WESTERN CAPITAL RESOURCES, INC. - Quarter Report: 2017 September (Form 10-Q)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2017

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

Commission File Number:   000-52015

Western Capital Resources, Inc.

(Exact Name of Registrant as Specified in its Charter)

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

(Address of Principal Executive Offices) (Zip Code)

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

N/A

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

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Yes ☐ No ☑

APPLICABLE ONLY TO CORPORATE ISSUERS

As of November 14, 2017, the registrant had outstanding 9,390,997 shares of common stock, $0.001 par value per share. 

Western Capital Resources, Inc.

Index

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONTENTS

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

See notes to condensed consolidated financial statements

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

See notes to condensed consolidated financial statements.

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

See notes to condensed consolidated financial statements.

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Basis of Presentation

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

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

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

Nature of Business

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

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

Basis of Consolidation

The consolidated financial statements include the accounts of WCR, its wholly owned subsidiaries and other entities in which the Company owns a controlling financial interest. For financial interests in which the Company owns a controlling financial interest, the Company applies the provisions of ASC 810 applicable to reporting the equity and net income or loss attributable to noncontrolling interests. All significant intercompany balances and transactions of the Company have been eliminated in consolidation.

Use of Estimates

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

Reclassifications

Certain Statements of Operations reclassifications have been made in the presentation of our prior financial statements and accompanying notes to conform to the presentation as of and for the three and nine month periods ended September 30, 2017.

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

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under US GAAP and IFRS. This converged standard is effective for annual and interim periods beginning after December 15, 2017. The Company is currently assessing the potential effects on our financial condition, results of operations and consolidated financial statements.

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

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

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

Regulatory

The Company’s Consumer Finance segment activities are highly regulated under numerous local, state, and federal laws, regulations and rules, which are subject to change. New laws, regulations or rules could be enacted or issued, interpretations of existing laws, regulations or rules may change and enforcement action by regulatory agencies may intensify. Over the past several years, consumer advocacy groups and certain media reports have advocated governmental action to prohibit or severely restrict sub-prime lending activities of the kind conducted by the Company. The federal Consumer Financial Protection Bureau has indicated that it will use its authority to further regulate the payday industry and has been actively involved in the enforcement of existing consumer-protection laws applicable to the payday industry.

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

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

3.         Loans Receivable –

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

4.         Loans Receivable Allowance –

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

5.         Accounts Receivable –

A breakdown of accounts receivables for continuing operations by segment are as follows: 

6.         Notes Payable – Long Term –

At September 30, 2017 and December 31, 2016, approximately $7,666,000 and $4,510,000 of credit was available under the credit facilities, respectively.

7.         Equity –

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

8.         Cash Dividends –

9.         Other Operating Expense –

A breakout of other expense is as follows:

10.       Segment Information –

Segment information related to the three and nine month periods ended September 30, 2017 and 2016 for continuing operations is presented below:

11.       Acquisition –

In 2016, PQH entered into an agreement to acquire 20 Cricket Wireless retail locations, with an option to purchase an additional 33 locations. The aggregate purchase price for all 53 locations was approximately $6,000,000, subject to reduction in the event that the seller exercised an option to retain a 30% ownership in the acquired business. From November 22, 2016 through June 30, 2017, PQH operated the store locations under a management agreement. Effective July 1, 2017, we consummated the acquisition transaction by acquiring a 70% interest in all 53 locations through a subsidiary of PQH, and the seller, upon exercising its option to retain a 30% ownership interest in the acquired business, contributed its interest to the subsidiary. As a result, PQH owns 70% of the newly formed subsidiary and the seller owns the remaining 30% of that subsidiary.

The provisional fair value of the purchase consideration together with the corresponding fair value of the contribution by noncontrolling interests was allocated to the net tangible assets acquired. We accounted for the acquisition of stores as the purchase of a business under GAAP under the acquisition method of accounting. The assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of our company. The fair value of the net assets acquired was approximately $6,000,000. The excess of the aggregate fair value over the net tangible assets has been treated as a gain on bargain purchase in accordance with ASC 805. The purchase price allocation was based, in part, on management’s knowledge of wireless retail business and is preliminary. Once we complete our analysis to finalize the purchase price allocation, which includes finalizing the valuation report, it is reasonably possible that, there could be significant changes to the preliminary values below. Under the purchase method of accounting, the assets acquired and liabilities assumed were recorded at their provisional fair values as of the purchase date as follows:

12.       Discontinued Operations –

On September 29, 2017, the Board of Directors of the Company authorized the Company to enter into a sale agreement (see Note 15) for 100% of its stock holdings of AGI, the sole business comprising the Company’s Franchise segment. 

