WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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 note 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, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
Management has analyzed the impact of the Coronavirus pandemic (COVID-19) on its financial statements as of March 31, 2020 and has determined that the changes to its significant judgements and estimates did not have a material impact with respect to goodwill, intangible assets or long-lived assets.
For further information, refer to the Consolidated Financial Statements and notes thereto included in our Form 10-K for the year ended December 31, 2019. The condensed consolidated balance sheet at December 31, 2019, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and notes 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.
|
o
|
PQH Wireless, Inc. (PQH) (100%) – operates 221 cellular retail stores as of March 31, 2020 (108 100% owned plus 113 held through its controlled but less than 100% owned subsidiaries), exclusively as an authorized retailer of the Cricket brand.
|
|
o
|
J&P Park Acquisitions, Inc. (JPPA) (100%) – an online and direct marketing distribution retailer of 1) live plants, seeds, holiday gifts and garden accessories selling its products under Park Seed, Jackson & Perkins, and Wayside Gardens brand names and 2) home improvement and restoration products operating under the Van Dyke’s Restorers brand, as well as a seed wholesaler under the Park Wholesale brand.
|
|
o
|
J&P Real Estate, LLC (JPRE) (100%) – owns real estate utilized as JPPA’s distribution and warehouse facility and the corporate offices of JPPA.
|
|
o
|
Wyoming Financial Lenders, Inc. (WFL) (100%) – owns and operates payday stores (38 as of March 31, 2020, two of which are located within the Company’s retail pawn stores) in six states (Iowa, Kansas, Nebraska, North Dakota, Wisconsin and Wyoming) providing sub-prime short-term uncollateralized non-recourse cash advance or payday loans typically ranging from $100 to $500 with a maturity of generally two to four weeks, sub-prime short-term uncollateralized non-recourse installment loans typically ranging from $300 to $800 with a maturity of six months, check cashing and other money services to individuals.
|
|
o
|
Express Pawn, Inc. (EPI) (100%) – owns and operates retail pawn stores (three as of March 31, 2020) in Nebraska and Iowa providing collateralized non-recourse pawn loans and retail sales of merchandise obtained from forfeited pawn loans or purchased from customers.
|
References in these financial statement notes to Company or we refer to Western Capital Resources, Inc. and its subsidiaries. References to specific companies within our enterprise, such as PQH, JPPA, 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 Financial Accounting Standards Board Accounting Standards Codification (ASC) 810, Consolidation applicable to reporting the equity and net income or loss attributable to noncontrolling interests. All significant intercompany balances and transactions of the Company have been eliminated in consolidation.
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 Statement of Income reclassifications have been made in the presentation of our prior financial statements to conform to the presentation as of and for the three months ended March 31, 2020.
Recent Accounting Pronouncements
In April, 2020 the staff of the Financial Accounting Standards Board (FASB) issued a question-and-answer document that says entities can elect not to evaluate whether a concession provided by a lessor to a lessee in response to the effects of the coronavirus pandemic is a lease modification. Retailers may make the elections for any lessor-provided concessions related to the effects of the coronavirus pandemic as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. The Company has made such election. The Company has received minimal rent concessions and has not entered into any lease modifications to date. As such, the Company does not believe this election will have a material impact on our financial condition, results of operations or 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.
2.
|
Risks Inherent in the Operating Environment –
|
Regulatory
The Company’s Consumer Finance segment activities are highly regulated under numerous federal, state, and local laws, regulations and rules, which are subject to change. New laws, regulations or rules could be enacted or issued, interpretations of existing laws, regulations or rules may change and enforcement action by regulatory agencies may intensify. Over the past several years, consumer advocacy groups and certain media reports have advocated governmental and regulatory action to prohibit or severely restrict sub-prime lending activities of the kind conducted by the Company. After several years of research, debate, and public hearings, in October 2017 the U.S. Consumer Financial Protection Bureau (CFPB) adopted a new rule for payday lending. The rule, originally scheduled to go into effect in August 2019, would impose significant restrictions on the industry, and it is expected that a large number of lenders would be forced to close their stores. The CFPB’s studies projected a reduction in the number of lenders by 50%, while industry studies forecast a much higher attrition rate if the rule is implemented as originally adopted.
However, in January 2018, the CFPB issued a statement that it intends to reconsider the regulation. The most current information from the CFPB website states the proposals it is considering includes rescinding the mandatory underwriting provisions contained in the rule and to delay the August 19, 2019 compliance date for the other provisions to November 19, 2020. At this time it is uncertain whether the rule will be implemented as announced, rewritten with more favorable terms for the industry, or thrown out altogether. If the rule is implemented as written, it could have a significant and negative impact on business conducted within our Consumer Finance segment.
