other operates Cricket retail cellular wireless stores.
Payday operations are conducted under our
wholly owned subsidiary Wyoming Financial Lenders, Inc. The Federal Trade Commission describes these loans as "small, short-term
high-rate loans." Our payday loans generally are offered and made in exchange for fees that, if treated as interest, are
at a rate extraordinarily higher than prime and are made to individuals who do not typically qualify for prime rate loans. As a
consequence, our loans may be considered a type of subprime loan. In Wisconsin and Colorado, the Payday division provides short-term
installment loans. The installment loan product has a rate of interest significantly higher than traditional financial institutions.
At March 31, 2012, we operated 52 payday lending stores in nine states, including Colorado, Iowa, Kansas, Nebraska, North Dakota,
South Dakota, Utah, Wisconsin and Wyoming. Our provision of payday and installment loans is typically heavily regulated by the
various states in which we operate, and our payday lending and installment loan business is extremely susceptible to the adverse
effects of any changes in federal or state laws and regulations that may further restrict or flatly prohibit payday lending.
Through our payday segment, we also provide
title and ancillary consumer financial products and services that are complementary to our payday and installment lending business,
such as check-cashing services, money transfers and money orders. Our check-cashing services involve the cashing of checks for
a fee; money-transfer services involve the transfer of money by wire for a fee; and our money-orders services involve the issuing
of money orders for a fee. We believe these services are complementary since customers typically come to our stores for financial
reasons and to procure financial services (i.e., obtain a loan). Once the loan has been obtained, a customer may, for instance,
decide to wire a payment of money or obtain a money order to satisfy a debt or other obligation. Our loans and other services are
subject to state regulations (which vary from state to state), and federal and local regulations, where applicable.
Our second segment operates retail stores
selling Cricket cellular phones and accessories. We are a premier Cricket dealer. Cricket phones are prepaid cellular phones that
function for a period of time for a flat fee, without usage limitations and without any long-term contract or commitment required
from the consumer. At March 31, 2012, we owned and operated 48 Cricket wireless retail stores in 13 states, including Arizona,
Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon and Texas. While there are state regulations
that affect our provision of Cricket phone products and services, our Cricket phone business is not highly susceptible to the adverse
effects of changes in federal or state laws and regulations.
For the fiscal year ended December 31, 2011,
each of our major lines of business (i.e., payday and installment lending, and our Cricket wireless business) generated associated
revenues. In 2011, we generated approximately:
·
$10.20 million in payday lending revenues representing approximately
52.3% of our total revenues,
·
$4.59 million in phone and accessory sales representing approximately
23.6% of our total revenues, and
·
$3.74 million in Cricket related sales and service fees representing
approximately 19.2% of our total revenues.
The tables below summarize our financial
results and condition as of March 31, 2012 and 2011 (unaudited) and as of December 31, 2011 and 2010 (audited).
March 31, 2012
March 31, 2011
Revenues
$
7,516,770
$
5,083,631
Net income (loss) to common shareholders
$
264,042
$
(112,631
)
Current assets
$
7,851,373
$
8,418,534
Current liabilities
$
7,497,621
$
7,883,414
Total assets
$
21,662,004
$
22,021,776
Total liabilities
$
9,306,899
$
9,623,479
Shareholder equity
$
12,355,105
$
12,398,297
34
December 31, 2011
December 31, 2010
Revenues
$
19,487,920
$
17,978,447
Net loss to common shareholders
$
664,769
$
751,059
Current assets
$
8,418,534
$
7,958,443
Current liabilities
$
7,883,414
$
6,452,628
Total assets
$
22,021,776
$
20,770,882
Total liabilities
$
9,623,479
$
7,707,816
Shareholder equity
$
12,398,297
$
13,063,066
The above figures include an assumed preferred
stock dividend relating to our Series A Convertible Preferred Stock in the amount of $2.1 million in 2011 and 2010.
PAYDAY LENDING BUSINESS
General Description
The short-term consumer loans we provide
are commonly referred to as "payday loans" or "cash advance" loans. Such loans are referred to as "payday
loans" because they are typically made to borrowers who have no available cash and promise to repay the loan out of their
next paycheck. In some cases, these same types of loans are referred to as "deferred deposit advances" because the
borrowers, instead of funding repayment of the loan out of a paycheck, promise to repay the loan with their next regular fixed-income
payment, such as a social security check.
When we make cash advance or "payday"
loans, we provide our customers with cash in exchange for a promissory note with a maturity of generally up to four weeks that
is supported by that customer's post-dated personal check for the aggregate amount of the loan, plus a fee. During 2011,
we offered payday loans typically ranging from $10 to $500, with the average loan amount being approximately $327. Approximately
75.0% of our loan transactions are made for a period of up to four weeks and approximately 25.0% of our loan transactions involve
loans whose initial maturity extends beyond four weeks. To repay the payday loans, customers may pay with cash, in which case their
personal check is returned to them, or allow their personal check to be presented to their bank for collection.
As part of our payday lending business,
we offer short-term installment loans in Colorado and Wisconsin. In 2011 approximately 5.3% of loan revenue was derived from installment
lending.
The Payday Loan Process
Customers seeking to obtain a payday loan
must:
·
complete a loan application
·
maintain a personal checking account
·
have a suitable source of income
·
have a valid driver's license or other form of picture ID
·
not otherwise be in default on a loan from us where available
·
enter into a standard loan agreement and promissory note with us,
and
·
deliver their personal post-dated check.
Our standard payday loan application with
customers provides that we will not cash their check until the due date of the associated loan. 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 loans are subject to state, federal, and where applicable, local regulations. State and local regulations are not uniform.
Where permitted by state regulation, a customer may renew a loan after full payment in cash of the fee associated with the original
loan. When applicable, a customer renewing a loan signs a new promissory note and provides us with a new check.
We require that a payday loan customer have
and maintain a personal checking account for a number of reasons. First, we need to ascertain that the personal post-dated check
we receive from that customer is written against a valid and existing checking account. Second, we review recent bank statements
from the checking account for proof that the customer's statements to us, and the representations made to us in the related
loan agreement, relating to their employment and level of income are accurate. Third, we also review the recent bank statements
for evidence of any returned checks. If an applicant had multiple returned checks on their recent bank statements, we are unlikely
to extend a loan to that person.
35
Ordinarily, we deem items such as a recent
pay stub, or a bank statement evidencing periodic deposits, as sufficient proof of current employment. We do not, however, independently
verify that a borrowing customer is employed at the time of a loan. Furthermore, we do not require or request any information relating
to whether a borrowing customer's employment is on a full-time or part-time, or hourly or salaried, basis; nor do we otherwise
make any independent verification regarding these kinds of employment-related facts. We make loans without proof of employment
and without a recent bank statement only to repeat customers, who have not previously defaulted on loans we have made to them,
in states that do not require those items as prerequisites for a loan. An employment income source is determined to be "suitable"
if it appears to be valid from our review of the bank statements a borrower provides us, and any pay stubs they may also offer
as evidentiary support for their employment. Generally, we do not advance a payday customer more than 25% of the monthly income
that they appear to earn, based on our review of applicable documentation the customer provides to us. We apply this limitation
to all of our customers and in all circumstances, including attempts to roll over loans, except for repeat customers who have had
repaid all of their prior loans on time. For installment customers, we will loan up to 35% of their monthly income.
We do not undertake any formal or informal
credit check of borrowers, or any review of their credit history in connection with a proposed loan transaction. When making a
loan to a first-time customer, we obtain reports from a third-party vendor that summarizes recent credit requests, existing bad
debt, and existing delinquencies. These reports are provided by Teletrack. If an applicant has a poor Teletrack report showing
multiple recent credit requests or existing delinquencies, or more than one returned check on their recent bank statements, we
are unlikely to extend a loan to that person. We do not order Teletrack reports for repeat customers.
As part of each payday loan transaction,
we enter into a standardized written contract with the borrowing customer. The standardized contracts vary slightly based on differing
state laws, but all of our standard contracts plainly state in simple terms the annual percentage rate (assuming the fees we charge
are computed as interest) in compliance with Regulation Z, and the consequences of defaulting on the loan. We retain copies of
our written contracts at the stores where the transactions are processed and also provide copies to our customers. Our standard
documentation includes:
·
a promise to repay the loan and associated loan fee
·
an express right to prepay without penalty (but without return of
any portion of the associated loan fee unless required by state law)
·
a statement that the borrower will pay an additional fee in the event
that the post-dated check is returned for insufficient funds
·
the borrower's right to rescind the transaction, without cost,
at any time prior to the close of business on the business day immediately following the date of the loan, by returning the borrowed
amount and acknowledgment that the loan was rescinded
·
customary representations and warranties
·
a dispute-resolution clause under which the parties agree to submit
any claims or controversies to binding arbitration
·
a notice of financial privacy rights
·
an affirmative check-the-box representation about whether the borrower
is a member of the U.S. military, and
·
an acknowledgment that the borrower has read and understands the borrowing
agreement.
Upon completion of a loan application, the
provision of proof of an existing bank account, current income, a valid driver's license or other acceptable photo identification,
and signed loan agreement and our acceptance of such agreement, the loan approval process is complete. At that point, the customer
signs a promissory note and provides us with a personal post-dated check for the principal loan amount plus a specified fee. All
documentation is reviewed and payday loans are approved at the store level only, barring extraordinary circumstances. Nearly all
of the loans we make are "payday loans" where the borrower provides us with a personal post-dated check. All checks
are drawn upon the borrower's bank. We do not accept third-party checks in connection with a payday lending transaction.
We make very few "deferred deposit advance" loans, and we estimate that fewer than one percent of our total loans during
2011 were loans of this type. In part, this is because we require reasonable proof of current employment as a condition to obtaining
a loan from us.
36
Beyond the steps described above, we do
not make any independent determination of the ability of a potential borrower to repay the loans we make to them. Instead, we rely
on a borrower's representations to us and proof regarding their employment and ownership of an active bank account, our review
of their recent bank statement, and our general policy that limits payday loans to no more than 25% of a borrower's monthly
income, and 35% of an installment loan customer's monthly income.
In general, our lending process and standards
are extraordinarily different from those used by banks. To our knowledge, banks typically order and carefully review credit reports,
engage in some level of analysis relating to the ability of a potential borrower to repay the loan, and will typically make independent
verification of employment and earnings history through payroll deposits, phone calls, reviews of tax returns and other processes—all
in an effort to minimize the risk of a loan default. As a result, we generally experience a higher default rate on our personal
loans than banks do on their personal loans. At March 31, 2012, we had an aggregate of all loan types of approximately:
·
$3.6 million in current outstanding loan principal, fees and interest
due to us
·
$1.1 million of late loans (customers' repayment checks presented
as NSF within the last 180 days or installment loan balances not past the final installment due date with 1 or more payments delinquent)
The Fees We Charge
The fee we charge for a payday loan 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. We do not charge interest in connection with our payday loans but do charge interest on our short-term installment
loans made in Colorado and Wisconsin. If, however, we calculate the loan fees we charge as an annual percentage rate of interest,
such rate would range from 177% for a 31-day loan transacted in Kansas (on the low end) to approximately 574% for a 14-day loan
in Wisconsin (on the high end), with the actual average loan amount and average actual loan fees we charge involving an imputed
annual percentage rate of approximately 450% and 203% for a 14-day and 31-day loan, respectively. The term of a loan significantly
affects the imputed APR of the fees we charge for our loans. For instance, when a $15 fee is charged for a two-week loan of $100,
the resulting APR is 391%. When the same fee on $100 is charged for a four-week loan, the resulting APR is 195%. When our general
range of payday loan fees is applied to our average 2011 loan amount of $327, the fee ranges from $46.99 to $68.92 and the APR
ranges from 391% to 574% for a two-week loan and from 195% to 287% for a four-week loan. Currently, we do not charge the maximum
fee permitted in all of the states where we operate. We do, however, charge a uniform fee for all transactions processed in any
particular state that involve the same range of payday loan amounts and the same term.
The table below sets forth the uniform fees
we charge and imputed APRs on non-interest payday loans in the states where we operated during 2011.
State
Fees
APR (%)
on a 14-
day $100
Loan
APR (%)
on a 28-
day $100
Loan
APR (%)
on a 14-
day $300
Loan
APR (%)
on a 28-
day $300
Loan
Iowa
$15 on first $85 advanced; 11.1% on additional amounts (up to $445)
435%
217
%
338
%
169
%
Kansas
$15 per $100 advanced
391%
196
%
391
%
196
%
Nebraska
$17.50 per $100 advanced
456%
228
%
456
%
228
%
North Dakota
$20 per $100 advanced
521%
261
%
521
%
261
%
South Dakota
$20 per $100 advanced
521%
261
%
521
%
261
%
Utah
$20 per $100 advanced
521%
261
%
521
%
261
%
Wisconsin
$22 per $100 advanced
574%
287
%
574
%
287
%
Wyoming
30% per $100 advanced if loan is less than $150 or 20% per $100 advanced if loan is equal to or greater than $150 (subject to numerous maximums)
782%
391
%
521
%
261
%
37
Of the nine states in which we presently
operate, three states (South Dakota, Utah and Wisconsin) do not limit the payday loan fees we may charge or the term (i.e., the
length) of the loans we may offer our customers. In addition, Utah does not limit the amount we may loan to customers in a payday
lending transaction.
In Colorado, we offer short-term installment
loans from $100 to $500 payable in six equal monthly payments. Loan terms include a 45% annual interest rate, an origination fee
of 20% on loan amounts up to $300 and 7.5% on loan amounts thereafter and a monthly maintenance fee. In 2011, we introduced a short-term
installment product in Wisconsin. Wisconsin installment loans are payable over four to six months at an annual percentage rate
of approximately 390%.
Many states have laws limiting the amount
of fees that may be charged in connection with any lending transaction (including payday lending transactions) when calculated
as an annual percentage rate or the payday lending is expressly prohibited. These limitations, combined with other limitations
and restrictions, effectively prohibit us from utilizing our present business model for cash advance or "payday" lending
in those jurisdictions. In addition, the federal government passed the "2007 Military Authorization Act" which prohibits
lenders from offering or making payday loans (or similar lending transactions) to members of the U.S. military when the interest
or fees calculated as an annual percentage rate, exceed 36%. Like the state limitations discussed above, 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. As a result of these restrictions, we do not conduct business with U.S. military personnel.
The above-described payday fees are the
only fees we assess and collect from our customers for payday loans. Nevertheless, we also charge a flat fee that ranges from $15
to $30 (depending on the state) for returned checks in the event that a post-dated check we attempt to cash as repayment for our
loan is returned. In 2011, we had approximately 7,200 checks returned that were assessed a fee, compared to approximately 8,300
such checks during 2010. In 2011, we collected fees on returned checks on approximately 26% of the returned checks, for a total
of approximately $46,000. In 2010, we collected on approximately 34% of these returned checks, for a total of approximately $55,000.
Extensions or "Rollovers"
of Payday Loans
When a customer "rolls over"
or extends the term of an outstanding loan, we treat that rollover or extension as a brand new loan and we again charge the above-described
loan fee for that transaction. This rollover has no effect on the imputed annual percentage rate of the loan in those cases where
the extended term is equal to the initial term of the loan. For example, a $100 four-week loan that costs $20 to obtain is the
APR equivalent of 261%. If a customer extends the term of that loan for an additional four-week period, the customer will have
paid $40 total in fees to obtain the $100 eight-week loan—which is again the APR equivalent of 261%. In cases where a customer
(1) extends or rolls over a loan for a length of time that is less than the original loan or (2) repays the extended loan prior
to the expiration of the fully extended term, the imputed APR will increase. For example, if a customer who obtained an initial
$100 four-week loan for $20 in loan fees (the APR equivalent of 261%) later extends the term of that loan for only two additional
weeks and pays the additional $20 loan fee, that customer will have borrowed $100 for a six-week period at a total cost of $40—which
is the APR equivalent of 347%. We do not charge any interest on the unpaid fee from the initial term of the loan because, as a
condition to agreeing to a loan extension, we will only accept cash payment of the fee for extending the loan. In 2011, 10.2% of
our total loan fee revenues were derived from loan fees charged and collected upon the extension or rollover of payday loans. Approximately
10% of payday loans are rolled over or renewed.
Most states prohibit payday lenders from
extending or refinancing a payday loan. Nevertheless, four states in which we presently operate—South Dakota, North Dakota,
Utah and Wisconsin—do permit a loan to be extended or "rolled over" for a specified period. Specifically, Wisconsin
and North Dakota permit only one loan extension; South Dakota permits up to four loan extensions; and Utah has no limit on the
number of loan extensions but does limit the time period of extensions to 10 weeks from the origination date of the original loan.
38
Summary of Loan Terms
The table below sets forth the minimum and
maximum loans we approve, the maximum fee we charge, the maximum term of the loan and whether an extension/rollover is permitted
in the state were we operate.
State
Minimum Loan
Maximum Loan
Maximum Fee
Maximum Term
Extension/  Rollover Permitted
Colorado - Installment
No minimum
$500
20% origination on first $300; 7.5% thereafter; 45% interest and a monthly maintenance fee
Minimum
6 months
Yes
Iowa
No minimum
$500
$5+10% of first $100
10% thereafter (1)
31 days
No
Kansas
No minimum
$500
$15 per $100
30 days
No
Nebraska
No minimum
$500
15%
1
per $100
31 days
No
North Dakota
No minimum
$600
20%
60 days
Yes (one)
South Dakota
No minimum
$500
No limit
No limit
Yes (four)
Utah
No minimum
No limit
No limit
84 days
Yes
Wisconsin - Installment
No minimum
$750
390%
7 months
Yes
Wisconsin - Payday
No minimum
$1,500
No limit
No limit
Yes (one)
Wyoming
No minimum
No limit
20%
30 days
No
______________
(1)
Denotes that the applicable percentage is calculated on the loan amount plus any finance charges.
Multiple Loans to Single Customers
We occasionally make multiple loans to a
single customer if permitted by applicable law and regulations. Based on our outstanding payday loans as of March 31, 2012, approximately
7.1% of our customers had more than one loan outstanding. In these cases, the average number of separate loans outstanding was
two and the average aggregate principal amount loaned was approximately $420.
Risks Associated With Our Loans—Default
and Collection
Ordinarily, our customers approach us for
a loan because they currently have insufficient funds to meet their present obligations, and so rarely if ever do our customers
have sufficient funds in their checking accounts to cover the personal post-dated checks they provide us at the time of the loan
transaction. The nature of our payday loan transactions present a number of risks, including the ultimate risk that the loan will
not be paid back. In addition, we do not obtain security for our payday loans principally because, even assuming our customers
would have potential collateral to offer as security for a payday loan, the small size of each particular lending transaction does
not justify the time, effort and expense of identifying the collateral and properly obtaining a security interest in such collateral.
As a consequence, all of our payday loans are unsecured. This means that, absent court or other legal action compelling a customer
to repay our loans, we rely principally on the willingness and ability of our customers to repay amounts they owe us. In this regard,
in many cases the costs of merely attempting to collect the amounts owed to us exceed the amounts we would seek to collect—making
it impractical to take formal legal action against a defaulted borrower.
When a customer defaults on a loan, we engage
in store-level collection practices that include attempts to contact the customer and obtain payment, and attempts to contact the
customer's bank in order to determine whether funds are available to satisfy their personal post-dated check. If funds are
available, we present the check to the bank for repayment and an official check from the bank is obtained to pay off the item.
The costs involved in these initial collection efforts are minimal as they involve some employee time and possibly a flat $15-30
bank fee to cover the cost of the cashier's check. If funds are not available, we generally attempt to collect returned checks
for up to 90 days (or up to 180 days in cases where a bank account is still active and the customer has not initiated a stop payment
on the postdated check provided), principally through continued attempts to contact the customer. If our attempts remain unsuccessful
after 90 (or 180) days, we assign the item to a collection agency. Assignment to a collection agency may cost us 30-40% of the
amount eventually collected (if any) from the customer. Ordinarily, we do not recoup any costs of collection from our customers.
39
Historically, we collect approximately 58%
of the amount of all returned checks, which results in approximately 2.42% of our total payday loans being uncollectible. In 2011,
we made approximately 178,000 payday loan transactions, of which approximately:
·
83% were paid in full at or prior to the expiration of the original
loan term, accounting for approximately 84% of our loan fee revenues
·
11% were refinanced, extended, renewed or otherwise paid after the
expiration of their original loan term, accounting for approximately 11% of our payday loan fee revenues, and
·
6% involved a personal post-dated check that was returned for insufficient
funds.
Marketing Strategy
Our advertising and marketing efforts are
designed to introduce customers to our services, build customer loyalty and generate repeat visits and transactions. Our principal
means of advertising our payday lending services consists of Yellow Page directories used in our active markets as well as building
signage visible from local arterial roadways on which we are located. For our Cricket business, we rely primarily on Cricket advertising
and promotional items as well as building signage visible from local arterial roadways on which we are located. Our Cricket locations
are also listed on the Cricket Wireless website and are searchable by address, city or zip code.