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

In accordance with the provisions of ASC 205-20, the Company has not included the results of operations of the Franchise segment in the results from continuing operations. The results of operations for this business have been reflected as discontinued operations in the unaudited Condensed Consolidated Statements of Operations for the nine month periods ended September 30, 2017 and 2016, and consist of the following:

13.       Pro Forma –

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

14.       Commitments and Contingencies –

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

15.      Subsequent Events –

Sale of Franchise Segment

On October 2, 2017, the Company entered into a Purchase and Sale Agreement (the “Agreement”) with U.S. Business Holdings, Inc. (the “Purchaser”), MBE WorldWide S.p.A. (as guarantor for the Purchaser), BC Alpha, LLC (“BCA”, a wholly owned subsidiary of BC Alpha Holdings II, LLC), and BC Alpha Holdings II, LLC (“BCAH”, a wholly owned subsidiary of the Company). Pursuant to the Agreement, BCA sold all of its shares of capital stock of AGI to the Purchaser. This sale, which closed on October 3, 2017, constitutes the sale of the Company’s franchise segment. The cash purchase price paid by the Purchaser pursuant to the Agreement was $61,500,000, subject to post-closing working capital adjustments. BCA, BCAH, the Company and the Purchaser also agreed to make a joint election under Section 338(h)(10) of the Internal Revenue Code, which treats the transaction as an asset purchase for tax purposes subject to satisfaction of applicable legal requirements. 

Pursuant to the Agreement, the Company, BCA and BCAH made customary representations and warranties regarding AGI and its business, and agreed to certain covenants, including customary non-compete and no-solicit covenants related to the AGI business for a period of three years from the closing date. In addition, the Agreement requires the Company to indemnify the Purchaser for damages resulting from or arising out of any inaccuracy or breach of any representation, warranty or covenant of the Company, BCA or BCAH in the Agreement and for certain other matters. The Company’s indemnification obligations generally survive for 24 months following the closing. The Company’s maximum aggregate liability for indemnification claims for any such inaccuracies or breaches is generally limited to an indemnification escrow of $6,500,000, 50% of which (less any indemnification claims) is to be disbursed 12 months following the closing, with the remaining balance (less any indemnification claims) to be disbursed 24 months following the closing.

As a result of the transaction, the Company received approximately $49,000,000 in proceeds from the sale, after taking into account the impact of the estimated working capital and similar purchase price adjustments, the escrowing of $6,500,000 of sale proceeds, the payoff of the Company’s current balance on its Fifth Third acquisition credit facility of approximately $4,300,000, and the payoff of an aggregate amount of approximately $1,600,000 in transaction costs and pre-closing AGI liabilities related to the cancellation and redemption of securities at the AGI level that occurred prior to the transaction.

In connection with the transaction, the Company also entered into a Consent and Third Loan Modification Agreement (the “Modification Agreement”) with Fifth Third Bank, as lender (“Fifth Third”), which amended that certain Credit Agreement between the Company and Fifth Third, dated April 22, 2016, as amended (the “Credit Agreement”) to (i) release Fifth Third’s liens on the assets of AGI, BCA and BCAH, (ii) remove AGI, BCA and BCAH as guarantors of the Company’s obligations under the Credit Agreement, and (iii) release Fifth Third’s lien on the Company’s equity interests in BCAH.

Real Estate Debt Payoff

On October 12, 2017 the Company paid off the subsidiary note payable with Fifth Third which had a maturity date of June 5, 2019 and a balance of $2,638,112. 

Risks Inherent in Our Consumer Finance Segment

In October 2017, the Consumer Financial Protection Bureau issued final rules affecting the payday lending industry and other market participants who make available certain kinds of high-interest loans. Those rules will generally require lenders to take steps to reasonably determine that borrowers will be able repay the loans according to their terms without needing to reborrow within the following 30 days. The rules also generally prohibit lenders from directly withdrawing payment from a borrower’s bank account after two prior consecutive attempted withdrawals have failed. Finally, the rules prohibit lenders from making loans to customers who have earlier taken out three “covered” loans (i.e., payday loans and certain other kinds of high-interest loans) within 30 days of each other until at least 30 days have passed from the date on which the last such covered loan is no longer outstanding. These rules will become effective on or about July 2019, and are expected to have a material impact on the industry.