Consumer advocacy groups in many states are actively seeking state law changes which would effectively end the viability of a payday loan business, including Nebraska where we generate approximately 28% of our payday lending revenue, or approximately 1.6% of our consolidated revenue. If these groups are successful in Nebraska, we will likely cease payday lending activities in Nebraska.
The above rule or any other adverse change in present federal, state, or local laws or regulations that govern or otherwise affect lending could result in the Consumer Finance segment’s curtailment or cessation of operations in certain or all jurisdictions or locations. Furthermore, any failure to comply with any applicable local, state or federal laws or regulations could result in fines, litigation, closure of one or more store locations or negative publicity. Any such change or failure would have a corresponding impact on the Company’s and segment’s results of operations and financial condition, primarily through a decrease in revenues resulting from the cessation or curtailment of operations, or a 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, state or local laws and regulations or changes in interpretations of them could, at any point, essentially prohibit the Consumer Finance segment from conducting its lending business in its current form. Any such legal or regulatory change would certainly have a material and adverse effect on the Company, its operating results, financial condition and prospects, and perhaps even the viability of the Consumer Finance segment.
Concentrations
The Company has demand deposits at financial institutions, often times in excess of the limit for insurance by the Federal Deposit Insurance Corporation. As of March 31, 2020, the Company had demand deposits in excess of insurance amounts of approximately $6.73 million.
COVID-19
In December 2019 COVID-19 emerged in Wuhan, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to almost all other countries, including the United States, and infections have been reported globally.
Because COVID-19 infections have been reported throughout the United States, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. Additional, more restrictive proclamations and/or directives may be issued in the future. As of March 31, 2020, the Company’s Cellular Retail segment had temporarily closed approximately 75 locations.
The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but may have a material impact on our business, financial condition and results of operations. The significance of the impact of the COVID-19 outbreak on the Company’s businesses and the duration for which it may have an impact cannot be determined at this time.
3.
|
Cash Equivalents and Marketable Investments –
|
The following table shows the Company’s cash and cash equivalents and held-to-maturity investments, by significant investment category, recorded as cash and cash equivalents or short- and long-term investments:
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
Operating accounts
|
|
$
|
12,509,044
|
|
|
$
|
10,163,845
|
|
Money Market – U.S. Treasury obligations
|
|
|
6,258,991
|
|
|
|
4,450,433
|
|
U.S. Treasury obligations
|
|
|
2,584,206
|
|
|
|
12,518,262
|
|
Subtotal
|
|
|
21,352,241
|
|
|
|
27,132,540
|
|
|
|
|
|
|
|
|
|
|
Held to Maturity Investments
|
|
|
|
|
|
|
|
|
Certificates of deposit (4 – 24 month maturities, FDIC insured)
|
|
$
|
11,315,739
|
|
|
$
|
9,049,787
|
|
U.S. Treasury obligations (less than one year maturities)
|
|
|
12,195,973
|
|
|
|
7,206,878
|
|
Subtotal
|
|
|
23,511,712
|
|
|
|
16,256,665