Industry Information
There are an estimated 20,600 cash advance
loan stores in the United States, which in the aggregate provide approximately $38.5 billion in short-term credit to households
experiencing cash-flow shortfalls. Industry trends indicate that there is likely to be a net decrease in total payday lending stores
over the next few years due to store closings resulting from a combination of regulatory or legal changes, a slowdown in new store
growth and general economic conditions.
According to the Community Financial Services
Association of America (CFSA), payday loan customers typically are middle-income or lower-middle-income, middle-educated individuals
who are a part of a young family (See Community Financial Services Association of America, citing to The Credit Research Center,
McDonough School of Business, Georgetown University, Gregory Elliehausen and Edward C. Lawrence, "Payday Advance Credit in
America: An Analysis of Customer Demand"). The CFSA is a lobbying organization for the payday loan industry. The Credit Research
Center study cited by the CFSA was based upon telephone interviews of 427 borrowers of payday loans in 2000 and 2001, and the answers
provided in those interviews by the borrowers were not independently verified by the study's authors. Moreover, the authors
of that study note that, of the 5,364 payday loan consumers whom they attempted to contact and interview for the study, 1,113 were
not able to be reached because their phones had been disconnected and another 1,043 refused to be interviewed or else quit the
interview prior to completion. We do not possess independent information that corroborates the findings of The Credit Research
Center, and we do not collect demographic data about our customers.
The Consumer Federation of America (CFA),
a nonprofit consumer advocacy organization, has submitted written comments to the Federal Trade Commission that make assertions
very different from those proponed by the CFSA. For example, the CFA asserts that "payday loan borrowers are typically female,
make around $25,000 a year, are renters, and more likely to be minorities than the general population. Payday lenders have clustered
around military bases, in low to moderate income neighborhoods, and in predominantly minority areas." (See Comments To the
Federal Trade Commission Regarding the Fair Debt Collection Practices Act Collecting Consumer Debts: The Challenges of Change By
the Consumer Federation of America, June 20, 2007). The CFA presently does not make available to the public the research data to
support its claims, and as a consequence we are unable to evaluate their accuracy. However, other statistics concerning payday
lending (such as default rates) that are contained in CFA website material conflict with our statistics borne out by years of involvement
in the business.
40
Predatory Lending and Regulatory
Concerns
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 payday loans 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.
In general, the payday lending suffers from
the perception and widespread belief that payday lenders are in the nature of predatory lenders, offering loans to low income and
poorly educated consumers at costs that are too high to be good for consumers. This perception and belief results in frequent efforts
in the U.S. Congress and various state legislatures, often proponed by consumer advocacy groups and lobbyists for traditional financial
institutions such as banks, to further regulate and restrict or prohibit payday lending outright. For example, the federal government
passed the 2007 Military Authorization Act which prohibits any persons from offering or making loans to members of the military
when the interest and loan fees, calculated as an annual percentage rate, exceed 36%. This limitation effectively prohibits payday
lenders from making payday loans to members of the U.S. military.
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 and compliance with federal rules and regulations. Future restrictions on
the payday lending industry could have serious consequences for the Company.
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 became effective August 11, 2010 and modified 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 limited the amount and type of fees
that can be charged on these loans, effectively reducing by one-half the fees that can be charged and when the fees may be realized.
In 2010, we began offering an installment loan product at our store in Colorado and in 2011 at our four stores in Wisconsin.
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 were only allowed to renew a payday loan once, and then
lenders are required to offer a 60-day, interest free, payment plan to consumers.
In response to these changes, the Company
began offering unsecured installment loans in Wisconsin in lieu of payday loans beginning in May 2011. By the fourth fiscal quarter,
the Company had phased out payday loans in Wisconsin altogether. Any adverse change in present federal or state laws or regulations
that govern or otherwise affect payday lending could, at any point, 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.
We do not believe that payday lending is
predatory, nor do we believe that our loans are too costly for consumers if they are judiciously obtained. In fact, we believe
that bank overdraft fees by themselves are typically far more costly for consumers, and bouncing a check can often involve other
negative consequences such as independent fees levied by the parties to whom a bad check is written, negative publicity, etc. In
this regard, the FDIC released a November 2008 report called "Study of Bank Overdraft Programs." The report indicates
that the average amount obtained when bank customers overdraw their accounts is $60, and the average overdraft fee charged by the
bank is $27. This equates to an APR of 1,173% and 587% for a two-week and four-week $60 bank "loan," respectively.
In sum, we believe that many of the bad perceptions about our industry are fueled primarily by:
41
·
the effects of our loans on consumers who do not judiciously obtain
payday loans
·
a lack of genuine understanding about the choices faced by low and
middle-income people facing a critical cash shortage, and
·
anti-payday lending lobbying campaigns often funded by traditional
financial institutions, such as banks and credit unions, that would economically benefit from the elimination of payday lending.
Finally, we have become aware of continued
aggressive enforcement and prosecution by the Federal Trade Commission against payday lenders using unfair and abusive lending
practices in violation of the Truth in Lending Act and Regulation Z, including failures to properly disclose loan terms and imputed
APRs. In particular, we believe that FTC regulators are expanding theories relating to "fair and adequate" disclosure
loan terms. This focus includes marketing and advertising materials (specifically, the layout and presentation of such materials),
and specific practices, that may detract attention from or diminish the prominence of disclosures relating to loan terms, and the
costs and risks involved with payday loans. Moreover, it has come to our attention that FTC regulators are more keenly scrutinizing
whether payday lending business practices match advertised claims. While we do not presently anticipate any adverse regulatory
issues or outcomes relating to our business, it is possible that one or more of our store locations could come under FTC scrutiny
and that any such scrutiny could negatively affect store performance and consume considerable time and attention of our management.
Seasonality
We have experienced seasonality in our payday
lending 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.
Effect of General Economic Conditions
on our Payday Lending Business
We believe that consumer demand for our
payday lending services is increasing as a result of the recent economic recovery and slowly improving employment numbers; however,
we expect improving economic conditions to be partially negated by unemployment levels that remain high in the context of recent
history. High unemployment levels generally reduce the pool of payday loan consumers that can meet all of our loan qualifications,
particularly the employment requirement. In addition, it seems likely that the continued economic situation and higher unemployment
rates could result in greater loan losses than we experienced in 2011 with unemployment rates expected to remain high for the foreseeable
future. Our business experienced fluctuating changes in our provision for loan losses in recent years. For instance, our provision
for loan losses totaled $1.40 million for 2011, an increase of $.12 million from our provision of $1.28 million for 2010. Our provision
for loan losses as a percentage of loan fee revenue was 14.5% for 2011 and 12.1% during 2010. The less favorable loss ratio in
2011 reflected in part a more challenging collections environment as a result of an increase in bankruptcy filings, higher energy
prices and increased competition in the lending industry. We believe that our new installment loan offering has also contributed
to the increased loan loss percentage for 2011. We also believe that as the country moves out of recession and into recovery, our
consumer base will increase as individuals are denied credit by traditional lenders because of recent unemployment, foreclosure
or liquidity issues. Nevertheless, we are not certain how improving economic conditions or an increase in our consumer base will
affect our loan losses for 2012.
Credit and financing available to us and
our industry has been negatively impacted by the recent economic situation, recent federal and state legislation, and the overall
negative perception associated with payday lending.
Future growth in our payday lending business
beyond reinvestment of our current profits may be limited due to the tighter credit markets. Furthermore, we anticipate that the
present condition of the financial markets and increased regulation related to payday lending currently under consideration at
the federal level will make it more difficult for us to borrow money to fund the expansion of our operations through acquisitions.
42
CRICKET PHONE BUSINESS
General Description
We are an authorized dealer of Cricket Wireless
products and services and operate Cricket retail stores in Arizona, Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Missouri,
Nebraska, Ohio, Oklahoma, Oregon and Texas. Although Cricket Wireless owns a number of corporate stores, Cricket Wireless is partnering
with dealers in order to reach their market-penetration goals. 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. In addition,
each store we operate must resemble a Cricket corporate store. Once we identify an area to locate a new store, we contact Cricket
Wireless to obtain approval. Once Cricket Wireless approves our recommended location, we establish the storefront.
We profit in this business through retail
sales of cellular phones used with Cricket services, sales of phone accessories (e.g., face plates and phone chargers), fees charged
when a customer changes services (service reactivations, adding lines, plan changes, etc.), or whenever a customer pays his or
her Cricket invoice at one of our store locations.
We bear no risk of non-payment because of
the prepaid nature of the service and because Leap Wireless Communications provides the cell phone services. Service automatically
terminates upon nonpayment, which is midnight of the date on which the payment is due if the account remains unpaid. If a customer
pays their service charge within 60 days of termination, the service is reinitiated and the phone number remains unchanged. After
60 days, a customer is deemed to be a new customer and a new phone number is assigned.
Market Information and Marketing
At March 31, 2012, Cricket cellular phone
service was offered in 35 states and had approximately 6.2 million customers. Leap Wireless Communications, Inc. is a Delaware
public reporting corporation and the owner of Cricket Wireless. Cricket Wireless service offers customers unlimited wireless voice,
data, text, Muve Music TM and broadband data services for a flat monthly rate. In addition, our retail stores in select markets
offer Cricket PAYGo™ services, which is an unlimited prepaid wireless service. Cricket PAYGo is a daily pay-as-you-go wireless
and text messaging service designed for customers who prefer the flexibility and control offered by traditional prepaid services
but who are seeking greater value for their dollar.
Cricket products and services are primarily
targeted to market segments that are underserved by traditional communications companies. Based on disclosures made by Leap Wireless
Communications, Cricket customers tend to be younger, have lower incomes and include a greater percentage of ethnic minorities.
Cricket services are designed to appeal to customers who value unlimited wireless services with predictable billing and who use
the majority of those wireless services from within Cricket service areas. In contrast, the majority of wireless customers in the
U.S. subscribe to post-pay services that may require credit approval and a contractual commitment from the subscriber for a period
of at least one year and may include overage charges for call volumes in excess of a specified maximum. Like Leap Wireless Communications,
we believe that a significant portion of the remaining growth potential in the U.S. wireless market consists of customers who are
price-sensitive, who have lower credit scores or who prefer not to enter into fixed-term contracts. We believe that our authorized
Cricket store business directly caters and appeals strongly to these customer segments.
We expect that consumers may wish to prepay
their phone service or purchase prepaid cellular/Cricket phones:
·
to avoid costly phone purchase and long-term and expensive service
contracts with wireless carriers
·
because poor credit histories may prevent them from successfully obtaining
a service contract with a wireless carrier, or
·
due to a short-term need and circumstances in which they expect to
engage in heavy usage of phones, and so they wish to pay a flat fee for a period of time instead of risking additional per-minute
charges on their phone usage.
43
Nevertheless, we do not formally query our
customers who purchase our phone products or services as to their motivations in purchasing those products or services, and we
do not have customer data indicating the extent to which our phone customers cannot obtain a service contract from a long-term
contract carrier of phone service or some other phone service provider.
Market Strategy
We believe that our business model is scalable
and can be expanded successfully into current adjacent and new markets as we continue to perfect our operational protocols and
our administrative office functions relating to our Cricket business. We are looking to acquire additional Cricket dealerships
in the midwest and launch additional stores in new Cricket markets that are currently underserved by competing service providers.
Products and Services
Our authorized Cricket retail stores offer
the following products and services:
·
Cricket Wireless service plans, each designed to attract customers
by offering simple, predictable and affordable wireless voice, Muve Music TM, text and data services that are a competitive alternative
to traditional wireless and wireline services by offering plans with a flat-rate and unlimited usage within Cricket service areas,
and without requiring fixed-term contracts, early termination fees or credit checks
·
Cricket Wireless plan upgrades (e.g., international calling minutes
to Canada and/or Mexico; roaming service packages, text messages) and applications (including customized ring tones, wallpapers,
photos, greeting cards, games and news and entertainment message deliveries) on a prepaid basis
·
Cricket handsets
·
Cricket broadband service affording customers unlimited wireless access
to the Internet through their computers at a flat rate with no long-term commitments or credit checks, and
·
Cricket PAYGo service, an unlimited prepaid (daily pay-as-you-go)
wireless and text messaging service available in select markets.
The service payment options for
Cricket customers include:
·
automatic charge against a debit or credit card on bill cycle due
date
·
check payment by mail
·
payment at any corporate Cricket store, dealer location or alternative
payment locations (e.g., a local grocery store), and
·
payment by telephone using a credit or debit card.
Customers also have an option on the purchase
of their cellular phone, including the latest in Android-based and Blackberry OS-based smartphones. The customer can either purchase
a new or refurbished phone from us or purchase a used phone from a previous customer. All phones must be paid for in full because
there is no contract for the monthly prepaid service. New phone prices range from $59 to high-end cellular phones at $329 before
promotional rebate offers.
Seasonality
Our customer activity is influenced by seasonal
effects related to traditional retail selling periods and other factors that arise from our target customer base. We generally
expect new sales activity to be highest in the first and fourth quarters. Nevertheless, our revenues can be strongly affected by
the launch of new markets, promotional activity and competitive actions, any of which have the ability to reduce or outweigh certain
seasonal effects.
REGULATION
We are subject to regulation by federal,
state and local governments that affect the products and services we provide. Generally, these regulations are designed to protect
consumers who deal with us and are not designed to protect our shareholders.
44
Regulation of Payday Lending
In those states where we currently operate,
we are licensed as a payday lender where required and are subject to various state regulations regarding the terms and conditions
of our payday loans and our lending policies, procedures and operations. In some states, payday lending is referred to as "deferred
presentment," "cash advance loans", "deferred deposit loans" or "consumer installment loans."
State regulations normally limit the amount that we may lend to any single consumer and may limit the number of loans that we may
make to any consumer at one time or in the course of a single year. State regulations also limit the amount of fees that we may
assess in connection with any loan transaction and may limit a customer's ability to extend or "rollover" a loan
with us. Often, state regulations also specify minimum and maximum maturity dates for payday loans and, in some cases, specify
mandatory cooling-off periods between transactions.
Our payday lending practices must also comply
with the disclosure requirements of the Federal Truth-In-Lending Act and Regulation Z under that Act. Our collection activities
for delinquent loans are generally subject to consumer protection laws regulating debt-collection practices. Finally, our payday
lending business subjects us to the Equal Credit Opportunity Act and the Gramm-Leach-Bliley Act.
During the last few years, legislation has
been introduced and passed in the U.S. Congress and in certain state legislatures proposing or effecting various restrictions or
an outright prohibition on payday lending. Currently, state laws in Arizona, Montana, Oregon and Georgia have effectively eliminated
the ability to conduct payday lending activities in those states. In addition, a 2007 federal law prohibits loans of any type to
U.S. military personnel and their family members with charges or interest in excess of 36% per annum. In 2010, Congress passed
the Dodd-Frank Wall Street Reform and Consumer Protection Act which consolidated most federal regulation of financial services
offered to consumers, and replaced 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, are now 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 and compliance with
federal rules and regulations. Future restrictions on the payday lending industry could have serious consequences for the Company.
For more information, see "PAYDAY
LENDING BUSINESS—Predatory Lending and Regulatory Concerns" above.
Financial Reporting Regulation
Regulations promulgated by the United States
Department of the Treasury under the Bank Secrecy Act require us to report all transactions involving currency in an amount greater
than $10,000. Generally, every financial institution must report each deposit, withdrawal, exchange of currency or other payment
or transfer that involves an amount greater than $10,000. In addition, multiple currency transactions must be treated as a single
transaction if we have knowledge that the transactions are by or on behalf of any one person and result, in a single business day,
in the transfer of cash in or out totaling more than $10,000. In addition, the regulations require us to maintain information concerning
sales of monetary instruments for cash in amounts from $3,000 to $10,000. The Bank Secrecy Act requires us, under certain circumstances,
to file a suspicious activity report.
The Money Laundering Act of 1994 requires
us, as a money service business, to register with the United States Department of the Treasury. Money services businesses include
check cashers and sellers of money orders. Money services businesses must renew their registrations every two years, maintain a
list of their agents, update the agent list annually, and make the agent list available for examination.
Finally, we have established various procedures
designed to comply, and we continue to monitor and evaluate our business methods and procedures to ensure compliance, with the
USA PATRIOT Act.
45
Privacy Regulation
We are subject to a variety of federal and
state laws and regulations restricting the use and seeking to protect the confidentiality of customer identity and other personal
nonpublic customer information. We have identified our systems that capture and maintain nonpublic personal information, as that
term is understood under the Gramm-Leach-Bliley Act and associated regulations. We disclose our public information policies to
our customers as required by that law. We also have systems in place intended to safeguard this information as required by the
Gramm-Leach-Bliley Act, which specifically governs certain aspects of our payday lending business.
COMPETITION
Like most other payday lenders, we believe
that the primary competitive factors in our business are location and customer service. We face intense competition in an industry
with relatively low barriers to entry, and we believe that the payday lending markets are becoming more competitive as the industry
matures and consolidates. We compete with other payday lending and check cashing stores, and with financial service entities and
retail businesses that offer payday loans or similar financial services. For example, we consider credit card companies that offer
payday features, credit unions, banks that offer small loans, and creditors and loan services that can extend payment terms on
outstanding loans to be our competitors. In addition, we compete in part with services offered by traditional financial institutions,
most particularly with respect to the "overdraft protection" services those institutions may offer and the charges
they levy for checks written with insufficient funds.
Additional areas of competition have recently
arisen. Businesses now offer loans over the Internet as well as "loans by phone," and these services compete with the
services we offer. There also has been increasing penetration of electronic banking and related services into the check cashing
and money transfer industry, including direct deposit of payroll checks, payroll or debit cards, stored-value cards, prepaid credit
and debit cards, and electronic transfer of government benefits.
We also believe that customer service is
critical to developing loyalty. In our industry, we believe that quality customer service means:
·
assisting with the loan application process and understanding the
loan terms,
·
treating customers respectfully, and
·
processing transactions with accuracy, efficiency and speed.
Our Cricket store business competes primarily
with other actual or potential authorized sellers and distributors of Cricket products and services. The authorization to sell
Cricket products and services is granted by Cricket Communications, a Delaware corporation (sometimes referred to as "Cricket
Wireless, Inc.") and wholly owned subsidiary of Leap Wireless International, Inc. Presently, we believe that our ability
to compete with other sellers of Cricket products and services will materially depend on the success with which we operate those
store locations for which we presently have authorization to operate. If we successfully manage those stores and are able to develop
and maintain a strong working relationship with Cricket Communications, we expect that we may be able to effectively compete for
additional store locations when and as they come available.
Competition within the cellular phone industry
in general is significant. We not only compete with other suppliers of Cricket or other prepaid service providers but also with
the other national cellular phone providers such as Verizon, AT&T and Sprint. It is estimated that there are in excess of 32
million wireless subscriber connections in the U.S.
With the introduction of additional prepaid
phone providers such as Straight Talk service rolled out by Wal-Mart in October 2009, Wal-Mart's Family Mobile TM powered
by T-Mobile, which began in September 2010, that provides unlimited talk and text for 3 family members, and the increase of national
retailers offering numerous prepaid phone options, such as Cricket PAYGo™ services sold at Target stores or Cricket phones
sold at Best Buy or Dollar General, it is possible that current and potential new customers will purchase these or other future
competing services from these national resellers because of brand recognition, location or convenience, any of which would negatively
impact our sales and our ability to win authorizations for new locations to grow our Cricket business. In addition, it is possible
that Cricket Communications may itself, at some point in the future, determine to become more involved in the direct operation
of its retail stores and move away from an authorized distributor business model or modify its existing model by changing the compensation
structure to dealers or by increasing the number of dealer locations and thus reduce traffic to existing locations. In any such
event, our ability to maintain and grow our Cricket business will be negatively impacted.
46
TECHNOLOGY AND INFORMATION
We maintain an integrated system of point
of sale and management software applications and platforms for processing the various types of financial transactions we offer.
These systems provide us with customer service, internal control mechanisms, record-keeping and reporting information. Both of
our point-of-sale systems used at our payday and Cricket store locations integrate transaction data with our management information
systems on a real-time basis. These systems are designed to provide summary, detailed and exception information to regional, area
and store managers as well as corporate staff and are designed to collect customer information for demographic analysis.
SECURITY
We believe the principal security risks
to our operations are robbery and employee theft. We have established extensive security systems, dedicated security personnel
and management information systems to address both areas of potential loss. To protect against robbery, most payday lending store
employees work behind bullet-resistant glass and steel partitions, and the back office, safe and computer areas are locked and
closed to customers. Our security measures in most payday lending and Cricket stores include safes, electronic alarm systems monitored
by third parties, control over entry to customer service representative and inventory areas, detection of entry through perimeter
openings, walls and ceilings and the tracking of all employee movement in and out of secured areas. Payday segment employees use
cellular phones to ensure safety and security whenever they are outside secured areas. Additional security measures used in many
stores include some combination of alarm systems, remote control over alarm systems, the arming, disarming and changing of user
codes, and mechanically and electronically controlled time-delay safes.