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

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

Forward-Looking Statements

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

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

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

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

OVERVIEW

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

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

On October 3, 2017 the Company sold 100% of its stock holdings of AlphaGraphics, Inc. (“AGI”), the sole business comprising the Company’s franchise segment, for an aggregate purchase price of $61,500,000 (subject to adjustment) and as more fully explained in Note 15 “Subsequent Events” of the notes to our condensed consolidated financial statements included in this report. AGI net income applicable to the Company’s shareholders for the nine-month period ended September 30, 2017 was $2.46 million, which represents 61.15% of the total net income applicable to the Company’s shareholders for the period.

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

Discussion of Critical Accounting Policies

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

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

Loan Loss Allowance

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

We do not specifically reserve for any individual payday, installment or title 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 (1) the amount of loan principal, interest and fee outstanding, (2) historical charge offs from loans that originated during the last 24 months, (3) current and expected collection patterns and (4) current economic trends. We utilize a software program to assist with the tracking of its historical portfolio statistics. A loan loss allowance is maintained for anticipated losses for payday and installment loans based primarily on our historical percentages by loan type of net charge offs, applied against the applicable balance of loan principal, interest and fees outstanding. We also periodically perform a look-back analysis on its loan loss allowance to verify the historical allowance established tracks with the actual subsequent loan write-offs and recoveries. We are aware that as conditions change, it may also need to make additional allowances in future periods. Loan losses or charge-offs of pawn or title loans are not recorded because the value of the collateral exceeds the loan amount. See Note 4 to our condensed consolidated financial statements included in this report for a rollforward of our loans receivable allowance.

Valuation of Long-lived and Intangible Assets

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

Results of Operations – Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

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

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

Following is a discussion of operating results by segment.

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

Cellular Retail

A summary table of the number of Cricket cellular retail stores we operated during the quarter ended September 30, 2017 and 2016 follows:

The Cellular Retail segment revenues increase period over period is a result of operating significantly more stores period over period. Included in the growth in the number of locations are 53 mature stores we acquired a 70% ownership interest in effective July 1, 2017. We had previously operated these locations since November 22, 2016 under the management agreement. In addition to operating these additional mature locations, we also operated an additional 100 locations (net of closed locations), most of which were launched. While the launching of the new locations contributed to revenue growth, it also contributed to the decline in segment net income period over period. 

Direct to Consumer

The Direct to Consumer segment has seasonal sources of revenue and historically experiences a greater proportion of annual revenue and net income in the months of March through May and December due to the seasonal products it sells. For the current quarter and comparable prior year period, the Direct to Consumer segment had net loss of ($0.46) million and ($0.33) million, respectively. Revenues for the three month period ended September 30, 2017 were $4.98 million compared to the comparable period in 2016 of $5.95 million.

Consumer Finance

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

Our Consumer Finance segment revenues decreased for the quarter ended September 30, 2017 compared to the quarter ended September 30, 2016 due to the closing of five locations in South Dakota at the end of 2016. Revenue decreased 5.32% period over period while net income decreased 16.62%.

Corporate

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

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

Net income attributable to our common shareholders was $4.02 million, or $0.43 per share (basic and diluted), for the nine-month period ended September 30, 2017, compared to net income of $4.54 million, or $0.48 per share (basic and diluted), for the nine-month period ended September 30, 2016. Net income from continuing operations attributable to our common shareholders was $1.56 million, or $0.17 per share (basic and diluted), for the nine-month period ended September 30, 2017, compared to net income of $2.54 million, or $0.27 per share (basic and diluted), for the nine-month period ended September 30, 2016. Net income from discontinued operations attributable to our common shareholders was $2.46 million, or $0.26 per share (basic and diluted), for the nine-month period ended September 30, 2017 compared to net income of $2.00 million, or $0.21 per share (basic and diluted) for the nine-month period ended September 30, 2016.

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

Following is a discussion of operating results by segment.

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