Since we have high volumes of cash and negotiable
instruments at our payday stores and inventory volumes at our Cricket stores, we believe that daily monitoring, unannounced audits
and immediate responses to irregularities are critical to security and play an important role in our internal controls. Our regional
managers and corporate staff perform unannounced store audits and cash counts at our stores as well as random inventory counts
of cellular phones and accessories. We self-insure for employee theft and dishonesty at the store level.
EMPLOYEES
At March 31, 2012, we had approximately
268 employees, consisting of 250 store personnel (106 of whom were employed at payday loan stores and 144 of whom were employed
at Cricket retail stores), 12 corporate office employees and six corporate office managers. We believe our relationship with our
employees is good, and we have not suffered any work stoppages or labor disputes. We do not have any employees that operate under
collective-bargaining agreements.
LEGAL PROCEEDINGS
We are involved in a variety of legal claims
and proceedings incidental to our business, including customer bankruptcy and employment-related matters from time to time, and
other legal matters that arise in the normal course of business. We believe these claims and proceedings are not out of the ordinary
course for a business of the type and size in which we are engaged. While we are unable to predict the ultimate outcome of these
claims and proceedings, management 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.
47
PROPERTIES
Our headquarters is in Omaha, Nebraska.
There, we have a 5,775-square-foot space, with additional space available, which is sufficient for our projected near-term future
growth. The monthly lease amount is currently $3,900 and escalates to $5,500 by the end of the lease term on December 31, 2014.
The corporate phone number is (402) 551-8888.
As of March 31, 2012, we had 52 payday store
locations. Our payday store locations typically range in size from 1,000 square feet to 2,000 square feet, and have varying lease
terms (none of which, however, have remaining terms of more than five years). As of that date, our payday lending stores were in
the following cities:
·
Sterling,
        Colorado
·
Council
        Bluffs, Iowa (two locations)
·
Des
        Moines, Iowa (four locations)
·
Sioux
        City, Iowa
·
Dodge
        City, Kansas
·
Garden
        City, Kansas
·
Columbus,
        Nebraska
·
Grand
        Island, Nebraska
·
Hastings,
        Nebraska
·
Lincoln,
        Nebraska (three locations)
·
North
        Platte, Nebraska
·
Omaha,
        Nebraska (seven locations)
·
Bismarck,
        North Dakota (two locations)
·
Grand
        Forks, North Dakota (three locations)
·
Fargo,
        North Dakota (four locations)
·
Minot,
        North Dakota
·
Aberdeen,
        South Dakota
·
Rapid
        City, South Dakota
·
Sioux
        Falls, South Dakota
·
Watertown,
        South Dakota
·
Salt
        Lake City, Utah
·
Sandy,
        Utah
·
Taylorsville,
        Utah
·
West
        Jordan, Utah
·
Kenosha,
        Wisconsin
·
Pleasant
        Prairie, Wisconsin
·
Racine,
        Wisconsin (two locations)
·
Casper,
        Wyoming (two locations)
·
Gillette,
        Wyoming
·
Laramie,
        Wyoming
·
Sheridan,
        Wyoming
·
Rock
        Springs, Wyoming
As of March 31, 2012, we had 48 Cricket
store locations. Our Cricket store locations typically range in size from 1,000 square feet to 2,500 square feet, and have varying
lease terms (none of which, however, have remaining terms of more than five years). As of that date, our Cricket retail stores
were in the following cities:
·
Nogales,
        Arizona
·
Phoenix,
        Arizona
·
Fort
        Collins, Colorado
·
Greeley,
        Colorado
·
Coeur
        d'Alene, Idaho
·
Cahokia,
        Illinois
·
Fairview
        Heights, Illinois
·
Mundelein,
        Illinois
·
Arlington
        Heights, Illinois
·
Round
        Lake Beach, Illinois
·
Elkhart,
        Indiana
·
Gary,
        Indiana (two locations)
·
Merrillville,
        Indiana
·
Mishawaka,
        Indiana
·
South
        Bend, Indiana
·
Griffith,
        Indiana
·
Council
        Bluffs, Iowa
·
Kansas
        City, Kansas
·
Kansas
        City, Missouri (four locations)
·
St.
        Louis, Missouri (four locations)
·
Wellston,
        Missouri
·
Lincoln,
        Nebraska
·
Omaha,
        Nebraska (seven locations)
·
Cincinnati,
        Ohio
·
Oklahoma
        City, Oklahoma (two locations)
·
Tulsa,
        Oklahoma
·
Hillsboro,
        Oregon
·
Portland,
        Oregon
·
San
        Antonio, Texas (three locations)
·
McAllen, Texas (two locations)
·
Laredo, Texas
48
MANAGEMENT
Our Board of Directors consists of Richard
E. Miller, Angel Donchev, Thomas H. Ripley, Ellery Roberts and John Quandahl. The following table sets forth the name and position
of each of our current directors and executive officers.
Name
Age
Positions
John Quandahl
45
Chief Executive Officer, Chief Operating Officer and Director
Steve Irlbeck
47
Chief Financial Officer
Rich Horner
49
Vice President and Treasurer, Wyoming Financial Lenders
Richard Miller
65
Director (Chairman)
Angel Donchev
30
Director
Thomas H. Ripley
42
Director
Ellery Roberts
42
Director
The biographies of the above-identified
individuals are set forth below:
John Quandahl
, the Company's
Chief Executive and Operating Officer, currently also serves as the President of Wyoming Financial Lenders, Inc., a position he
has held since 2007. Mr. Quandahl served as the Company's Interim Chief Financial Officer from January 1, 2008 to May 10,
2011. From 2005 until joining Wyoming Financial Lenders, Mr. Quandahl was the President of Houlton Enterprises, Inc., and prior
to that served as that corporation's Chief Operating Officer from 1999 until 2004. During his tenure at Wyoming Financial
Lenders and Houlton Enterprises, Mr. Quandahl and the respective employers were based in Omaha, Nebraska. Mr. Quandahl was the
controller as Silverstone Group, Inc., from 1993 until 1998, and before that began his career at the Nebraska Department of Revenue
as a tax auditor in 1989. Mr. Quandahl is a certified public accountant (inactive) and earned a degree in accounting from the University
of Nebraska - Lincoln. Mr. Quandahl served as Chief Operating Officer of Wyoming Financial Lenders prior to its merger with the
Company has continued to serve as our Chief Operating Officer since that time. Effective January 1, 2009, Mr. Quandahl was appointed
as our Chief Executive Officer and until May 2011, our interim Chief Financial Officer. Mr. Quandahl was appointed to the Board
of Directors on March 9, 2009.
Steve Irlbeck
was appointed the Company's
Chief Financial Officer in May 2011. Mr. Irlbeck joined the Company in January 2009 as the Company's Senior Director of Accounting.
From 1995 until 2008, Mr. Irlbeck was employed at Lutz & Company, PC, a public accounting and consulting firm in Omaha, Nebraska
where he was a tax partner. Mr. Irlbeck is a certified public accountant (inactive) and earned a degree in accounting from Creighton
University.
Rich Horner
, the Company's
Vice President of Wyoming Financial Lenders, joined Wyoming Financials Lenders in 2000 as its general manager. Since that time,
he has served as the Wyoming Financial Lenders controller from 2007 to present. Mr. Horner was promoted to Vice President of Wyoming
Financial Lenders in January 2009. Prior to joining Wyoming Financial Lenders, Mr. Horner served in a finance and budgetary capacity
for InfoUSA. Mr. Horner has an MBA in finance and management from the University of Nebraska-Omaha.
Richard Miller
is an independent
business consultant. Previously, Mr. Miller was Chief Executive Officer of Pirelli Tire North America, a $120 million tire manufacturer,
and Chief Executive Officer of Dunn Tire Corporation, a $25 million regional tire retailer. Prior experience also includes senior
operating positions with Dunlop Tire and Michelin Tire. Mr. Miller has served as Executive Chairman of True Home Value, Inc., and
currently serves as Chairman of Flow Dry Industries and Swift Spinning, Inc. ― two private companies to which Blackstreet
Capital Management, LLC provides management and advisory services. Mr. Miller is a highly decorated former Marine Captain and holds
a BA from Chapman College in California. Mr. Miller serves as Chairman of the Board.
Angel Donchev
was appointed
as a director of the Company on March 31, 2010 in connection with the acquisition of voting control of the Company by WCR,
LLC. Mr. Donchev is employed by Blackstreet Capital Management, LLC, a Delaware limited liability company principally engaged
in the management of private investments. Mr. Donchev joined Blackstreet Capital Management in 2005 and currently serves as
a director of American Combustion Industries, Flow Dry Technology, Inc., Swift Spinning, Inc., and Alpha Graphics, Inc. (all
of which are private companies). Mr. Donchev has been involved in control buyouts of companies with combined revenues in
excess of $300 million over the past five years. Previously, Mr. Donchev worked as a generalist in the Corporate Finance
division of Stephens Inc., a middle market investment bank, where he gained experience in a variety of M&A and
public offering transactions. Prior to that, Mr. Donchev worked for Teton Capital, an Austin, Texas based hedge fund, where
he provided research and analysis on potential investments. Mr. Donchev graduated summa cum laude from the McCombs School
of Business at the University of Texas at Austin, where he received a BBA in Business Honors and Finance.
49
Thomas H. Ripley
, was appointed as
a director of the Company on February 17, 2012 to fill the vacancy created by Aldus Chapin, II. Mr. Ripley is an independent operating
partner that has worked with Blackstreet Capital Management, LLC. since April 2008 and currently serves as the Chairman of the
Board of American Combustion Industries, and is also the President and a director of ThinkDirect Marketing Group. Mr. Ripley has
been an operating partner and member of the executive team of several companies since 2001. Prior to his private equity experience,
Mr. Ripley worked on Wall Street for Bear Stearns, and Goldman Sachs. Mr. Ripley was a Captain in the U.S. Marine Corps and holds
a Masters in Business from the University of Chicago, and completed his undergraduate studies at the Virginia Military Institute.
Ellery Roberts
was appointed by the
Board of Directors to serve as a director on May 10, 2010. Mr. Roberts is the co-founder and co-managing principal of RW Capital
Partners LLC, a lower middle-market mezzanine fund. Mr. Roberts brings over 15 years of private equity investing experience having
been one of the founding members and Managing Director of Parallel Investment Partners, LP (formerly SKM Growth Investors, LP),
a Dallas based private equity fund focused on re-capitalizations, buyouts and growth capital investments in lower middle market
companies throughout the United States. Mr. Roberts was responsible for approximately $400 million in invested capital across two
funds. Also during his tenure with Parallel, Mr. Roberts sat on the boards of Environmental Lighting Concepts, Hat World Corporation,
Senex Financial Corporation, Builders TradeSource Corporation, Action Sports, Weisman Discount Home Centers, Winnercom, Mealey's
Furniture, Regional Management Corporation, Marmalade Cafes and Diesel Service and Supply (all of which are private companies).
Prior to Parallel, Mr. Roberts was a Vice President with Lazard Freres & Co. While at Lazard, he focused on and also gained
experience in the home building, health care, retail, industrial and lodging sectors. Prior to joining Lazard in 1997, Mr. Roberts
was with Colony Capital, Inc., where he analyzed and executed transactions for Colony Investors II, L.P., a $625 million private
equity fund and prior to that was with the Corporate Finance Division of Smith Barney, Inc. where he participated in a wide variety
of investment banking activities. During his career Mr. Roberts has been directly involved with over $3.0 billion in direct private
equity investments. Mr. Roberts received his B.A. degree in English from Stanford University.
Under our corporate bylaws, all of our directors
serve for indefinite terms expiring upon the next annual meeting of our shareholders.
When considering whether directors and nominees
have the experience, qualifications, attributes and skills to enable the Board of Directors to satisfy its oversight responsibilities
effectively in light of the Company's business and structure, the Board of Directors focuses primarily on the industry and
transactional experience, and other background, in addition to any unique skills or attributes associated with a director. With
regard to Mr. Quandahl, the Board of Directors considered his significant experience, expertise and background with regard to accounting,
financial and tax matters, his particular experience with the payday lending industry as well as retail operations, and his demonstrated
experience and skills in managing and evaluating the coordination and integration of the Company's two principal operating
segments. With regard to Mr. Donchev, the Board of Directors considered his background and experience with the public securities
markets and his former employment and experience with the investment banking field. With regard to Mr. Ripley, the Board of Directors
considered his experience in business acquisitions and post-acquisition operational improvements with emphasis upon cost reduction
and revenue growth. With regard to Mr. Miller, the Board of Directors considered his leadership experience as well as his background
and experience in retail operations. Finally, with regards to Mr. Roberts, the Board of Directors considered his extensive experience
in finance and capital structures, his prior board leadership experience as well as his prior experience in retail operations.
The Company does not have a standing nominating
committee. Instead, the entire Board of Directors shares the responsibility of identifying potential director-nominees to serve
on the Board of Directors.
The Board of Directors does have a standing
Compensation Committee and Audit Committee. The Compensation Committee is composed of Mr. Roberts. The Audit Committee is composed
of Messrs. Roberts and Donchev, with Mr. Roberts serving as the chairperson. The Board of Directors has determined that only Mr.
Roberts is "independent," as such term is defined in Section 5605(a)(2) of the Nasdaq listing rules, and meets the
criteria for independence set forth in Rule 10A-3(b)(1) under the Exchange Act. The preceding disclosure respecting director independence
is required under applicable SEC rules. However, as a corporation whose shares are listed for trading on the OTCBB, the Company
is not required to have any independent directors at all on its Board of Directors, or any independent directors serving on any
particular committees of the Board of Directors.
50
The Board of Directors has determined that
at least one member of the Audit Committee, Mr. Ellery Roberts, is an "audit committee financial expert" as that term
is defined in Regulation S-K promulgated under the Exchange Act. Mr. Robert's relevant experience is detailed above. As noted
above, Mr. Roberts qualifies as an "independent director," as such term is defined in Section 5605(a)(2) of the Nasdaq
listing rules, and meets the criteria for independence set forth in Rule 10A-3(b)(1) under the Exchange Act. The Board of Directors
has determined that each of the Audit Committee members is able to read and understand fundamental financial statements and that
at least one member of the Audit Committee has past employment experience in finance or accounting.
51
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the cash
and non-cash compensation for awarded to or earned by: (i) each individual who served as the principal executive officer and principal
financial officer of Western Capital during the year ended December 31, 2011; and (ii) each other individual that served as an
executive officer of either Western Capital or Wyoming Financial Lenders, Inc. at the conclusion of the year ended December 31,
2011 and who received more than $100,000 in the form of salary and bonus during such fiscal year. For purposes of this report,
these individuals are collectively the "named executives" of the Company.
Name and Principal Position
Salary
Other Annual Compensation
Stock Option
Awards
Total
John
Quandahl
(1)
2011
$
246,000
$
80,114
$
0
$
326,114
Pres. and Chief Operating Officer
2010
$
246,000
$
70,313
$
0
$
316,313
Steve
Irlbeck
(2)
2011
$
140,000
$
70,000
$
0
$
210,000
Chief Financial Officer
2010
$
120,000
$
55,000
$
0
$
175,000
Rich
Horner
(3)
2011
$
148,000
$
64,000
$
0
$
212,000
Vice President and Treasurer of WFL
2010
$
145,500
$
50,000
$
0
$
195,500
___________
(1)
Mr. Quandahl is the President and Chief Operating Officer of Wyoming Financial Lenders, Inc., the wholly owned and principal
operating subsidiary of Western Capital that offers payday lending services. Mr. Quandahl also began serving as the Chief Operating
Officer of Western Capital effective November 29, 2007, and continues to serve in that capacity. Effective January 1, 2009, Mr.
Quandahl was also appointed to serve as the Company's President and Chief Executive Officer. From January 1, 2009 through
May 10, 2011, Mr. Quandahl also served as interim Chief Financial Officer.
(2)
Mr. Irlbeck is the Chief Financial Officer of Western Capital Resources. Mr. Irlbeck began serving as our Chief Financial Officer
on May 10, 2011. Prior to May 10, 2011, Mr. Irlbeck was the Company's Senior Director of Accounting.
(3)
Mr. Horner is the Company's Controller and became the Vice President and Treasurer of Wyoming Financial Lenders in
                                                            January 2009.                                                             Prior
                                                            to January 2009, Mr. Horner served as the Company's
                                                            Controller.
Outstanding Equity Awards at Fiscal Year End
We had no outstanding equity awards as of
December 31, 2011 for any named executives.
Employment and Change-In-Control Agreements
We do not currently have change-in-control
agreements with any named executives or any other current members of our executive management. On March 31, 2010, we entered into
an Employment Agreement with Mr. Quandahl to serve as our Chief Executive Officer and Chief Operating Officer. Prior to that time,
Mr. Quandahl served in such capacities without any written agreement. Mr. Quandahl receives an annual base salary of $246,000 and
is eligible for an annual performance-based cash bonus.
The performance-based bonus provisions of
the Employment Agreement permit Mr. Quandahl and other members of management to receive annual bonus payments based on adjusted
EBITDA targets annually established by the Board of Directors. The 2011 and 2010 adjusted EBITDA target was $4 million. If the
Company's actual adjusted EBITDA performance for a particular annual period ranges from 85-100% of the established adjusted
EBITDA target, management will be entitled to receive a cash bonus consisting of 7.5% of the actual adjusted EBITDA. Mr. Quandahl's
share of the bonus pool for any particular year is expected to be 10-50% and the bonus pool will be payable to other management-level
participants in the bonus pool selected from time to time by the Board of Directors. If the Company's actual adjusted EBITDA
performance for a particular annual period is less than 85% of the established adjusted EBITDA target, no bonus will be payable,
and if such performance exceeds 100% of the established adjusted EBITDA target, the bonus pool will include 15% of the amount by
which such performance exceeds the target. In addition to the adjusted EBITDA threshold, the agreement also contains capital expenditure
and working capital thresholds.
52
During 2011 and 2010, the Board of Directors
authorized certain transactions that resulted in the capital expenditure limitation and working capital threshold eligibility requirements
not being satisfied. The board waived compliance with these two eligibility requirements in 2010 and approved the exclusion of
such transactions when testing these two eligibility requirements in 2011. The board also authorized the adjusted EBITDA calculation
to exclude certain expenditures. The effect of those actions permitted eligible participants to benefit under the management bonus
pool arrangement in both 2010 and 2011.
The Employment Agreement also contains customary
provisions prohibiting Mr. Quandahl from soliciting customers and employees of the Company for three years after any termination
of his employment with the Company, and from competing with the Company for either three years (if Mr. Quandahl is terminated for
good cause or if he resigns without good reason) or two years (if the Company terminates Mr. Quandahl's employment for without
good cause or if he resigns with good reason). If Mr. Quandahl's employment is terminated by the Company without "good
cause" or if Mr. Quandahl voluntarily resigns with "good reason," then Mr. Quandahl will be entitled to (i) severance
pay for a period of 12 months and (ii) reimbursement for health insurance premiums for his family if he elects continued coverage
under COBRA.
Compensation of Directors
Name and Principal Position
Compensation
Other Annual Compensation
Stock Option
Awards
Total
Richard Miller
(1)
2011
$
0
$
100,000
$
0
$
100,000
Chairman
2010
$
0
$
75,000
$
0
$
75,000
Ellery Roberts
(2)
2011
$
102,583
$
0
$
0
$
102,583
Director
2010
$
11,666
$
0
$
0
$
11,666
Angel Donchev
2011
$
0
$
0
$
0
$
0
Director
2010
$
0
$
0
$
0
$
0
Aldus Chapin II
(3)
2011
$
0
$
0
$
0
$
0
Director
2010
$
0
$
0
$
0
$
0
____________
(1)
Mr. Miller provides management consulting services to the Company in addition to his services as Chairman of the Board. In
accordance with the consulting agreement, his compensation is $100,000 per year. All compensation reflected in the table for Mr.
Miller was paid pursuant to his consulting agreement with the Company.
(2)
Mr. Roberts serves on a special committee of the Board of Directors. In connection with this service, the Board of Directors
approved the payment of compensation to Mr. Roberts in the amount of $13,000 per month from June through November 2011, and $10,000
per month from December 2011 through November 2012.
(3)
Mr. Chapin resigned from the Board of Directors effective February 17, 2012.
Related-Party Transactions
On October 18, 2011 the Company entered
into a borrowing arrangement with River City Equity, Inc. and delivered a related long-term promissory note in favor of River City
Equity. The borrowing arrangement allows the Company to borrow up to $2,000,000 at an interest rate of 12% per annum, with interest
payable on a monthly basis. The note matures on September 30, 2013, on which date all unpaid principal and accrued but unpaid interest
thereon is due and payable. The note includes a prepayment penalty and, under certain circumstances, permits River City Equity
to obtain a security interest in substantially all of the Company's assets. As of December 31, 2011, $1,000,000 has been
advanced under this arrangement. After the initial advancement from River City Equity under the borrowing arrangement, the brother
of the Company's Chief Executive Officer obtained an ownership interest in River City Equity. Since such time, there have
been additional advancements. The Board of Directors has been apprised of the fact that, subsequent to the transactions creating
the arrangement with River City Equity, that entity has become a "related party" under applicable SEC disclosure rules.
The Company may in the future seek advancements from the $1,000,000 remaining available under the borrowing arrangement. In any
such case, advancements will be approved in the manner required under the board's related-party transaction policy discussed
below.
The Board of Directors has adopted a written
Conflict of Interest and Related Party Transaction Policy. That policy governs the approval of all related-party transactions,
subject only to certain customary exceptions (e.g., compensation, certain charitable donations, transactions made available to
all employees generally, etc.). The policy contains a minimum dollar threshold of $5,000.
53
The entire Board of Directors administers
the policy and approves any related-party transactions. At each calendar year's first regularly scheduled meeting, management
discloses any related-party transactions to be entered into by the Company for that calendar year, including the proposed aggregate
value of such transactions if applicable. After full disclosure of all material facts, review and discussion, the board approves
or disapproves such transactions. If a related-party transaction will be ongoing, the board may establish guidelines for management
to follow in its ongoing dealings with the related party. However, management is generally required to update the board as to any
material change to the related-party transactions approved at the first calendar year meeting.
In the event management recommends any related-party
transactions after the first calendar year meeting, such transactions are generally presented to the board for approval in advance,
or preliminarily entered into by management subject to ratification by the board. If ratification is not obtained, management must
make all reasonable efforts to cancel or annul such transaction.
Procedurally, no director is allowed
to vote in any approval of a related-party transaction for which he or she is the related party, except that such a director
may otherwise participate in a related discussion and shall provide to the board all material information concerning the
related-party transaction and the director's interest therein.
54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
As of the close of business on June 13, 2012,
we had outstanding two classes of voting securities—common stock, of which there were 5,397,780 shares issued and outstanding;
and Series A Convertible Preferred Stock, of which there were 10,000,000 shares issued and outstanding. Each share of capital stock
is currently entitled to one vote on all matters put to a vote of our shareholders. The following table sets forth the number of
common shares, and percentage of outstanding common shares, beneficially owned as of June 13, 2012, by:
·
each person known by the Company to be the beneficial owner of more
than five percent of the Company's outstanding common stock
·
each current director
·
each executive officer of the Company and other persons identified
as a named executive in our Summary Compensation Table above, and
·
all current executive officers and directors as a group.
Unless otherwise indicated, the address
of each of the following persons is 11550 "I" Street, Omaha, Nebraska 68137, and each such person has sole voting and
investment power with respect to the shares set forth opposite his, her or its name.
Name and Address
Common Shares
Beneficially Owned
(1)
Percentage of
Common Shares
(1)
Richard Miller
(2)
333,750
5.9
%
Ellery Roberts
(3)
-
-
Angel Donchev
(3)
-
-
Thomas H. Ripley
(3)
-
-
Rich Horner
(4)
100,000
1.9
%
Steve Irlbeck
(5)
200,000
3.7
%
John Quandahl
(6)
200,000
3.7
%
All current executive officers and directors as a group
(7)
833,750
14.6
%
WCR, LLC
(8)
c/o Blackstreet Capital Advisors II
5425 Wisconsin Avenue, Suite #701
Chevy Chase, MD 20815
10,791,250
71.5
%
Alpha Capital Anstalt
(9)
Pradaafant 7
Furst en Tums 9490
Vaduz, Liechtenstein
416,667
7.7
%
_______________
* less than 1%
(1)
Beneficial ownership is determined in accordance with the rules of the SEC, and includes general voting power and/or investment
power with respect to securities. Shares of common stock issuable upon exercise of options or warrants that are currently exercisable
or exercisable within 60 days of the record rate, and shares of common stock issuable upon conversion of other securities currently
convertible or convertible within 60 days, are deemed outstanding for computing the beneficial ownership percentage of the person
holding such securities but are not deemed outstanding for computing the beneficial ownership percentage of any other person. Under
the applicable SEC rules, each person's beneficial ownership is calculated by dividing the total number of shares with respect
to which they possess beneficial ownership by the total number of outstanding shares of the Company. In any case where an individual
has beneficial ownership over securities that are not outstanding, but are issuable upon the exercise of options or warrants or
similar rights within the next 60 days, that same number of shares is added to the denominator in the calculation described above.
Because the calculation of each person's beneficial ownership set forth in the "Percentage of Common Shares"
column of the table may include shares that are not presently outstanding, the sum total of the percentages set forth in such column
may exceed 100%.
(2)
Mr. Miller is a director of the Company. Share figures contained in the table are taken from Mr. Miller's most recent
filing under §13 of the Securities Exchange Act of 1934 on Schedule 13G/A, filed with the SEC on November 3, 2010.
(3)
Messrs. Roberts, Donchev, and Riley are directors of the Company.
55
(4)
Mr. Horner became the Treasurer of Wyoming Financial Lenders, Inc. in January 2009.
(5)
Mr. Irlbeck became the Company's Chief Financial Officer on May 10, 2011 and was the Company's Senior Director
of Accounting from January 1, 2009 to May 10, 2011.
(6)
Mr. Quandahl is the Company's Chief Executive Officer and a director of the Company.
(7)
Consists of Messrs. Miller, Roberts, Donchev, Riley, Irlbeck, Horner and Quandahl.
(8)
Consists of 1,091,250 shares of common stock and 9,700,000 shares of Series A Convertible Preferred Stock which are convertible
into an equal number of shares of common stock. Share figures contained in the table are taken from WCR LLC's most recent
filing under §13 of the Securities Exchange Act of 1934 on Schedule 13D/A, filed on November 5, 2010.
(9)
Based solely on a registered shareholder report dated June 1, 2012.
56
THE RIGHTS OFFERING
The Subscription Rights
We are distributing, at no charge, to the
record holders of our shares of capital stock as of        , 2012, the record date, non-transferable
subscription rights to purchase shares of our common stock at a subscription price of $ per share. Each subscription right will
entitle the holders of our capital stock to purchase one share of our common stock, which we refer to as the "basic subscription
privilege." Each eligible holder of record of shares of our capital stock will receive       subscription
rights for each share of capital stock owned by such holder as of 5:00 p.m., Minneapolis time, on the record date. We intend to
keep the rights offering open until , 2012, unless our Board of Directors, in its sole discretion, extends such time.
You may exercise all or a portion of your
subscription rights, or none at all. If, however, you exercise less than your entire basic subscription privilege, you will not
be eligible to exercise your over-subscription privilege
We will not issue fractional shares of common
stock in the rights offering, and holders will only be entitled to purchase a whole number of shares of common stock. Any excess
subscription payments received by the subscription agent will be returned promptly, without interest or penalty.
Over-Subscription Privilege
If you fully exercise your basic
subscription privilege and other shareholders do not fully exercise their basic subscription privileges, then you may also
exercise the over-subscription privilege component of your subscription rights to purchase additional shares of common stock
that remain unsubscribed at the expiration of the rights offering, subject to the availability and pro rata allocation of
shares among persons exercising their over-subscription privileges. To the extent that the number of the unsubscribed shares
is not sufficient to satisfy all of the properly exercised over-subscription requests, then the shares which are available
will be prorated among those shareholders properly exercising their over-subscription privileges based on the number of
shares each such shareholder subscribed for under their basic subscription privilege. If this pro rata allocation results in
any shareholder receiving a greater number of common shares than the shareholder subscribed for pursuant to the exercise of
his, her or its over-subscription privilege, then such shareholder will be allocated only that number of shares for which the
shareholder subscribed, and the remaining common shares will be allocated among all other shareholders exercising their
over-subscription privileges on the same pro rata basis described above. This share-allocation process will be repeated until
all common shares have been allocated or all over-subscription exercises have been honored, whichever occurs earlier.
In order to properly exercise your over-subscription
privilege, you must deliver the subscription payment related to the exercise of your over-subscription privilege prior to the expiration
of the rights offering. Because we will not know the total number of unsubscribed shares prior to the expiration of the rights
offering, if you wish to maximize the number of shares you purchase pursuant to your over-subscription privilege, you will need
to deliver payment in an amount equal to the aggregate subscription price for the maximum number of shares of our common stock
available to you, assuming that no shareholder other than you has purchased any shares of our common stock pursuant to their basic
subscription privilege and over-subscription privilege.
We can provide no assurances that you will
actually receive the number of shares you wish to purchase upon exercise of your over-subscription privilege. For example, we will
not be able to satisfy any portion of your exercise of the over-subscription privilege if all of our other shareholder exercise
their basic subscription privileges in full. We will only fully honor an exercised over-subscription privilege to the extent sufficient
shares of our common stock are available after the exercise of all basic subscription privileges associated with the subscription
rights.
To the extent there are fewer shares available
to you upon exercise of your over-subscription privileges than that for which you subscribe and tender payment under such privilege,
you will be allocated only the number of unsubscribed shares available to you, and any excess subscription payments received by
the subscription agent will be returned to you, without interest or deduction, as soon as practicable. To the extent shareholders
properly exercise their over-subscription privileges for an aggregate amount of shares that is less than the number of the unsubscribed
shares, you will be allocated the number of shares for which you actually tender payment in connection with the exercise of your
over-subscription privilege. We will deliver certificates representing shares of our common stock purchased with the over-subscription
privilege as soon as practicable after the expiration of the rights offering.
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Delivery of Shares of Common Stock Acquired in the Rights
Offering
If you purchase shares in the rights offering
by submitting a rights certificate and payment, we will mail you a stock certificate evidencing the new shares purchased as soon
as practicable after the completion of the rights offering. One stock certificate will be generated for each rights certificate
processed. Until your stock certificate is received, you may not be able to sell the shares of common stock acquired in the rights
offering. If, as of the record date, your shares were held by a custodian bank, broker, dealer or other nominee, and you participate
in the rights offering, you will not receive stock certificates for your new shares. Nevertheless, your custodian bank, broker,
dealer or other nominee will be credited with the shares of common stock you purchase in the rights offering as soon as practicable
after the completion of the rights offering.
Reasons for the Rights Offering
Prior to approving the rights offering,
our Board of Directors carefully considered our current and expected acquisition opportunities, our liquidity requirements, our
expected results of operations, current market conditions, and business and capital-raising opportunities, as well as the dilution
of the ownership percentage of the current holders of our common stock that may be caused by the rights offering if they do not
exercise their rights in full.
After weighing the factors discussed above
and the effect of the $4,400,000 in additional capital, after deducting $100,000 of estimated offering-related expenses, that may
be generated by the sale of shares pursuant to the rights offering, our Board of Directors determined the rights offering to be
in the best interests of the Company and its shareholders. Although we believe that the rights offering will strengthen our financial
condition and allow us to pursue opportunities to grow and diversify the Company, the Board of Directors is not making any recommendation
as to whether you should exercise your subscription rights.
Effect of Rights Offering on Existing Shareholders
The ownership interests and voting interests
of our existing shareholders that do not fully exercise their subscription rights will be diluted.
Method of Exercising Subscription Rights
The exercise of subscription rights is irrevocable
and may not be cancelled or modified. You may exercise your subscription rights as follows:
Subscription by Registered Holders
If you hold certificates of shares of our
capital stock, the number of rights you may exercise pursuant to your subscription rights will be indicated on the rights certificate
delivered to you. You may exercise your subscription rights by properly completing and executing the rights certificate and forwarding
it, together with your full subscription payment, to the subscription agent at the address set forth below in this section under
the caption "—Subscription Agent," prior to the expiration of the rights offering.
Subscription by DTC Participants
We expect that the exercise of your subscription
rights may be made through the facilities of DTC. If your subscription rights are held of record through DTC, you may exercise
your subscription rights by instructing DTC, or having your broker instruct DTC, to transfer your subscription rights from your
account to the account of the subscription agent, together with certification as to the aggregate number of subscription rights
you are exercising and the number of shares of our common stock you are subscribing for under both the basic subscription privilege
and the over-subscription privilege, if any, together with your full subscription payment.
Subscription by Beneficial Owners
If you are a beneficial owner of our
shares of common stock that are registered in the name of a broker, dealer, custodian bank or other nominee, you will not
receive a rights certificate. Instead, subscription rights will be issued to the nominee record holder for shares of our
common stock that you beneficially own at the record date. If you are not contacted by your broker, dealer, custodian bank or
other nominee, you should promptly contact your broker, dealer, custodian bank or other nominee in order to subscribe for
shares of our common stock in the rights offering.
58
If you hold your shares in the name of a
broker, dealer, custodian bank or other nominee, your nominee will exercise the subscription rights on your behalf in accordance
with your instructions. Your nominee may establish a deadline that may be before the 5:00 p.m., Minneapolis time, , 2012 expiration
date we have established for the rights offering.
Payment Method for Registered Holders
As described in the instructions accompanying
the rights certificate, payments must be made in full in United States Dollars for the full number of shares of our common stock
for which you are subscribing by (i) cashier's check or (ii) certified check, in either case drawn upon a United States bank
and made payable to the subscription agent at the address set forth below in this section under the caption "—Subscription
Agent."
Personal checks are not accepted. Payment
received after the expiration of the rights offering may not be honored, and the subscription agent will return your payment to
you promptly, without interest or penalty.
You should read and follow the delivery
and payment instructions accompanying the rights certificate. DO NOT SEND RIGHTS CERTIFICATES OR PAYMENTS DIRECTLY TO WESTERN CAPITAL.
Except as described below under the caption "—Guaranteed Delivery Procedures," we will not consider your subscription
received until the subscription agent has received delivery of a properly completed and duly executed rights certificate and other
subscription documents, together with payment of the full subscription amount. The risk of delivery of all documents and payments
is borne by you or your nominee, not by the subscription agent or us.
The method of delivery of rights certificates
and payment of the subscription amount to the subscription agent will be at the risk of the holders of subscription rights. If
sent by mail, we recommend that you send subscription materials and payments by overnight courier or by registered mail, properly
insured, with return-receipt requested, and that a sufficient number of days be allowed to ensure delivery to the subscription
agent and clearance of payment prior to the expiration of the rights offering.
Unless a rights certificate provides that
the shares of our common stock are to be delivered to the record holder of such rights or such certificate is submitted for the
account of a bank or a broker, signatures on such rights certificate must be guaranteed by an "eligible guarantor institution"
(as such term is defined in Rule 17Ad-15 of the Securities Exchange Act of 1934) that is a participant in the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Program Medallion Signature Program or the Stock Exchange Medallion Program,
subject to any standards and procedures adopted by the subscription agent.
Missing or Incomplete Subscription Information
If you do not indicate the number of subscription
rights being exercised, or the subscription agent does not receive the full subscription payment for the number of subscription
rights that you indicate are being exercised, then you will be deemed to have exercised the maximum number of subscription rights
that may be exercised with the aggregate subscription payment you delivered to the subscription agent. If the subscription agent
does not apply your full subscription payment to your purchase of our shares of common stock, any excess subscription payment received
by the subscription agent will be returned promptly, without interest or penalty.
Expiration Date and Amendments
The subscription period, during which you
may exercise your subscription rights, expires at 5:00 p.m., Minneapolis time, on , 2012, which is the expiration of the rights
offering. If you do not exercise your subscription rights prior to that time, your subscription rights will expire and will no
longer be exercisable. We will not be required to issue shares of common stock to you if the subscription agent receives your rights
certificate and subscription payment after that time, regardless of when the rights certificate and subscription payment were sent
by you, unless you send the documents in compliance with the guaranteed delivery procedures described below. We have the option
to extend the rights offering and the period for exercising your subscription rights, although we do not presently intend to do
so. We may extend the expiration of the rights offering by giving oral or written notice to the subscription agent prior to the
expiration of the rights offering. If we elect to extend the expiration of the rights offering, we will issue a press release announcing
such extension no later than 9:00 a.m., New York time, on the next business day after the most recently announced expiration of
the rights offering. We reserve the right to amend or modify the terms of the rights offering.
59
Subscription Price
The subscription price was determined by
a special committee of our Board of Directors. Factors considered by the committee included the strategic alternatives available
to our Company for raising capital, the price at which our shareholders might be willing to participate in the rights offering,
historical and current trading prices of our common stock, the business prospects of our Company and the general condition of the
securities market. The market price for our common stock during the rights offering may not be equal to or above the subscription
price. Furthermore, a subscribing owner of rights may be unable to sell the shares of common stock purchased in the rights offering
at a price equal to or greater than the subscription price.
We urge you to obtain a current quote for
our common stock before exercising your subscription rights.
Conditions, Withdrawal and Termination
We reserve the right to withdraw the rights
offering prior to the expiration of the rights offering for any reason. We may terminate the rights offering, in whole or in part,
if at any time before completion of the rights offering there is any judgment, order, decree, injunction, statute, law or regulation
entered, enacted, amended or held to be applicable to the rights offering that in the sole judgment of our Board of Directors would
or might make the rights offering or its completion, whether in whole or in part, illegal or otherwise restrict or prohibit completion
of the rights offering. We may waive any of these conditions and choose to proceed with the rights offering even if one or more
of these events occur. Moreover, our Board of Directors may otherwise choose in its sole discretion to terminate the rights offering
at any time and for any reason. If we terminate the rights offering, in whole or in part, all affected subscription rights will
expire without value, and all excess subscription payments received by the subscription agent will be returned promptly, without
interest or penalty. If we cancel the rights offering, we will issue a press release notifying shareholders of the cancellation,
and all subscription payments received by the subscription agent will be returned promptly, without interest or penalty.
Subscription Agent
The subscription agent for this offering
is Corporate Stock Transfer, Inc.. The address to which subscription documents, rights certificates, notices of guaranteed delivery
and subscription payments should be mailed or delivered is:
Corporate Stock Transfer, Inc.
3200 Cherry Creek South Drive, Suite 430
Denver, Colorado 80209
You are solely responsible for completing
delivery to the subscription agent of your subscription materials. The subscription materials are to be received by the subscription
agent on or prior to 5:00 p.m., Minneapolis time, on , 2012. We urge you to allow sufficient time for delivery of your subscription
materials to the subscription agent. If you deliver subscription materials in a manner different from those described in this prospectus,
we may not honor the exercise of your subscription rights.
Whom to Contact for Information
Any questions regarding our rights offering
or requests for additional copies of documents may be directed to Maslon Edelman Borman & Brand, LLP, Attn: Paul Chestovich,
at (612) 672-8305, Monday through Friday (except bank holidays), between 9:00 a.m. and 5:00 p.m., Minneapolis time.
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Fees and Expenses
We will pay all fees charged by the subscription
agent. You are responsible for paying any other commissions, fees, taxes or other expenses incurred in connection with the exercise
of the subscription rights.
No Fractional Shares
We will not issue fractional subscription
rights or fractional shares in the rights offering.
Medallion Guarantee May Be Required
Your signature on each subscription rights
certificate must be guaranteed by an eligible institution, such as a member firm of a registered national securities exchange or
a member of the Financial Industry Regulatory Authority, Inc., or a commercial bank or trust company having an office or correspondent
in the United States, subject to standards and procedures adopted by the subscription agent, unless:
·
your subscription rights certificate provides that shares are to be
delivered to you, as record holder of those subscription rights, at your address of record; or
·
you are an eligible institution.
You can obtain a signature guarantee from
a financial institution—such as a commercial bank, savings, bank, credit union or broker dealer—that participates in
one of the Medallion signature guarantee programs. The three Medallion signature guarantee programs are the following:
·
Securities Transfer Agents Medallion Program (STAMP) whose participants
include more than 7,000 U.S. and Canadian financial institutions.
·
Stock Exchanges Medallion Program (SEMP) whose participants include
the regional stock exchange member firms and clearing and trust companies.
·
New York Stock Exchange Medallion Signature Program (MSP) whose participants
include NYSE member firms.
If a financial institution is not a member
of a recognized Medallion signature guarantee program, it would not be able to provide signature guarantees. Also, if you are not
a customer of a participating financial institution, it is likely the financial institution will not guarantee your signature.
Therefore, the best source of a Medallion Guarantee would be a bank, savings and loan association, brokerage firm, or credit union
with whom you do business. The participating financial institution will use a Medallion imprint or stamp to guarantee the signature,
indicating that the financial institution is a member of a Medallion signature guarantee program and is an acceptable signature
guarantor.
Notice to Nominees
If you are a broker, dealer, custodian bank
or other nominee holder that holds shares of our common stock for the account of others on the record date, you should notify the
beneficial owners of the shares for whom you are the nominee of the rights offering as soon as possible to learn their intentions
with respect to exercising their subscription rights. You should obtain instructions from the beneficial owner, as set forth in
the instructions we have provided to you for your distribution to beneficial owners. If the beneficial owner so instructs, you
should submit information and payment for shares. We expect that the exercise of subscription rights on behalf of beneficial owners
may be made through the facilities of DTC. You may exercise individual or aggregate beneficial owner subscription rights by instructing
DTC to transfer subscription rights from your account to the account of the subscription agent, together with certification as
to the aggregate number of subscription rights exercised and the number of common shares subscribed for under the basic subscription
privilege and the over-subscription privilege, if any, and your full subscription payment.
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Beneficial Owners
If you do not hold certificates for shares
of our capital stock, you are a beneficial owner of shares of our capital stock. Instead of receiving a rights certificate, you
will receive your subscription rights through a broker, dealer, custodian bank or other nominee. We will ask your broker, dealer,
custodian bank or other nominee to notify you of the rights offering.
You should contact your broker, dealer,
custodian bank or other nominee if you do not receive information regarding the rights offering, but believe you are entitled to
subscription rights. We are not responsible if you do not receive notice by your broker, dealer, custodian bank or other nominee
or if you do not receive notice in time to respond to your nominee by the deadline established by the nominee, which may be prior
to 5:00 p.m. Minneapolis time, on , 2012.
If you wish to exercise your subscription
rights, you will need to have your broker, dealer, custodian bank or other nominee act for you. If you hold certificates for shares
of our common stock and received a rights certificate, but would prefer to have your broker, dealer, custodian bank or other nominee
act for you, you should contact your nominee and request it to effect the transaction for you.
Guaranteed Delivery Procedures
If you wish to exercise subscription rights,
but you do not have sufficient time to deliver the rights certificate evidencing your subscription rights to the subscription agent
prior to the expiration of the rights offering, you may exercise your subscription rights by the following guaranteed delivery
procedures:
·
deliver to the subscription agent prior to the expiration of the rights
offering the subscription payment for each share you elected to purchase pursuant to the exercise of subscription rights in the
manner set forth above under the caption "—Payment Method";
·
deliver to the subscription agent prior to the expiration of the rights
offering the form entitled "Notice of Guaranteed Delivery"; and
·
deliver the properly completed rights certificate evidencing your
subscription rights being exercised and the related nominee holder certification, if applicable, with any required signatures guaranteed,
to the subscription agent within three business days following the date you submit your Notice of Guaranteed Delivery.
Your Notice of Guaranteed Delivery must
be delivered in substantially the same form provided with the "Form of Instructions for Use of Western Capital Subscription
Rights Certificates," which will be distributed to you with your rights certificate. Your Notice of Guaranteed Delivery must
include a signature guarantee from an eligible institution, acceptable to the subscription agent. A form of that guarantee is included
with the Notice of Guaranteed Delivery.
In your Notice of Guaranteed Delivery, you
must provide:
·
your name;
·
the number of subscription rights represented by your rights certificate,
the number of shares of our common stock for which you are subscribing under your basic subscription privilege, and the number
of shares of our common stock for which you are subscribing under your over-subscription privilege, if any; and
·
your guarantee that you will deliver to the subscription agent a rights
certificate evidencing the subscription rights you are exercising within three business days following the date the subscription
agent receives your Notice of Guaranteed Delivery.
You may deliver your Notice of Guaranteed
Delivery to the subscription agent in the same manner as your rights certificate at the address set forth above under "—Subscription
Agent." Eligible institutions may also alternatively transmit a Notice of Guaranteed Delivery to the subscription agent by
facsimile transmission at (303) 282-5800.
62
If you require additional copies of the
Notice of Guaranteed Delivery form, you should call Paul Chestovich of Maslon Edelman Borman & Brand, LLP, at (612) 672-8305.
Validity of Subscriptions
We will resolve all questions regarding
the validity and form of the exercise of your subscription rights, including time of receipt and eligibility to participate in
the rights offering. Our determination will be final and binding. Once made, subscriptions and directions are irrevocable, and
we will not accept any alternative, conditional or contingent subscriptions or directions. We reserve the absolute right to reject
any subscriptions or directions not properly submitted or the acceptance of which would be unlawful. You must resolve any irregularities
in connection with your subscriptions before the subscription period expires, unless waived by us in our sole discretion. Neither
we nor the subscription agent shall be under any duty to notify you or your representative of defects in your subscriptions. A
subscription will be considered accepted, subject to our right to withdraw or terminate the rights offering, only when a properly
completed and duly executed rights certificate and any other required documents and the full subscription payment has been received
by the subscription agent. Our interpretations of the terms and conditions of the rights offering will be final and binding.
Escrow Arrangements; Return of Funds
The subscription agent will hold funds received
in payment for shares of our common stock in a segregated account pending completion of the rights offering. The subscription agent
will hold this money in escrow until the rights offering is completed or is withdrawn and canceled. If the rights offering is canceled
for any reason, all subscription payments received by the subscription agent will be returned promptly, without interest or penalty.
Shareholder Rights
You will have no rights as a holder of our
shares of common stock you purchase in the rights offering, if any, until certificates representing our shares of common stock
are issued to you or until your account at your record holder is credited with shares of common stock purchased in the rights offering.
You will have no right to revoke your subscriptions once made in accordance with the procedures set forth in this prospectus.
Foreign Shareholders
We will not mail this prospectus or rights
certificates to shareholders with addresses that are outside the United States or that have an army post office or foreign post
office address. The subscription agent will instead hold these rights certificates for their account. To exercise any such subscription
rights, our foreign shareholders must notify the subscription agent prior to 11:00 a.m., Minneapolis time, at least three business
days prior to the expiration of the rights offering of their exercise of such rights, and, with respect to holders whose addresses
are outside the United States, provide evidence satisfactory to us, such as a legal opinion from local counsel, that the exercise
of such subscription rights does not violate the laws of the jurisdiction of such shareholder.
No Revocation or Change
Once you submit the form of rights certificate
to exercise any subscription rights, you are not allowed to revoke or change the exercise or request a refund of monies paid. All
exercises of subscription rights are irrevocable, even if you learn information about us that you consider to be unfavorable. You
should not exercise your subscription rights unless you are certain that you wish to purchase additional common shares at the subscription
price.
Material U.S. Federal Income Tax Consequences
For U.S. federal income tax purposes, you
should not recognize income or loss upon receipt or exercise of subscription rights. For a more detailed discussion, see "Material
U.S. Federal Income Tax Consequences" below.
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Listing
The subscription rights are not transferable,
and we will not apply for listing of such rights on any exchange, market or listing service. Shares of our common stock are, and
we expect that the shares of common stock to be issued in the rights offering will be, traded on the over-the-counter Bulletin
Board (OCTBB) under the symbol "WCRS." The last reported sales price of our common stock on the OTCBB on June 13, 2012
the last practicable date before the filing of this prospectus, was $0.10. We urge you to obtain a current market price for
the shares of our common stock before making any determination with respect to the exercise of your subscription rights.
Outstanding Shares of Capital Stock after the Rights Offering
As of             ,
2012, the last practicable date before the filing of this prospectus, 5,370,789 of our shares of common stock were issued and outstanding
and there were no rights to purchase shares of our common stock outstanding. As of such date there were also 10,000,000 shares
of Series A Convertible Preferred Stock issued and outstanding. Assuming no other transactions by us involving shares of our capital
stock, and no options or other convertible securities for shares of our common stock are exercised, prior to the expiration of
the rights offering, an additional of our shares of common stock will be issued and outstanding after the closing of the rights
offering if the rights offering is fully subscribed through the exercise of subscription rights, for a total of shares of common
stock outstanding. Nevertheless, there is no minimum amount of shares that must be sold in the rights offering for us to close
the offering, accept subscriptions and access related payments. Therefore, it is possible that fewer that              shares
of common stock will be outstanding after completion of the rights offering.
Other Matters
We are not making the rights offering in
any state or other jurisdiction in which it is unlawful to do so, nor are we distributing or accepting any offers to purchase any
shares of our common stock from subscription rights holders who are residents of those states or other jurisdictions or who are
otherwise prohibited by federal or state laws or regulations from accepting or exercising the subscription rights. We may delay
the commencement of the rights offering in those states or other jurisdictions, or change the terms of the rights offering, in
whole or in part, in order to comply with the securities laws or other legal requirements of those states or other jurisdictions.
Subject to state securities laws and regulations, we also have the discretion to delay allocation and distribution of any shares
you may elect to purchase by exercise of your subscription privileges in order to comply with state securities laws. We may decline
to make modifications to the terms of the rights offering requested by those states or other jurisdictions, in which case, if you
are a resident in those states or jurisdictions or if you are otherwise prohibited by federal or state laws or regulations from
accepting or exercising the subscription rights you will not be eligible to participate in the rights offering. However, we are
not currently aware of any states or jurisdictions that would preclude participation in the rights offering.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of
certain United States federal income tax consequences to U.S. holders, as defined below, of the receipt, ownership and exercise
of the rights distributed in the subscription rights offering and ownership of the shares of common stock that would be issued
upon an exercise of the subscription rights. This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations promulgated thereunder, and applicable administrative and judicial interpretations, all as in effect as of
the date hereof and all of which are subject to change, possibly with retroactive effect. No assurance can be given that the tax
consequences described herein will not be challenged by the Internal Revenue Service (the "IRS") or that such a challenge
would not be sustained by a court. No ruling has been sought from the IRS, and no opinion of counsel has been rendered, as to the
federal income tax consequences of this rights offering.
This discussion is not a comprehensive description
of the U.S. federal income taxation considerations that may be applicable to holders in light of their particular circumstances
or to holders subject to special treatment under the U.S. federal income tax laws, including but not limited to financial institutions,
brokers and dealers in securities or currencies, insurance companies, tax-exempt organizations, persons who hold their shares as
part of a straddle, hedge, conversion or other risk-reduction transaction, persons liable for the alternative minimum tax, U.S.
expatriates, persons whose functional currency is not the U.S. dollar, persons who hold their shares through "foreign financial
institutions" within the meaning of Section 1471 of the Code, persons that could be subject to the 3.8% Medicare tax on certain
investment income beginning in 2013, or foreign taxpayers. This discussion also does not address any aspect of state, local or
foreign income or other tax laws. This discussion is limited to U.S. holders which hold our shares of common stock or preferred
stock, and would hold the subscription rights or any shares of common stock issued on an exercise of the subscription rights, as
capital assets. For purposes of this discussion, a "U.S. holder" is a holder of common stock that is, for U.S. federal
income tax purposes:
·
a citizen or resident of the United States;
·
a corporation or partnership created or organized in or under the
laws of the United States or any political subdivision thereof;
·
an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
·
a trust if a U.S. court is able to exercise primary supervision over
the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES TO YOU OF RECEIPT, OWNERSHIP AND EXERCISE OF THE RIGHTS, INCLUDING THE APPLICABILITY OF ANY FEDERAL
ESTATE OR GIFT TAX LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS.
Receipt of the Subscription Rights
You will not recognize taxable income for
U.S. federal income tax purposes in connection with the receipt of subscription rights in the rights offering.
Tax Basis and Holding Period of the Rights
The tax basis of the subscription rights
received by you in the rights offering will be zero unless either (1) the fair market value of the subscription rights on the date
such rights are distributed is equal to at least 15% of the fair market value on such date of the shares of stock with respect
to which they are received or (2) you elect to allocate part of the tax basis of such shares to the subscription rights. If
either (1) or (2) is true, then, if you exercise the subscription rights, your tax basis in your shares will be allocated between
the rights and the shares with respect to which the subscription rights were received in proportion to their respective fair market
values on the date the rights are distributed. In order to comply with applicable regulations, we expect to prepare an IRS Form
8397 and either provide the same to our shareholders or post that form on our website within 45 days of the distribution of the
subscription rights. If we determine that the value of the subscription rights on the date such rights are distributed is equal
to or exceeds 15% of the fair market value on such date of the shares of stock with respect to which the rights are received, we
expect to reflect the value of the rights which we determine, and its effect on your basis in the rights and shares, on the IRS
Form 8937. If we determine that the value of the subscription rights on such date is less than 15% of the fair market value on
such date of the shares with respect to which the rights are received, we expect to reflect the value of the rights on the IRS
Form 8937, consistent with this determination (and subject to the election that you may make to allocate basis in your shares to
the rights, as discussed above) that the subscription rights do not have an effect on your basis in shares. We have not obtained,
and may not obtain, an independent appraisal of the valuation of the rights, and any determinations we reflect on an IRS Form 8937
will not be binding on the IRS. You should consult with your tax advisor to determine the proper allocation of basis between the
rights and your shares with respect to which the rights are received.
65
Your holding period for the rights will
include your holding period for the shares with respect to which the rights were received.
Expiration of the Rights
If you allow subscription rights received
in the rights offering to expire, you will not recognize any gain or loss. If you have tax basis in the subscription rights which
was allocated from your shares, the tax basis of the expired rights will be restored to the tax basis of such shares.
Exercise of the Rights; Tax Basis and Holding Period of the
Shares
You will not recognize any gain or loss
upon the exercise of subscription rights received in the rights offering. The aggregate tax basis of the shares acquired through
exercise of the rights should equal the sum of the exercise price for such shares and your tax basis, if any, in the rights as
described above. In determining the tax basis of the shares acquired through exercise of the rights, the price paid upon exercise
of the rights should be allocated pro rata to the shares acquired. The holding period for the shares acquired through exercise
of the rights will begin on the date the rights are exercised.
Tax Treatment of Shares received on Exercise of Subscription
Rights
Distributions, if any, made on shares of
our common stock, including shares received on exercise of subscription rights, generally will be ordinary dividend income to the
extent of our current and accumulated earnings and profits. If you are a noncorporate holder of our shares, for taxable years beginning
before January 1, 2013, such dividends are generally taxed at a maximum U.S. federal income tax rate of 15%, provided certain holding
period requirements are satisfied. Distributions in excess of our current and accumulated earnings and profits will be treated
as a return of capital to the extent of your adjusted tax basis in the shares and thereafter as capital gain from the sale or exchange
of such shares. If you are a corporation, or are taxed as a corporation, you may be eligible for a dividends received deduction
on dividends you receive on our shares, subject to applicable limitations.
Upon the sale, exchange, certain redemptions
or other taxable dispositions of shares of our common stock, you generally will recognize capital gain or loss equal to the difference
between (i) the amount of cash and the fair market value of any property received upon such taxable disposition and (ii) your adjusted
tax basis in the shares. Such capital gain or loss will be long-term capital gain or loss if your holding period in the shares
is more than one year at the time of the taxable disposition. Otherwise, such gain or loss will be short-term capital gain or loss.
If you are a noncorporate holder of our shares, any long-term capital gains you recognize will generally be subject to a maximum
U.S. federal income tax rate of 15%. This maximum tax rate is currently scheduled to increase to 20% for dispositions occurring
during taxable years beginning on or after January 1, 2013. The deductibility of capital losses is subject to limitations.
Backup Withholding and Information Reporting
In general, if you are not a corporation,
we are required to report to the IRS dividends paid to you on shares and proceeds you receive from a disposition of shares in a
transaction with the Company. Backup withholding may also apply to any payments if you fail to provide an accurate taxpayer identification
number or you are notified by the IRS that you have previously failed to report all dividends or certain other income required
to be shown on your federal income tax returns. Backup withholding is not an additional tax. Any amounts withheld under the backup
withholding rules will be allowed as a refund or credit against your United States federal income tax liability, provided the required
information is furnished to the IRS.
66
MARKET INFORMATION
Our common stock is listed for trading
on the OTC Bulletin Board, the "OTCBB," under the symbol "WCRS." The transfer agent and registrar for
our common stock is Corporate Stock Transfer, Inc., 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209. The following
table sets forth the high and low bid prices for our common stock as reported by the OTC Bulletin Board in 2011 and 2010. These
quotations reflect inter-dealer prices, without retail mark-up, markdown, or commission, and may not represent actual transactions.
Trading in the Company's common stock during the period represented was sporadic, exemplified by low trading volume and
many days during which no trades occurred. On or about March 1, 2010, our common stock also began trading on the "OTCQB",
which is the OTC Markets' middle-tier over-the-counter quotation platform. OTC Markets is the entity formerly known as "The
Pink Sheets."
Market Price (high/low)
For the Fiscal Year
2012
2011
2010
First Quarter
$
0.09 – 0.01
$
0.04 – 0.02
$
0.30 – 0.08
Second Quarter
$
n/a
$
0.06 – 0.02
$
0.18 – 0.02
Third Quarter
$
n/a
$
0.03 – 0.01
$
0.08 – 0.02
Fourth Quarter
$
n/a
$
0.04 – 0.01
$
0.19 – 0.02
On June 5, 2012, the last practicable date
before the filing of this prospectus, the last reported sales price of our common stock on the OTCBB was $ per share. As of June
1, 2012, there were approximately 540 holders of record.
Holders of our common stock are entitled
to share pro rata in dividends and distributions with respect to the common stock when, as and if declared by our Board of Directors
out of funds legally available therefor. We have not paid any dividends on our common stock and intend to retain earnings, if any,
to finance the development and expansion of our business. In addition, we must first pay preferred dividends on its Series A Convertible
Preferred Stock as described under the caption "Description of Equity Securities" below. The current dividend payable
to the holders of Series A Convertible Preferred Stock aggregates to $525,000 on a quarterly basis. Other than with respect to
shares of Series A Convertible Preferred Stock, future dividend policy is subject to the sole discretion of our Board of Directors
and will depend upon a number of factors, including future earnings, capital requirements and our financial condition. As of March
31, 2012, we had an outstanding accrued but unpaid and cumulated dividends on our Series A Convertible Preferred Stock aggregating
to $4,075,000.
DESCRIPTION OF SECURITIES
The following is a description of the
common stock we are registering, our outstanding preferred stock, and certain material provisions of Minnesota law, our Articles
of Incorporation, and our corporate bylaws. The following is only a summary and is qualified by applicable law, our Articles of
Incorporation, and our corporate bylaws. Copies of our Articles of Incorporation and corporate bylaws are included as exhibits
to the registration statements of which this prospectus is a part and are available as set forth under "Where You Can Find
More Information."
General
As of the date of this prospectus, there
were 5,397,780 shares of our common stock issued and outstanding, and approximately 540 holders of record of our common stock,
and there were 10,000,000 shares of our Series A Convertible Preferred Stock issued and outstanding held by two holders of record.
Our authorized capital consists of 250,000,000 shares of capital stock, no par value (unless otherwise designated), of which 10,000,000
shares have been designated for issuance as preferred stock, with a par value of $0.01 per share. As of the date of this prospectus,
we had outstanding no options or warrants for the purchase of any capital shares.
Common Stock
Voting
. The holders of our common
stock are entitled to one vote for each outstanding share of common stock owned by that shareholder on every matter properly submitted
to the shareholders for their vote. Shareholders are not entitled to vote cumulatively for the election of directors.
67
Dividend Rights
. Subject to the dividend
rights of the holders of any outstanding series of preferred stock, holders of our common stock are entitled to receive ratably
such dividends and other distributions of cash or any other right or property as may be declared by our Board of Directors out
of our assets or funds legally available for such dividends or distributions.
Liquidation Rights
. In the event
of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, holders of our common stock would be entitled
to share ratably in our assets that are legally available for distribution to shareholders after payment of liabilities. If we
have any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution or liquidation
preferences. In either such case, we must pay the applicable distribution to the holders of our preferred stock before we may pay
distributions to the holders of our common stock.
Conversion, Redemption and Preemptive
Rights
. Holders of our common stock have no conversion, redemption, preemptive, subscription or similar rights.
Preferred Stock
Of our 250 million shares of authorized
capital, we have designated 10,000,000 for issuance as "Series A Convertible Preferred Stock." Each share of Series
A Convertible Preferred Stock carries a $2.10 stated value and entitles its holders to (i) a cumulative 10% dividend, payable on
a quarterly basis; (ii) in the event of a liquidation or dissolution of the Company, a preference in the amount of all accrued
but unpaid dividends plus the stated value of such shares before any payment shall be made or any assets distributed to the holders
of any junior securities; (iii) convert their preferred shares into our common shares on a share-for-share basis, subject to adjustment;
and (iv) vote their preferred shares on an as-if-converted basis. We have the right to redeem some or all of such preferred shares,
at any time upon 60 days' advance notice, at a price equal to $3.50 per share plus accrued but unpaid dividends thereon.
Holders of our Series A Convertible Preferred Stock have no preemptive or cumulative-voting rights.
Anti-Takeover Provisions
The following is a description of certain
provisions of the Minnesota Business Corporation Act and our corporate bylaws that are likely to discourage any unfriendly attempt
to obtain control of the Company. This summary does not purport to be complete and is qualified in its entirety by reference to
the Minnesota Business Corporation Act and our corporate bylaws.
Minnesota Business Combination Act
We are subject to the Minnesota Business
Combination Act, Section 302A.673 of the Minnesota Business Corporation Act. Subject to certain qualifications and exceptions,
the statute prohibits an "interested shareholder" of certain Minnesota corporations that are termed "issuing
public corporations" (which definition Western Capital satisfies) from effecting any "business combination" with
the corporation for a period of four years from the date the shareholder becomes an "interested shareholder" unless
the corporation's Board of Directors approved the business combination prior to the shareholder becoming an "interested
shareholder" or otherwise approved the shareholder becoming an "interested shareholder."
An "interested shareholder"
is defined to include (i) any beneficial owner of 10% or more of the voting power of the outstanding voting stock of the corporation,
or (ii) any affiliate or associate of the corporation, that, within the prior four-year period has at any time directly or indirectly
beneficially owned 10% or more of the voting power of the then-outstanding stock of the corporation.
The term "business combination"
is defined broadly to include, among other things:
·
the merger, consolidation or share exchange of the corporation with
the interested shareholder or any corporation that is, or after the merger, consolidation or share exchange would be, an affiliate
or associate of the interested shareholder (subject to certain exceptions);
·
the sale, lease, exchange, mortgage, pledge, transfer or other disposition
to or with an interested shareholder or any affiliate or associate of the interested shareholder, of assets of the corporation
or any subsidiary (i) having an aggregate market value of 10% or more of the corporation's consolidated assets, (ii) having
an aggregate market value of 10% or more of the market value of all outstanding shares of the corporation, or (iii) representing
10% or more of the earning power or net income of the corporation determined on a consolidated basis (subject to certain exceptions);
or
68
·
the issuance or transfer to an interested shareholder or any affiliate
or associate of the interested shareholder of 5% or more of the aggregate market value of the outstanding stock of the corporation
(subject to certain exceptions).
The statute is designed to protect minority
shareholders by prohibiting transactions in which an acquirer could favor itself at the expense of minority shareholders. The statute's
prohibition on the issuance or transfer to an interested shareholder of 5% or more of the aggregate market value of the outstanding
stock of a corporation is subject to an exemption for shares purchased pursuant to the exercise of rights offered on a pro rata
basis to all shareholders, such as this rights offering.
Bylaws
Certain provisions of our corporate bylaws
could have anti-takeover effects. These provisions are intended to enhance the likelihood of continuity and stability in the composition
of our corporate policies formulated by our Board of Directors. In addition, these provisions also are intended to ensure that
our Board of Directors will have sufficient time to act in what our Board of Directors believes to be in the best interests of
us and our shareholders. However, these provisions could delay or frustrate the removal of incumbent directors or the assumption
of control of us by the holder of a large block of common stock, and could also discourage or make more difficult a merger, tender
offer, or proxy contest, even if such event would be favorable to the interest of our shareholders. These provisions are summarized
below.
Advance Notice Provisions for Raising
Business or Nominating Directors
. Sections 3.3 and 3.6 of our bylaws contain advance-notice provisions relating to the ability
of shareholders to raise business at a shareholder meeting and make nominations for directors to serve on our Board of Directors.
These advance-notice provisions generally require shareholders to raise business within a specified period of time prior to a meeting
in order for the business to be properly brought before the meeting. Similarly, our bylaws prescribe the timing of submissions
for nominations to our Board of Directors and the certain of factual and background information respecting the nominee and the
shareholder making the nomination.
Limited Shareholder Action in Writing
.
Our bylaws provide that shareholder action can be taken only at an annual or special meeting of shareholders and cannot be taken
by written consent in lieu of a meeting by fewer than all shareholders entitled to vote. This provision is consistent with the
Minnesota Business Corporation Act, which does not allow for fewer than all shareholders of a public corporation to take action
other than at an actual meeting of the shareholders.
Number of Directors and Vacancies
.
Our bylaws provide that the number of directors shall be determined from time to time by a vote of shareholders; provided, that
the number of directors comprising the board may be increased (but not decreased) by a majority of the directors then serving on
the board. The bylaws also provide that our board has the exclusive right, except as may be provided in the terms of any series
of preferred stock created by resolutions of the board, to fill vacancies, including vacancies created by any decision of our board
to increase the number of directors serving.
Articles of Incorporation –
Blank-Check Preferred Stock Power
Under our Articles of Incorporation, our
board has the authority to fix by resolution the terms and conditions of one or more series of preferred stock and provide by resolution
for the issuance of shares of such series.
We believe that the availability of our
preferred stock, in each case issuable in series, and additional shares of common stock could facilitate certain financings and
acquisitions and provide a means for meeting other corporate needs which might arise. The authorized shares of our preferred stock,
as well as authorized but unissued shares of common stock, will be available for issuance without further action by our shareholders,
unless shareholder action is required by applicable law or the rules of any stock exchange on which any series of our stock may
then be listed, or except as may be provided in the terms of any preferred stock created by resolution of our board.
69
These provisions give our board the power
to approve the issuance of a series of preferred stock, or additional shares of common stock, that could, depending on its terms,
either impede or facilitate the completion of a merger, tender offer or other takeover attempt. For example, the issuance of new
shares of preferred stock might impede a business combination if the terms of those shares include voting rights which would enable
a holder to block business combinations or, alternatively, might facilitate a business combination if those shares have general
voting rights sufficient to cause an applicable percentage vote requirement to be satisfied.
PLAN OF DISTRIBUTION
As soon as practicable after the
record date for the rights offering, we will distribute the rights, rights certificates, and copies of this prospectus to
individuals who owned shares of our capital stock on , 2012. If you wish to exercise your rights and purchase shares of
common stock, you should complete the rights certificate and return it by mail, hand, express mail, courier or other
expedited service, together with payment for the shares, to the subscription agent at the following address:
Corporate Stock Transfer, Inc.
3200 Cherry Creek South Drive, Suite 430
Denver, Colorado 80209
For more information, see the section of
this prospectus entitled "The Rights Offering." If you have any questions, you should contact Maslon Edelman Borman
& Brand, LLP, Attn: Paul Chestovich, at (612) 672-8305.
We do not know of any existing agreements
between any shareholder, broker, dealer, underwriter, or agent relating to the sale or distribution of the common stock underlying
the rights.
DISCLOSURE OF COMMISSION POSITION
ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Our Articles of Incorporation and our corporate
bylaws contain provisions indemnifying our directors and officers to the fullest extent permitted by Minnesota law. In addition,
and as permitted by Minnesota law, our Articles of Incorporation provide that no director will be liable to us or our shareholders
for monetary damages for breach of certain fiduciary duties as a director. The effect of this provision is to restrict our rights
and the rights of our shareholders in derivative suits to recover monetary damages against a director for breach of certain fiduciary
duties as a director, except that a director will be personally liable for:
·
any breach of his or her duty of loyalty to us or our shareholders;
·
acts or omissions not in good faith which involve intentional misconduct
or a knowing violation of law;
·
the payment of an improper dividend or an improper repurchase of our
stock in violation of Minnesota law or in violation of federal or state securities laws; or
·
any transaction from which the director derived an improper personal
benefit.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons, we have been advised
that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore
unenforceable.
70
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports,
proxy statements and other information with the SEC. Our SEC filings, including the registration statement and exhibits, are available
to the public at the SEC's website at
http://www.sec.gov
. You may also read and copy any document we file at the SEC's
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 for information on the
operating rules and procedures for the public reference room.
We maintain an Internet site at
http://www.westerncapitalresources.com
.
We have not incorporated by reference into this prospectus the information on our website, and you should not consider it to be
a part of this prospectus.
This prospectus does not contain all of
the information included in the registration statement. We have omitted certain parts of the registration statement in accordance
with the rules and regulations of the SEC. For further information, we refer you to the registration statement, including its exhibits
and schedules, which may be found at the SEC's website referenced above. Statements contained in this prospectus and any
accompanying prospectus supplement about the provisions or contents of any contract, agreement or any other document referred to
are not necessarily complete. Please refer to the actual exhibit for a more complete description of the matters involved.
Any questions you may have regarding the
rights offering or requests for additional copies of documents may be directed to Maslon Edelman Borman & Brand, LLP, Attn:
Paul Chestovich at (612) 672-8305, Monday through Friday (except bank holidays), between 9:00 a.m. and 5:00 p.m., Minneapolis time.
LEGAL MATTERS
The validity of the subscription rights
and the shares of common stock offered by this prospectus have been passed upon for us by Maslon Edelman Borman & Brand, LLP
of Minneapolis, Minnesota.
EXPERTS
The consolidated financial statements of
Western Capital Resources, Inc. and its subsidiaries as of and for the years ended December 31, 2011 and 2010, included in this
prospectus and in the related registration statement, have been audited by Lurie Besikof Lapidus LLP, an independent registered
public accounting firm. As indicated in their report with respect thereto, these consolidated financial statements are included
in this prospectus in reliance upon the authority of such firm as experts in auditing and accounting, with respect to such report.
71
FINANCIAL INFORMATION
Western Capital Resources, Inc.
Page No.
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets as of December 31, 2011 and 2010
F-3
Consolidated Statements of Income for the years ended December 31, 2011 and 2010
F-4
Consolidated Statements of Changes in Shareholder Equity for the years ended December 31, 2011 and 2010
F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010
F-6
Notes to Consolidated Financial Statements
F-7
Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011
F-21
Condensed Consolidated Statements of Income for the periods ended March 31, 2012 and 2011
F-22
Condensed Consolidated Statements of Cash Flows for the periods ended March 31, 2012 and 2011
F-23
Notes to Condensed Consolidated Financial Statements
F-24
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM ON CONSOLIDATED FINANCIAL STATEMENTS
Board of Directors
Western Capital Resources, Inc.
Omaha, Nebraska
We have audited the accompanying
consolidated balance sheets of Western Capital Resources, Inc. and Subsidiaries as of December 31, 2011 and 2010, and the related
consolidated statements of income, shareholders' equity, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the financial position of Western Capital Resources,
Inc. and Subsidiaries as of December 31, 2011 and 2010 and the results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in the United States of America.
Minneapolis, Minnesota
/s/ Lurie Besikof Lapidus &
Company, LLP
March 30, 2012
F-
2
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
December 31,
2011
2010
ASSETS
CURRENT ASSETS
Cash
$
1,909,442
$
2,092,386
Loans receivable (less allowance for losses of $1,001,000 and $1,165,000)
4,887,813
4,743,906
Inventory
756,528
502,415
Prepaid expenses and other
451,751
152,736
Deferred income taxes
413,000
467,000
TOTAL CURRENT ASSETS
8,418,534
7,958,443
PROPERTY AND EQUIPMENT
757,747
824,102
GOODWILL
12,393,869
11,458,744
INTANGIBLE ASSETS
309,552
434,413
OTHER
142,074
95,180
TOTAL ASSETS
$
22,021,776
$
20,770,882
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities
$
2,323,730
$
1,477,607
Income tax payable
-
435,670
Note payable – short-term
1,000,000
2,000,000
Current portion long-term debt
695,123
769,330
Preferred dividend payable
3,550,000
1,450,000
Deferred revenue
314,561
320,021
TOTAL CURRENT LIABILITIES
7,883,414
6,452,628
LONG-TERM LIABILITIES
Note payable – long-term
1,210,065
905,188
Deferred income taxes
530,000
350,000
TOTAL LONG-TERM LIABILITIES
1,740,065
1,255,188
TOTAL LIABILITIES
9,623,479
7,707,816
SHAREHOLDERS' EQUITY
Series 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
100,000
Common stock, no par value, 240,000,000 shares authorized, 7,446,007 and 7,446,007 shares issued and outstanding.
-
-
Additional paid-in capital
18,221,777
18,221,777
Accumulated deficit
(5,923,480
)
(5,258,711
)
TOTAL SHAREHOLDERS' EQUITY
12,398,297
13,063,066
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
22,021,776
$
20,770,882
See notes
to consolidated financial statements.
F-
3
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
Year ended December 31,
2011
2010
REVENUES
Payday loan fees
$
9,663,130
$
10,607,136
Phones and accessories
4,585,584
4,094,049
Cricket service fees
3,741,495
1,419,446
Installment interest income
538,273
-
Check cashing fees
682,094
739,733
Other income and fees
277,344
1,118,083
19,487,920
17,978,447
STORE EXPENSES
Salaries and benefits
4,702,051
4,573,346
Provisions for loan losses
1,396,724
1,279,547
Phone and accessories cost of sales
2,857,294
1,706,160
Occupancy
1,686,373
1,852,279
Advertising
333,453
363,171
Depreciation
275,389
280,250
Amortization of intangible assets
435,861
517,656
Other
2,417,441
2,327,611
14,104,586
12,900,020
INCOME FROM STORES
5,383,334
5,078,427
GENERAL & ADMINISTRATIVE EXPENSES
Salaries and benefits
1,735,686
1,527,797
Depreciation
23,741
17,677
Interest expense
290,913
405,249
Other
1,014,763
1,026,763
3,065,103
2,977,486
INCOME BEFORE INCOME TAXES
2,318,231
2,100,941
INCOME TAX EXPENSE
883,000
752,000
NET INCOME
1,435,231
1,348,941
SERIES A CONVERTIBLE PREFERRED STOCK DIVIDENDS (assumes all paid)
(2,100,000
)
(2,100,000
)
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
$
(664,769
)
$
(751,059
)
NET LOSS PER COMMON SHARE -
Basic and diluted
$
(0.09
)
$
(0.10
)
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING -
Basic and diluted
7,446,007
7,584,637
See notes
to consolidated financial statements.
F-
4
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY
Series A Convertible
Preferred Stock
Common Stock
Additional
Paid-In
Retained
Shareholders'
Shares
Amount
Shares
Amount
Capital
Deficit
Equity
BALANCE - December 31, 2009
10,000,000
$
100,000
7,996,007
$
-
$
18,478,337
$
(4,676,212
)
$
13,902,125
Shares retired
-
-
(550,000
)
-
(256,560
)
168,560
(88,000
)
Dividends
-
-
-
-
-
(2,100,000
)
(2,100,000
)
Net income
-
-
-
-
-
1,348,941
1,348,941
BALANCE - December 31, 2010
10,000,000
100,000
7,446,007
-
18,221,777
(5,258,711
)
13,063,066
Dividends
-
-
-
-
-
(2,100,000
)
(2,100,000
)
Net income
-
-
-
-
-
1,435,231
1,435,231
BALANCE - December 31, 2011
10,000,000
$
100,000
7,446,007
$
-
$
18,221,777
$
(5,923,480
)
$
12,398,297
See notes to
consolidated financial statements.
F-
5
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2011
2010
OPERATING ACTIVITIES
Net Income
$
1,435,231
$
1,348,941
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
299,130
297,927
Amortization
435,861
517,656
Shares received for reimbursement of expenses
-
(88,000
)
Deferred income taxes
234,000
119,000
Loss on disposal of property and equipment
28,172
57,650
Changes in operating assets and liabilities:
Loans receivable
(100,876
)
131,964
Inventory
(254,113
)
(128,557
)
Prepaid expenses and other assets
(334,283
)
97,944
Accounts payable and accrued liabilities
411,453
414,515
Deferred revenue
(5,460
)
(25,805
)
Net cash provided by operating activities
2,149,115
2,743,235
INVESTING ACTIVITIES
Purchases of property and equipment
(145,947
)
(103,964
)
Acquisition of stores, net of cash acquired
(1,416,782
)
-
Net cash used by investing activities
(1,562,729
)
(103,964
)
FINANCING ACTIVITIES
Net advances on notes payable
-
205,628
Payments on notes payable – long-term
(769,330
)
(629,075
)
Dividends
-
(1,650,000
)
Net cash used by financing activities
(769,330
)
(2,073,447
)
NET INCREASE (DECREASE) IN CASH
(182,944
)
565,824
CASH
Beginning of year
2,092,386
1,526,562
End of year
$
1,909,442
$
2,092,386
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid
$
1,094,468
$
343,103
Interest paid
$
290,954
$
401,594
Noncash investing and financing activities:
Refinancing of note payable – short-term
$
-
$
1,636,044
See notes
to consolidated financial statements.
F-
6
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Basis
                                                                                              of Presentation, Nature of Business
                                                                                              and Summary of Significant Accounting
                                                                                              Policies –
Nature of Business/ Basis
of Presentation
Western Capital Resources, Inc.
(WCR) through its wholly owned operating subsidiaries, Wyoming Financial Lenders, Inc. (WFL) and PQH, 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.  The Company operated 52 "Payday" stores in nine states (Colorado, Iowa, Kansas,
Nebraska, North Dakota, South Dakota, Utah, Wisconsin and Wyoming) as of December 31, 2011 and 51 "Payday" stores
in 2010. The Company operated 45 Cricket wireless retail stores in 13 states (Arizona, Colorado, Idaho, Illinois, Indiana, Iowa,
Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon and Texas) as of December 31, 2011 and 31 Cricket wireless retail stores in
eight states (Illinois, Indiana, Iowa, Kansas, Maryland, Missouri, Nebraska and Texas) as of December 31, 2010.  The
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 and installment 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 a cash advance 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. Installment loans provide customers with cash in exchange for a promissory note with a maturity of generally
three to six months and are unsecured. The fee and interest rate on installment loans vary based on applicable regulations.
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 consolidated
financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that may affect certain reported amounts and disclosures in the consolidated financial statements
and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed
to be reasonable under the circumstances. Actual results could differ from those estimates. Significant management estimates relate
to the loans receivable allowance, allocation of and carrying value of goodwill and intangible assets, inventory valuation and
obsolescence and deferred taxes and tax uncertainties.
Revenue Recognition
The Company recognizes fees on
cash advance loans on a constant-yield basis ratably over the loans' terms. Title and installment loan fees and interest
are recognized using the interest method, except that installment loan origination fees are recognized as they become non-refundable
and installment loan maintenance fees are recognized when earned. 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.
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CAPITAL RESOURCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Loans Receivable Allowance
We maintain a loan loss allowance
for anticipated losses for our payday, installment 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.
Included in loans receivable
are payday loans that are currently due or past due and payday 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.  Also included in loans receivable are current and delinquent
installment and title loans. Loans are carried at cost less the loans receivable allowance.  The Company does not specifically
reserve for any individual loan.  The Company aggregates loan types for purposes of estimating the loss allowance using
a methodology that analyzes historical portfolio statistics and management's judgment regarding recent trends noted in the
portfolio.  This methodology takes into account several factors, including 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 42% of
the returned items.  Based on days past the check return date, write-offs of returned items historically have tracked
at the following approximately percentages: 1 to 30 days – 42%; 31 to 60 days – 66%; 61 to 90 days – 82%; 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 loans receivable 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.
At December 31, 2011 and 2010
our outstanding loans receivable aging was as follows:
December 31,
2011
2010
Current
$
4,626,000
$
4,542,000
1-30
297,000
276,000
31 – 60
220,000
234,000
61 – 90
223,000
209,000
91 - 120
171,000
220,000
121 – 150
189,000
227,000
151 – 180
163,000
201,000
5,889,000
5,909,000
Allowance for losses
(1,001,000
)
(1,165,000
)
$
4,888,000
$
4,744,000
A rollforward of the Company's
loans receivable allowance for the years ended December 31, 2011 and 2010 is as follows:
Year Ended December 31,
2011
2010
Loans receivable allowance, beginning of year
$
1,165,000
$
1,237,000
Provision for loan losses charged to expense
1,397,000
1,280,000
Charge-offs, net
(1,561,000
)
(1,352,000
)
Loans receivable allowance, end of year
$
1,001,000
$
1,165,000
Inventory
Inventory, consisting of phones
and accessories, is stated at cost, determined on the specific identification and a first-in, first-out basis, respectively.
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CAPITAL RESOURCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Property and Equipment
Property and equipment are recorded
at cost less accumulated depreciation. Depreciation is provided on the straight-line method over the estimated useful lives of
the related assets. Useful lives generally range from five to seven years for furniture, equipment, and vehicles. Leasehold improvements
are amortized using the straight-line method over the lesser of the estimated useful lives of the related assets or the leases
term, and this amortization is included with depreciation.
Goodwill
Goodwill represents the excess
of cost over the fair value of net assets acquired using purchase accounting and is not amortized.
Intangible Assets
Customer relationships represent
the fair values management assigned to relationships with customers acquired through business acquisitions and is amortized over
three years on an accelerated basis based on management's estimates of attrition of the acquired customers.
Long- Lived Assets
The Company assesses the possibility
of impairment of long-lived and intangible assets whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Factors that could trigger an impairment review include significant underperformance relative to expected
historical or projected future cash flows, significant changes in the manner of use of acquired assets or the strategy for the
overall business, and significant negative industry events or trends. In addition, we conduct an
annual
goodwill impairment test as of October 1 each year
. W
e assess our goodwill for impairment at
the reporting unit level by applying a fair value test. This fair value test involves a two-step process. The first step is to
compare the carrying value of our net assets to our fair value. If the fair value is determined to be less than the carrying value,
a second step is performed to measure the amount of the impairment, if any.
Due to the effect of our capital
structure involving preferred stock and related cumulative preferred dividends, the market capitalization approach of valuing
the reporting unit as a whole is not practical. The discounted future cash flows method is utilized in estimating value. When
estimated future cash flows are less than the carrying value of the net assets and related goodwill, an impairment test is performed
to measure and recognize the amount of the impairment loss, if any. There were no impairment charges recorded in 2011 or 2010.
Concentrations of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist of cash and loans receivable. The Company's cash
is placed with high quality financial institutions. From time to time, cash balances exceed federally insured limits. The Company
has not experienced any significant losses with respect to its cash. Loans receivable, while concentrated in geographical areas,
are dispersed among numerous customers.
Income Taxes
Deferred income taxes reflect
the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting
amounts, based on enacted tax laws and statutory tax rates applicable in the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected
to be realized. The provision for income taxes represents taxes paid or payable for the current year and changes during the year
in deferred tax assets and liabilities.
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 (convertible
preferred shares) when dilutive. The 10 million shares of potentially dilutive Series A Convertible Preferred Stock outstanding
at December 31, 2011 and 2010 were anti-dilutive and therefore excluded from the dilutive net loss per share computation:
F-
9
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31,
2011
2010
Series A Convertible Preferred Stock
10,000,000
10,000,000
Fair Value of Financial Instruments
The amounts reported in the balance
sheets for cash, loans receivable, inventory, and accounts payable are short-term in nature and their carrying values approximate
fair values. The amounts reported in the balance sheets for notes payable are both long-term and short-term and their carrying
value approximates fair value.
Recent Accounting Pronouncements
In July 2010, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-20 "
Receivables (Topic 310) – Disclosures
about the Credit Quality of Financing Receivables and the Allowance for Credit Losses."
ASU 2010-20 requires
extensive new disclosures about financing receivables, including credit risk exposures and the allowance for credit losses.  For
public entities, ASU 2010-20 disclosures of period-end balances are effective for interim or annual reporting periods ending on
or after June 15, 2011, as updated by ASU 2011-01.  Disclosures related to activity that occurs during the reporting
period are required for interim and annual reporting periods beginning on or after December 15, 2010. The Company adopted this
standard with no material impact on its consolidated financial statements.
In May 2011, the FASB issued
ASU No. 2011-04 "
Fair Value Measurement (Topic820) – Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRS
." ASU 2011-04 results in common fair value measurement and disclosure requirements
in U.S. GAAP and IFRSs. For public entities, ASU 2011-04 is effective for interim or annual reporting periods ending on or after
December 15, 2011. We are assessing the impact of ASU 2011-04 on our consolidated financial statements.
In September 2011, the Financial
Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-08 "
Intangibles – Goodwill
and Other (Topic 350) – Testing Goodwill for Impairment."
ASU 2011-08 allows an entity the option to make a qualitative
evaluation about the likelihood of goodwill impairment to determine whether it should perform additional steps to determine if
there is goodwill impairment. The amendments are effective for annual and interim goodwill tests performed for fiscal years beginning
after December 15, 2011, early adoption being permitted. The adoption of ASU 2011-08 is not expected to have an impact on our
consolidated financial statements.
2.
Acquisitions/Dispositions
                                                                                                 –
In 2011 the Company purchased
the assets of various stores in separate transactions. The aggregate purchase price totaled $1,421,000.
In September through December
2011, the Company acquired 17 retail storefronts (Arizona (2), Colorado (2), Idaho, (1), Illinois (4), Missouri (1), Nebraska
(1), Ohio (1), Oklahoma (3) and Oregon (2)) for $1,373,000. Fourteen of the storefronts were previously Cricket corporate owned
stores and 3 were acquired from another Cricket dealer.
In October
2011, the Company acquired one Payday store in Iowa for $48,000.
The Company
made no material acquisitions in 2010.
F-
10
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Under the
purchase method of accounting the assets and liabilities of the aforementioned acquisitions were recorded at their respective
fair values as of the purchase date as follows:
Year Ended
December 31, 2011
Cash
$
4,000
Loans receivable
43,000
Property and equipment
115,000
Intangible assets
311,000
Goodwill
935,000
Other non-current assets
12,000
Other
1,000
$
1,421,000
The results
of the operations for the acquired locations have been included in the consolidated financial statements since the date of the
acquisitions. The following table presents the unaudited pro forma results of operations for the year ended December 31, 2011
and 2010, as if the acquisitions had been consummated at the beginning of 2010. The pro forma results of operations are prepared
for comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisition occurred
at the beginning of the 2010 or the results which may occur in the future.
For the Year Ended December 31,
2011
2010
Pro forma revenue
$
25,996,000
$
25,788,000
Pro forma net loss
$
(148,100
)
$
(232,400
)
Pro forma net loss per common share – basic and diluted
$
(0.02
)
$
(0.03
)
3.
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 years ended December 31, 2011 and 2010:
For the Year Ended December 31, 2011
For the Year Ended December 31, 2010
Payday
Cricket
Wireless
Total
Payday
Cricket
Wireless
Total
Revenues
$
11,211,739
$
8,276,181
$
19,487,920
$
11,753,254
$
6,225,193
$
17,978,447
Depreciation and amortization
$
151,249
$
583,742
$
734,991
$
183,186
$
632,397
$
815,583
Interest expense
$
-
$
290,913
$
290,913
$
144
$
405,105
$
405,249
Income tax expense (benefit)
$
963,000
$
(80,000
)
$
883,000
$
1,009,000
$
(257,000
)
$
752,000
Net income (loss)
$
1,575,757
$
(140,526
)
$
1,435,231
$
1,745,791
$
(396,850
)
$
1,348,941
Total segment assets
$
15,037,112
$
6,984,665
$
22,021,776
$
15,481,283
$
5,289,599
$
20,770,882
Expenditures for segmented assets
$
55,216
$
1,451,856
$
1,507,072
$
101,991
$
51,973
$
153,964
F-
11
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
4.
Property and Equipment –
Property and equipment consisted
of the following:
For the Year Ended December 31,
2011
2010
Furniture and equipment
$
1,076,225
$
938,535
Leasehold improvements
727,570
705,909
Other
71,766
71,983
1,875,561
1,716,427
Less accumulated depreciation
1,117,814
892,325
$
757,747
$
824,102
Depreciation expense on all operations
for the year ended December 31, 2011 and 2010 was $299,130 and $297,927, respectively.
5.
Intangible Assets –
Intangible assets consisted of
the follows:
For the Year Ended December 31,
2011
2010
Customer relationships
$
4,453,912
$
4,142,912
Less accumulated amortization
4,144,360
3,708,499
$
309,552
$
434,413
As of December 31, 2011, estimated
future amortization expense for the customer relationships is as follows:
2012
$
175,000
2013
88,000
2014
47,000
$
310,000
6.
Note Payable – Short Term –
The Company's short-term
debt is as follows:
December 31,
2011
2010
Note payable to WERCS with interest payable monthly at the fixed rate of 12%.  The note was extended to April 1, 2012, is collateralized by substantially all assets of WFL and shares of stock of WFL, and contains certain financial and compliance covenants, as defined.
$
1,000,000
$
2,000,000
$
1,000,000
$
2,000,000
F-
12
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
7.
Notes Payable – Long Term –
The Company's long-term
debt is as follows:
December 31,
2011
2010
Note payable (with a credit limit of $2,000,000) to River City Equity, Inc., a related party, with interest payable monthly at 12% due September 30, 2013 and upon certain events  can be collateralized by substantially all assets of WCR.
$
1,000,000
$
-
Note payable to a related party with interest payable monthly at 10%, due March 1, 2013 and collateralized by substantially all assets of select locations of PQH.
449,340
770,638
Note payable to a related party with interest payable monthly at 10%, due April 1, 2013 and collateralized by substantially all assets of select locations of PQH.
440,499
711,140
Note payable with interest payable monthly at 7%, amortized through January 1, 2012 and collateralized by substantially all assets of select locations of PQH.
15,349
192,740
Total
1,905,188
1,674,518
Less current maturities
(695,123
)
(769,330
)
$
1,210,065
$
905,188
Estimated repayments are as follows:
2012
$
695,123
2013
1,210,065
$
1,905,188
8.
Income Taxes –
The Company's provision
for income taxes is as follows:
For the Year Ended December 31,
2011
2010
Current:
Federal
$
549,000
$
525,000
State
100,000
108,000
649,000
633,000
Deferred:
Federal
197,000
100,000
State
37,000
19,000
234,000
119,000
$
883,000
$
752,000
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13
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income tax assets
(liabilities) are summarized as follows:
As of December
    31,
2011
2010
Current
Non-Current
Current
Non-Current
Deferred income tax assets:
Allowance for loan receivable
$
380,000
$
-
$
442,000
$
-
Other
33,000
-
25,000
-
413,000
-
467,000
-
Deferred income tax liabilities:
Property and equipment
-
(163,000
)
-
(194,000
)
Goodwill and intangible assets
-
(367,000
)
-
(156,000
)
-
(530,000
)
-
(350,000
)
Net
$
413,000
$
(530,000
)
$
467,000
$
(350,000
)
Reconciliations from the statutory
federal income tax rate to the effective income tax rate are as follows:
For the Year Ended December 31,
2011
2010
Income tax expense using the statutory federal rate
$
788,000
$
714,000
State income taxes, net of federal benefit
92,000
83,000
Shares received for reimbursement of expenses
-
(33,000
)
Other
3,000
(12,000
)
Income tax expense
$
883,000
$
752,000
It is the Company's practice
to recognize penalties and/or interest related to income tax matters in interest and penalties expense. As of December 31, 2011
and 2010, the Company had an immaterial amount of accrued interest and penalties.
The Company is subject to income
taxes in the U.S. federal jurisdiction and various states and local jurisdictions. Tax regulations within each jurisdiction are
subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. Accounting principles
generally accepted in the United States of America require management to evaluate tax positions taken by the Company and recognize
a tax liability (or asset) if the company has taken an uncertain position that more likely than not would not be sustained upon
examination by the Internal Revenue Service. Management has analyzed the tax positions taken by the Company and has concluded
that as of December 31, 2011, there are no uncertain positions taken or expected to be taken that would require recognition of
a liability (or asset) or disclosure in the financial statements. The Company is subject to routine audits by taxing jurisdictions;
however, there are currently no audits for any tax periods in progress. Management believes it is no longer subject to income
tax examinations for years prior to 2008.
9.
Shareholders' Equity –
Capitalization
At December 31, 2011, the Company's
authorized capital stock consists of 250,000,000 shares of no par value capital stock. All shares have equal voting rights and
are entitled to one vote per share.
Of the 250,000,000 shares of
authorized capital, 240,000,000 have been designated as common stock and 10,000,000 as Series A Convertible Preferred Stock. The
Series A Convertible Preferred Stock has a 10% cumulative dividend and can be converted on a share-for-share basis into common
stock. The Company has the right to redeem some or all of the Series A Convertible Preferred Stock at any time, upon 60 days notice,
at $3.50 per share, plus any cumulative unpaid dividends.
F-
14
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
2008 Stock Incentive Plan
On February 2, 2008, the Board
of Directors of the Company approved and adopted the Company's 2008 Stock Incentive Plan, pursuant to which an aggregated
of 2,000,000 shares of common stock have been reserved for issuance.  No options under this plan have been granted as
of December 31, 2011.
The Company had no stock options
or stock warrants outstanding at December 31, 2011.
10.
Preferred Stock Dividend –
Reconciliations of the cumulative
preferred stock dividend payable are as follows:
As of  December
    31,
2011
2010
Balance due, beginning of year
$
1,450,000
$
1,000,000
Current year preferred dividends payable
2,100,000
2,100,000
Preferred dividends paid
-
(1,650,000
)
Balance due, end of year
$
3,550,000
$
1,450,000
In addition, the Company has
$525,000 of fourth quarter unaccrued cumulative preferred dividends at December 31, 2011 and 2010 that became due and payable
January 15, 2012 and 2011, respectively.
11.
Operating Lease Commitments –
The Company leases its facilities
under operating leases with terms ranging from month to month to six years, with rights to extend for additional periods. Rent
expense on all operations was approximately $1,704,000 and $1,863,000 in 2011 and 2010, respectively.  Future minimum
lease payments are approximately as follows:
Year Ending December 31,
Amount
2012
$
1,411,000
2013
899,000
2014
548,000
2015
234,000
2016 and thereafter
70,000
$
3,162,000
12.
Related Party Transactions –
The Company leases two properties
from an officer of the Company and another related party under operating leases, one that extends through October, 2016 requiring
monthly lease payments of $1,680 and one that extends through June, 2015 requiring monthly lease payments of $1,200.
On August 31, 2011, the Company
entered into two operating leases for property owned by Ladary, Inc.  Ladary, which acquired the two properties in foreclosure
sales, is a corporation partially owned by the Chief Executive Officer of the Company, two directors and two employees of the
management company that manages the Company's largest shareholder.  The new leases, one of which replaced an earlier
lease that the Company had entered into with the prior landlord, have four-year terms, require aggregate monthly rental payments
of $6,000, and are on terms and conditions substantially similar to those contained in the replaced leases.
F-
15
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
On October 18, 2011 the Company
entered into a long-term Promissory Note with River City Equity, Inc. River City Equity, Inc. is a related party due to the relationship
of one of its minority shareholders to the Company's CEO. Terms of the note are for up to $2,000,000 of principal to be
loaned at a rate of 12% with interest payable on a monthly basis. The note matures and all accrued and unpaid interest and the
unpaid principal is due and payable on September 30, 2013. The note includes a prepayment penalty and terms providing a security
interest, under certain circumstances, in substantially all assets of the Company.
Mr. Richard Miller is the
Company's Board Chairman. Mr. Miller provides management consulting services to the Company in addition to his services
as Chairman of the Board. In accordance with the consulting agreement, his compensation is $100,000 per year. He was paid
$100,000 and $75,000 in 2011 and 2010, respectively, under this consulting agreement.
Rent expense to related parties
for 2011 and 2010 was approximately $57,000 and $33,000, respectively.
Interest expense for 2011 and
2010 on the related party notes payable was approximately $139,000 and $176,000, respectively.
At the time of executing the
credit facility with WERCS, the CEO was a non-controlling and non-affiliate (under 10%) shareholder of WERCS. As of December 31,
2010, the CEO was no longer a shareholder of WERCS.
13.
Stock Purchase and Sale –
On February 23, 2010, WERCS,
a Wyoming
corporation
("WERCS")
,
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.
14.
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 an annual performance-based
cash bonus pool for management.
The performance-based bonus provisions
permit management to receive annual bonus payments in cash based on adjusted EBITDA and other targets established by the Board
of Directors annually. The Employment Agreement sets the 2011 and 2010 adjusted EBITDA target at $4 million. If the Company's
actual adjusted EBITDA performance for a particular annual period ranges from 85-100% of the established adjusted EBITDA target,
the cash bonus pool will be 7.5% of adjusted EBITDA. If the Company's actual EBITDA performance for a particular annual
period exceeds 100% of the established adjusted EBITDA target, 15% of adjusted EBITDA over the established target will be added
to the cash bonus pool. The cash bonus pool for 2010 is limited to 75% of the calculated annual amount due to the mid-year implementation
of the agreement. The Board approved modifications to the threshold calculations for 2011 by modifying them to exclude from the
capital expenditures and working capital requirement calculations the Cricket store acquisition transactions and related long-term
debt. The bonus pool for 2011 is approximately $334,000. Certain targets were not achieved for 2010 due to transactions approved
by the Board. The Board did, however, approve a bonus pool for management of approximately $215,000 for 2010, the amount that
would have been earned under this plan had all the targets been achieved.
15.
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 (increased by 5% annually effective April 1, 2011). Management and advisory
fees for 2011 and 2010 were $311,250 and $225,000, respectively.
F-
16
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
16.
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 exceeds 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.
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 and compliance with federal rules and regulations.
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 became effective August 11, 2010 and modified 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 limited the amount and type
of fees that can be charged on these loans, effectively reducing by one-half the fees that can be charged and when the fees may
be realized. The Company continues to operate its sole store in Colorado offering short-term installment loans.
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 are 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. In 2011 we introduced
an installment loan product in Wisconsin.
F-
17
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
On November 2, 2010, voters in
Montana passed Petition Initiative I-164. Effective January 1, 2011, Petition Initiative I-164 capped fees on payday loans at
an imputed interest rate of 36%. The Company discontinued its payday loan operations in that state on December 31, 2010.
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 years ended December
31, 2011 and 2010, the Company had significant revenues by state (shown as a percentage of applicable division's revenue
when 10% or more) as follows:
Payday Division
Cricket Wireless Division
2011
% of
Revenues
2010
% of
Revenues
2011
% of
Revenues
2010
% of
Revenues
Nebraska
28%
28
%
Missouri
25%
31%
Wyoming
15
%
14
%
Nebraska
18
%
16
%
North Dakota
18
%
16
%
Texas
11
%
12
%
Iowa
12
%
12
%
Indiana
22
%
28
%
17.
Other Expenses –
A breakout of other expense is
as follows:
For the Year Ended December 31,
2011
2010
Store expenses
Bank fees
$
273,868
$
223,757
Collection costs
386,230
408,180
Repair and Maintenance
155,579
178,825
Supplies
248,011
167,624
Telephone
133,945
142,592
Utilities and network lines
486,355
503,703
Other
733,453
702,930
$
2,417,441
$
2,327,611
General & administrative expenses
Professional fees
$
235,380
$
452,244
Management and consulting fees
411,250
300,000
Other
368,133
274,519
$
1,014,763
$
1,026,763
18.
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 our former Chief Financial Officer
and another former member of management, Messrs. Steven Staehr and David Stueve, respectively. 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. After the filing of the lawsuit, the Company
removed the lawsuit to federal court and the plaintiffs sought to remand the case back to state court. On October 26, 2010, the
plaintiffs' motion to remand the case to state court was denied by the federal court. On July 6, 2011, the U.S. District
Court for the District of Minnesota granted the Company's motion to dismiss the action brought by Messrs. Steven Staehr
and David Stueve. The lawsuit was dismissed without prejudice. The Company obtained a full and complete release from Steven Staehr
pursuant to a Stock Redemption Agreement entered into on March 1, 2012, effective as of February 28, 2012. The redemption transaction
contemplated by the agreement was consummated on March 12, 2012.
F-
18
WESTERN
CAPITAL RESOURCES, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
19.
Special Committee of the Board of
                                                          Directors
In June 2011, the Board
of Directors appointed Mr. Ellery Roberts to a special committee of the board.  The appointment was made for a period of
six months.  In November 2011 this appointment was extended through August 2012. In consideration for his additional service
on the committee, the Company will pay Mr. Roberts $13,000 per month from June 2011 through November 2011 and $10,000 per month
from December 2011 through November 2012.
20.
Subsequent
                                                                                            Events –
TX store acquisition
In February, 2012, the
Company acquired three additional Cricket corporate owned stores for approximately $350,000. Two of the stores are located in
McAllen, Texas and one in Laredo, Texas.
Common Stock Repurchase
Also in February-March,
2012, the Company repurchased an aggregate of 2,048,227 shares of its common stock from four shareholders at $0.15 per share for
a total repurchase cost of $307,234.
Credit Facility
On March 14, 2012, the
Company paid the remaining principal balance and all accrued and unpaid interest owing under the WERCS credit facility.
Related-Party Consulting
Agreement
On March 7, 2012, a
consulting agreement with Mr. Richard Miller was approved by the Company's Board of Directors. The agreement provides for
consulting fees in the amount of $100,000 and the same terms and conditions as the agreement that expires March 31, 2012.
F-
19
ITEM 9    CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.      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 December 31, 2011, 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 December
31, 2011.
F-
20
WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2012 (Unaudited)
December 31, 2011
ASSETS
CURRENT ASSETS
Cash
$
2,486,834
$
1,909,442
Loans receivable (less allowance for losses of $864,000 and $1,001,000)
3,825,508
4,887,813
Inventory
660,786
756,528
Prepaid expenses and other
517,245
451,751
Deferred income taxes
361,000
413,000
TOTAL CURRENT ASSETS
7,851,373
8,418,534
PROPERTY AND EQUIPMENT
739,167
757,747
GOODWILL
12,632,569
12,393,869
INTANGIBLE ASSETS
328,151
309,552
OTHER
110,744
142,074
TOTAL ASSETS
$
21,662,004
$
22,021,776
LIABILITIES AND  SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities
$
2,475,506
$
2,323,730
Note payable – short-term
-
1,000,000
Current portion long-term debt
696,910
695,123
Preferred dividend payable
4,075,000
3,550,000
Deferred revenue
250,205
314,561
TOTAL CURRENT LIABILITIES
7,497,621
7,883,414
LONG-TERM LIABILITIES
Notes payable – long-term
1,229,278
1,210,065
Deferred income taxes
580,000
530,000
TOTAL LONG-TERM LIABILITIES
1,809,278
1,740,065
TOTAL LIABILITES
9,306,899
9,623,479
SHAREHOLDERS' EQUITY
Series 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
100,000
Common stock, no par value, 240,000,000 shares authorized, 5,397,780 and 7,446,007 shares issued and outstanding
-
-
Additional paid-in capital
17,914,543
18,221,777
Accumulated deficit
(5,659,438
)
(5,923,480
)
TOTAL SHAREHOLDERS' EQUITY
12,355,105
12,398,297
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
21,662,004
$
22,021,776
See notes to condensed consolidated financial statements.
F-
21
WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended
March 31, 2012
March 31, 2011
REVENUES
Payday loan fees
$
2,307,901
$
2,325,747
Phones and accessories
2,741,696
1,586,915
Cricket service fees
1,995,025
554,696
Installment interest income
196,509
-
Check cashing fees
195,812
232,542
Other income and fees
79,827
338,731
7,516,770
5,038,631
STORE EXPENSES
Phones and accessories cost of sales
1,835,075
957,897
Provisions for loan losses
276,390
178,873
Salaries and benefits
1,687,392
1,112,045
Occupancy
552,308
418,063
Advertising
77,121
81,600
Depreciation
69,245
64,093
Amortization of intangible assets
59,401
115,605
Other
752,278
609,977
5,309,210
3,538,153
INCOME FROM STORES
2,207,560
1,500,478
GENERAL & ADMINISTRATIVE EXPENSES
Salaries and benefits
527,732
445,927
Depreciation
5,492
4,020
Interest expense
78,121
93,192
Other
304,173
289,970
915,518
833,109
INCOME BEFORE INCOME TAXES
1,292,042
667,369
INCOME TAX EXPENSE
503,000
255,000
NET INCOME
789,042
412,369
SERIES A CONVERTIBLE PREFERRED STOCK DIVIDENDS
(assumes all paid)
(525,000
)
(525,000
)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
$
264,042
$
(112,631
)
NET INCOME (LOSS) PER COMMON SHARE
Basic and diluted
$
0.04
$
(0.02
)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
Basic and diluted
6,512,273
7,446,007
See notes to condensed consolidated financial statements.
F-
22
WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended
March 31, 2012
March 31, 2011
OPERATING ACTIVITIES
Net Income
$
789,042
$
412,369
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
74,737
68,113
Amortization
59,401
115,605
Deferred income taxes
102,000
106,000
Loss on disposal of property and equipment
-
27,342
Changes in operating assets and liabilities
Loans receivable
1,062,305
1,028,362
Inventory
95,742
99,433
Prepaid expenses and other assets
(29,764
)
12,651
Accounts payable and accrued liabilities
151,776
(698,227
)
Deferred revenue
(64,356
)
(106,228
)
Net cash provided by operating activities
2,240,883
1,065,420
INVESTING ACTIVITIES
Purchase of property and equipment
(21,157
)
(13,574
)
Acquisitions, net of cash acquired
(356,100
)
-
Net cash used by investing activities
(377,257
)
(13,574
)
FINANCING ACTIVITIES
Payments on notes payable – short-term
(1,000,000
)
(1,000,000
)
Payments on notes payable – long-term
(179,000
)
(172,162
)
Advances from notes payable – long-term
200,000
-
Common stock redemption
(307,234
)
-
Net cash used by financing activities
(1,286,234
)
(1,172,162
)
NET INCREASE (DECREASE) IN CASH
577,392
(120,316
)
CASH
Beginning of period
1,909,442
2,092,386
End of period
$
2,486,834
$
1,972,070
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid
$
18,966
$
447,084
Interest paid
$
87,728
$
94,361
See notes to condensed consolidated financial
statements.
F-
23
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
month period ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December
31, 2012. 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, 2011. The condensed consolidated balance sheet at December 31, 2011, 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 March 31, 2012, the Company operated 52 "payday" stores in nine states
(Colorado, Iowa, Kansas, Nebraska, North Dakota, South Dakota, Utah, Wisconsin and Wyoming) and operated 48 Cricket wireless retail
stores in 13 states (Arizona, Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon 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 and installment 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 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. Installment
loans provide customers with cash in exchange for a promissory note with a maturity of generally three to six months. The fee and
interest rate on installment loans vary based on applicable regulations. Like cash advance or "payday" loans, installment
loans are unsecured.
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 Communications, Inc., reselling cellular phones and accessories and accepting service
payments from Cricket customers.
F-
24
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 loans receivable allowance, allocation of and carrying value of goodwill and intangible assets, inventory valuation and
obsolescence, and deferred taxes and tax uncertainties.
Revenue Recognition
The Company recognizes fees on cash advance loans on
a constant-yield basis ratably over the loans' terms. Title and installment loan fees and interest are recognized using the
interest method except that installment loan origination fees are recognized as they become non-refundable and installment loan
maintenance fees are recognized when earned. 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 Allowance
We maintain a loan loss allowance for anticipated losses
for our payday, installment 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 payday loans that
are currently due or past due and payday 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.  Also included in loans receivable are current and delinquent installment and title
loans. Loans are carried at cost less the loans receivable allowance.  The Company does not specifically reserve for
any individual loan.  The Company aggregates loan types for purposes of estimating the loss allowance using a methodology
that analyzes historical portfolio statistics and management's judgment regarding recent trends noted in the portfolio.  This
methodology takes into account several factors, including 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 41% 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 – 42%; 31 to 60 days – 66%; 61 to 90 days – 82%; 91 to 120 days – 87%; 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
loans receivable 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.
Net Income (Loss) Per Common Share
Basic net income (loss) per common share is computed
by dividing the income (loss) available to common shareholders by the weighted average number of common shares outstanding for
the year. Diluted net income (loss) per common share is computed by dividing the net income (loss) available to common shareholders
by the sum of the weighted average number of common shares outstanding plus potentially dilutive common share equivalents (convertible
preferred shares) when dilutive. The 10 million shares of potentially dilutive Series A Convertible Preferred Stock outstanding
at March 31, 2012 and 2011 were anti-dilutive and therefore excluded from the dilutive net income (loss) per share computation.
Recent Accounting Pronouncements
In September 2011, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update (ASU) No. 2011-08 "
Intangibles – Goodwill and Other (Topic 350)
– Testing Goodwill for Impairment."
ASU 2011-08 allows an entity the option to make a qualitative evaluation about
the likelihood of goodwill impairment to determine whether it should perform additional steps to determine if there is goodwill
impairment. The amendments are effective for annual and interim goodwill tests performed for fiscal years beginning after December
15, 2011, early adoption being permitted. The Company adopted this standard with no material impact on its consolidated financial
statements.
In May 2011, the FASB issued ASU No. 2011-04 "
Fair
Value Measurement (Topic820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP
and IFRS
." ASU 2011-04 results in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. For
public entities, ASU 2011-04 is effective for interim or annual reporting periods ending on or after December 15, 2011. The Company
adopted this standard with no material impact on its 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.
F-
25
2.
Loans Receivable and Loans Receivable Allowance –
At March 31, 2012 and December 31, 2011 our outstanding
loans receivable aging was as follows:
March 31, 2012
December 31, 2011
Current
$
3,609,000
$
4,626,000
1-30
233,000
297,000
31 – 60
176,000
220,000
61 – 90
203,000
223,000
91 – 120
146,000
171,000
121 – 150
156,000
189,000
151 – 180
167,000
163,000
4,690,000
5,889,000
Allowance for losses
(864,000
)
(1,001,000
)
$
3,826,000
$
4,888,000
A rollforward of the Company's loans receivable
allowance for the three months ended March 31, 2012 and 2011 is as follows:
Three Months Ended
March 31,
2012
2011
Loans receivable allowance, beginning of period
$
1,001,000
$
1,165,000
Provision for loan losses charged to expense
276,000
179,000
Charge-offs, net
(413,000
)
(423,000
)
Loans receivable allowance, end of period
$
864,000
$
921,000
3.
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 Communications, Inc., reselling cellular phones
and accessories and serving as a payment center for Cricket customers.
Segment information related to the three months ended
March 31, 2012 and 2011 is set forth below:
Three Months Ended
March 31, 2012
Three Months Ended
March 31, 2011
Payday
Cricket
Wireless
Total
Payday
Cricket
Wireless
Total
Revenues from external customers
$
2,789,116
$
4,727,654
$
7,516,770
$
2,640,997
$
2,397,634
$
5,038,631
Net income
$
368,771
$
420,271
$
789,042
$
379,568
$
32,801
$
412,369
Total segment assets
$
14,677,536
$
6,984,468
$
21,662,004
$
14,283,393
$
4,937,241
$
19,220,634
4.
Notes Payable –
On January 26, 2011, WERCS extended the maturity of
the promissory note made by WERCS to WFL, pursuant to the Business Loan Agreement dated April 1, 2010 and an accompanying $2,000,000
promissory note to WFL, to April 1, 2012. In March 2011, as required by the terms of the note extension, the Company paid $1,000,000
toward the principal balance on the WERCS promissory note. On March 14, 2012, the Company repaid the remaining principal balance
and all accrued and unpaid interest under the WERCS credit facility.
The Company drew an additional $200,000 on the existing
note payable with River City Equity, Inc, a related party, during the first quarter 2012. Total advanced on the $2,000,000 credit
facility as of March 31, 2012 was $1,200,000.
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26
5.
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 exceeds 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.
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 and compliance with federal rules and regulations. 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 became effective August 11, 2010 and modified 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 limited the amount and type of fees that can
be charged on these loans, effectively reducing by one-half the fees that can be charged and when the fees may be realized. At
present, the Company continues to operate its sole store in Colorado while the impact to profitability of this new law is being
assessed.
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 are only allowed to renew a payday loan once, and then lenders
are required to offer a 60-day, interest free, payment plan to consumers. As a result of these changes, we introduced an installment
loan product in Wisconsin in 2011.
On November 2, 2010, voters
in Montana passed Petition Initiative I-164. Effective January 1, 2011, Petition Initiative I-164 capped fees on payday loans
at an imputed interest rate of 36%.
The Company discontinued its operations in that state on December 31, 2010.
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.
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For the three months ended March 31, 2012 and
2011, the Company had significant revenues by state (shown as a percentage of applicable division's revenue) as follows:
Payday Division
Cricket Wireless Division
2012
% of Revenues
2011
% of Revenues
2012
% of Revenues
2011
% of Revenues
Nebraska
26%
28%
Missouri
18%
29%
Wyoming
15%
15%
Nebraska
13%
18%
North Dakota
18%
17%
Texas
11%
14%
Iowa
12%
12%
Indiana
12%
27%
Oklahoma
10%
-%
6.
Preferred Stock
Dividend
–
Reconciliations of the cumulative preferred stock dividend
payable are as follows:
Three Months Ended
March 31,
2012
2011
Balance due, beginning of the period
$
3,550,000
$
1,450,000
Current quarter preferred dividends payable
525,000
525,000
Preferred dividends paid
-
-
Balance due, end of the period
$
4,075,000
$
1,975,000
In addition, the Company has $525,000 of first quarter
unaccrued cumulative preferred dividends from March 31, 2012 and 2011 that became due and payable April 15, 2012 and 2011, respectively.
7.
Other Expense –
A breakout of other expense is as follows:
Three Months Ended
March 31,
2012
2011
Store expenses
Bank fees
$
81,620
$
75,329
Collection costs
128,698
107,954
Repairs & maintenance
34,191
47,295
Supplies
87,925
34,404
Telephone
33,834
33,654
Utilities and network lines
176,172
127,424
Other
209,838
183,917
$
752,278
$
609,977
General & administrative expenses
Professional fees
$
85,923
$
123,515
Management and consulting fees
133,750
100,000
Other
84,500
66,455
$
304,173
$
289,970
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8.
Acquisitions –
In February 2012, the Company acquired three Cricket
corporate-owned stores for approximately $355,000. Two of the stores are located in McAllen, Texas and one in Laredo, Texas.
Fair Value
Property and equipment
$
35,000
Intangible assets
78,000
Goodwill
238,700
Other non-current assets
4,400
$
356,100
The results of the operations for the acquired locations
have been included in the condensed consolidated financial statements since the date of the acquisitions. The following table presents
the unaudited pro forma results of continuing operations for the three months ended March 31, 2012 and 2011, as if the acquisitions
had been consummated at the beginning of each period presented. The pro forma results of continuing operations are prepared for
comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisitions occurred at
the beginning of the year presented or the results which may occur in the future.
Three Months Ended
March 31,
2012
2011
Pro forma revenue
$
7,670,000
$
5,481,000
Pro forma net income
$
813,000
$
482,000
Pro forma net income (loss) per common share – basic and diluted
$
.04
$
(0.01
)
9.
Consulting Agreement –
On March 7, 2012, a consulting agreement with Mr. Richard
Miller, the Chairman of the Board, was approved by the Company's Board of Directors. The agreement provides for consulting
fees in the amount of $100,000 and contains the same terms and conditions as the earlier agreement that expired March 31, 2012.
10.
Common Stock Repurchases –
In February and March 2012, the Company repurchased
an aggregate of 2,048,227 shares of its common stock from four shareholders at $0.15 per share for a total repurchase cost of $307,234.
11.
Subsequent Events –
Acquisitions
The Company entered into three Asset Purchase Agreements
between April 1 and May 15, 2012 to acquire three Cricket retail storefronts for a combined purchase price of approximately $260,000.
Among other things, those agreements require the Company to open two new Cricket retail storefronts and relocate one existing Cricket
retail storefront.
F-
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$4,500,000
WESTERN CAPITAL RESOURCES, INC.
Common
Stock
PROSPECTUS
, 2012
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below are expenses we expect to
incur in connection with the issuance and distribution of the securities registered hereby. With the exception of the Securities
and Exchange Commission registration fee, the amounts set forth below are estimates and actual expenses may vary considerably from
these estimates depending upon how long the notes are offered and other factors:
Securities and Exchange Commission registration fee
$
516
Accounting fees and expenses
$
10,000
Legal fees and expenses
$
55,000
Blue sky fees and expenses
$
10,000
Printing and mailing expenses
$
10,000
Subscription agent fees and expenses
$
10,000
Miscellaneous
$
5,000
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The registrant is subject to Minnesota
Statutes, Chapter 302A, the Minnesota Business Corporation Act (the "Corporation Act"). Section 302A.521
of the Corporation Act provides in substance that, unless prohibited by its articles of incorporation or bylaws, a Minnesota corporation
must indemnify an officer or director who is made or threatened to be made a party to a proceeding by reason of the former or present
official capacity of the person against judgments, penalties, fines, including, without limitation, excise taxes assessed against
the person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding, if certain criteria are met. These criteria, all of which
must be met by the person seeking indemnification, are as follows: (a) such person has not been indemnified by another organization
or employee benefit plan for the same judgments, penalties, fines, including, without limitation, excise taxes assessed against
the person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorneys' fees and
disbursements, incurred by the person in connection with the proceeding with respect to the same acts or omissions; (b) such
person must have acted in good faith; (c) no improper personal benefit was obtained by such person and such person satisfied
certain statutory conflicts of interest provisions, if applicable; (d) in the case of a criminal proceeding, such person had no
reasonable cause to believe that the conduct was unlawful; and (e) in the case of acts or omissions occurring in such person's
performance in an official capacity, such person must have acted in a manner such person reasonably believed was in the best interests
of the corporation or, in certain limited circumstances, not opposed to the best interests of the corporation. In addition, Section 302A.521,
subd. 3, requires payment by the registrant, upon written request, of reasonable expenses in advance of final disposition in certain
instances. A decision as to required indemnification is made by a majority of the disinterested board of directors present at a
meeting at which a disinterested quorum is present, or by a designated committee of disinterested directors, by special legal counsel,
by the disinterested shareholders, or by a court.
The registrant also maintains a director
and officer insurance policy to cover the registrant, its directors and its officers against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
None.
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1
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. The exhibits listed below
are filed as a part of this registration statement.
Exhibit No.
Description
2.1
Stock Purchase Agreement with PQH Wireless, Inc., John Quandahl, Mark Houlton  and Charles Payne, dated October 15, 2008 (incorporated by reference to Exhibit 2.3 to the registrant's registration statement on Form S-1/A filed with the SEC on November 24, 2008).
3.1
Amended and Restated Articles of Incorporation, filed with the Minnesota Secretary of State on May 25, 2007 (incorporated by reference to Exhibit 3.1 to the registrant's annual report on Form 10-K filed on April 7, 2008) (see also Exhibits 3.2, 3.3, 3.4, 3.6 and 3.7 below).
3.2
Amendment to Amended and Restated Articles of Incorporation, filed with the Minnesota Secretary of State on December 27, 2007 (incorporated by reference to Exhibit 3.2 to the registrant's annual report on Form 10-K filed on April 7, 2008).
3.3
Certificate of Designation for Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.2 to the registrant's current report on Form 8-K filed on January 7, 2008).
3.4
Amendment to Articles of Incorporation, filed with the Minnesota Secretary of State on March 18, 2008 (incorporated by reference to Exhibit 3.5 to the registrant's annual report on Form 10-K filed on April 7, 2008).
3.5
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the registrant's current report on Form 8-K filed on June 23, 2008).
3.6
Amendment to Articles of Incorporation, filed with the Minnesota Secretary of State on July 29, 2008 (incorporated by reference to the registrant's current report on Form 8-K filed on July 29, 2008).
3.7
Amendment to Articles of Incorporation, filed with the Minnesota Secretary of State on March 30, 2010 (incorporated by reference to the registrant's current report on Form 8-K filed on April 2, 2010).
4.1
Form of Subscription Rights Certificate (
filed herewith
).
5.1
Opinion of Maslon Edelman Borman & Brand, LLP (with regard to legality of securities offered) (
filed herewith
).
10.1
2008 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the registrant's annual report on Form 10-K filed on April 7, 2008).
10.2
Term Promissory Note in principal amount of $1,000,000 in favor of John Quandahl (incorporated by reference to Exhibit 10.7 to the registrant's registration statement on Form S-1/A filed with the SEC on November 24, 2008).
10.3
Term Promissory Note in principal amount of $1,000,000 in favor of Mark Houlton (incorporated by reference to Exhibit 10.8 to the registrant's registration statement on Form S-1/A filed with the SEC on November 24, 2008).
10.4
Form of Security Agreement with Charles Payne, John Quandahl and Mark Houlton (incorporated by reference to Exhibit 10.9 to the registrant's registration statement on Form S-1/A filed with the SEC on November 24, 2008).
10.5
Employment Agreement with John Quandahl dated as of March 31, 2010 (incorporated by reference to Exhibit 10.4 to the registrant's quarterly report on Form 10-Q filed on May 13, 2010).
10.6
Management and Advisory Agreement with Blackstreet Capital Management, LLC, dated as of May 10, 2010 (incorporated by reference to Exhibit 10.4 to the registrant's quarterly report on Form 10-Q filed on August 13, 2010).
10.7
Promissory Note delivered in favor of River City Equity, Inc. dated as of October 18, 2011 (incorporated by reference to Exhibit 10.11 to the registrant's annual report on Form 10-K filed on March 30, 2012).
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2
10.8
Security Agreement delivered in favor of River City Equity, Inc. dated as of October 18, 2011 (incorporated by reference to Exhibit 10.12 to the registrant's annual report on Form 10-K filed on March 30, 2012).
10.9
Consulting Agreement with Ric Miller Consulting, Inc. dated as of April 1, 2012 (incorporated by reference to Exhibit 10.17 to the registrant's annual report on Form 10-K filed on March 30, 2012).
21
List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the registrant's annual report on Form 10-K filed on March 30, 2012).
23.1
Consent of Lurie Besikof Lapidus & Co, LLP (
filed herewith
).
23.2
Consent of Maslon Edelman Borman & Brand, LLP (included in exhibit 5.1)
99.1
Form of Instructions for Use of Western Capital Resources, Inc. Subscription Rights Certificate (
filed herewith
).
99.2
Forms of Notice of Guaranteed Delivery (
filed herewith
).
99.3
Form of letter to shareholders who are record holders (
filed herewith
).
99.4
Form of letter to beneficial holders of shares (
filed herewith
).
99.5
Form of letter to clients (
filed herewith
).
99.6
Form of Beneficial Owner Election Form (
filed herewith
).
99.7
Form of Nominee Holder Certification (
filed herewith
).
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)
to include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii)
to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the foregoing, an increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;
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3
(iii)
to include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4)
[intentionally omitted]
(5)
For the purpose of determining any liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or
other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior
to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of
the registration statement or made in any such document immediately prior to such date of first use.
(6)
That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned
registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser,
if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant
will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i)
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant
to Rule 424;
(ii)
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
(iii)
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv)
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
II-
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SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Omaha, State of Nebraska.
WESTERN CAPITAL RESOURCES, INC.
By:
/s/ John Quandahl
Chief Executive Officer
Dated:  June 15, 2012
POWER OF ATTORNEY
Each person whose signature appears below
hereby constitutes and appoints John Quandahl and Richard Miller, and each of them, as his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to
be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated
below.
Signature
Title
Date
/s/ John Quandahl
John Quandahl
Director, Chief Executive Officer
(principal executive officer)
June 15, 2012
/s/ Richard Miller
Richard Miller
Chairman of the Board
June 15, 2012
/s/ Steve Irlbeck
Steve Irlbeck
Chief Financial Officer
(principal accounting and financial officer)
June 15, 2012
/s/ Angel Donchev
Angel Donchev
Director
June 15, 2012
/s/ Ellery Roberts
Ellery Roberts
Director
June 15, 2012
/s/ Thomas H. Ripley
Thomas H. Ripley
Director
June 15, 2012
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