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
44,863,953
|
|
|
$
|
43,389,205
|
|
Held to maturity investments consisted of the following:
March 31, 2020
|
|
|
Cost
|
|
|
Accrued Interest
|
|
|
Amortized Discount
|
|
|
Amortized Cost
|
|
|
Unrealized Gain (Loss)
|
|
|
Estimated Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of Deposit
|
|
$
|
11,271,888
|
|
|
$
|
43,851
|
|
|
$
|
—
|
|
|
$
|
11,315,739
|
|
|
$
|
(25,906
|
)
|
|
$
|
11,289,833
|
|
U.S. Treasuries
|
|
|
12,155,120
|
|
|
|
—
|
|
|
|
40,853
|
|
|
|
12,195,973
|
|
|
|
2,953
|
|
|
|
12,198,926
|
|
|
|
$
|
23,427,008
|
|
|
$
|
43,851
|
|
|
$
|
40,853
|
|
|
$
|
23,511,712
|
|
|
$
|
(22,953
|
)
|
|
$
|
23,488,759
|
|
December 31, 2019
|
|
|
Cost
|
|
|
Accrued Interest
|
|
|
Amortized Discount
|
|
|
Amortized Cost
|
|
|
Unrealized Gain (Loss)
|
|
|
Estimated Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of Deposit
|
|
$
|
9,015,618
|
|
|
$
|
34,169
|
|
|
$
|
—
|
|
|
$
|
9,049,787
|
|
|
$
|
(32,429
|
)
|
|
$
|
9,017,358
|
|
U.S. Treasuries
|
|
|
7,153,587
|
|
|
|
—
|
|
|
|
53,291
|
|
|
|
7,206,878
|
|
|
|
2,883
|
|
|
|
7,209,761
|
|
|
|
$
|
16,169,205
|
|
|
$
|
34,169
|
|
|
$
|
53,291
|
|
|
$
|
16,256,665
|
|
|
$
|
(29,546
|
)
|
|
$
|
16,227,119
|
|
Interest income recognized on held-to-maturity investments and other sources was as follows:
|
|
|
Three Months Ended
March 31, 2020
|
|
|
Three Months Ended
March 31, 2019
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
|
|
|
$
|
116,075
|
|
|
$
|
142,146
|
|
Other
|
|
|
|
22,652
|
|
|
|
39,397
|
|
|
|
|
$
|
138,727
|
|
|
$
|
181,543
|
|
4. Loans Receivable –
The Consumer Finance segment’s outstanding loans receivable aging is as follows:
March 31, 2020
|
|
|
Payday
|
|
|
Installment
|
|
|
Pawn
|
|
|
Total
|
|
Current
|
|
$
|
2,390,819
|
|
|
$
|
38,006
|
|
|
$
|
278,764
|
|
|
$
|
2,707,589
|
|
1-30
|
|
|
168,738
|
|
|
|
3,337
|
|
|
|
—
|
|
|
|
172,075
|
|
31-60
|
|
|
127,840
|
|
|
|
720
|
|
|
|
—
|
|
|
|
128,560
|
|
61-90
|
|
|
112,411
|
|
|
|
108
|
|
|
|
—
|
|
|
|
112,519
|
|
91-120
|
|
|
105,426
|
|
|
|
—
|
|
|
|
—
|
|
|
|
105,426
|
|
121-150
|
|
|
86,619
|
|
|
|
—
|
|
|
|
—
|
|
|
|
86,619
|
|
151-180
|
|
|
87,232
|
|
|
|
—
|
|
|
|
—
|
|
|
|
87,232
|
|
|
|
|
3,079,085
|
|
|
|
42,171
|
|
|
|
278,764
|
|
|
|
3,400,020
|
|
Less Allowance
|
|
|
(662,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(662,000
|
)
|
|
|
$
|
2,417,085
|
|
|
$
|
42,171
|
|
|
$
|
278,764
|
|
|
$
|
2,738,020
|
|
December 31, 2019
|
|
|
Payday
|
|
|
Installment
|
|
|
Pawn
|
|
|
Total
|
|
Current
|
|
$
|
3,322,131
|
|
|
$
|
67,891
|
|
|
$
|
309,934
|
|
|
$
|
3,699,956
|
|
1-30
|
|
|
216,753
|
|
|
|
10,590
|
|
|
|
—
|
|
|
|
227,343
|
|
31-60
|
|
|
140,872
|
|
|
|
6,234
|
|
|
|
—
|
|
|
|
147,106
|
|
61-90
|
|
|
117,544
|
|
|
|
2,649
|
|
|
|
—
|
|
|
|
120,193
|
|
91-120
|
|
|
118,626
|
|
|
|
840
|
|
|
|
—
|
|
|
|
119,466
|
|
121-150
|
|
|
110,278
|
|
|
|
395
|
|
|
|
—
|
|
|
|
110,673
|
|
151-180
|
|
|
108,674
|
|
|
|
—
|
|
|
|
—
|
|
|
|
108,674
|
|
|
|
|
4,134,878
|
|
|
|
88,599
|
|
|
|
309,934
|
|
|
|
4,533,411
|
|
Less Allowance
|
|
|
(673,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(673,000
|
)
|
|
|
$
|
3,461,878
|
|
|
$
|
88,599
|
|
|
$
|
309,934
|
|
|
$
|
3,860,411
|
|
5. Loans Receivable Allowance –
A rollforward of the Consumer Finance segment’s loans receivable allowance is as follows:
|
|
Three Months Ended
March 31, 2020
|
|
|
Year Ended
December 31, 2019
|
|
Loans receivable allowance, beginning of period
|
|
$
|
673,000
|
|
|
$
|
818,000
|
|
Provision for loan losses charged to expense
|
|
|
291,428
|
|
|
|
975,938
|
|
Write-offs, net
|
|
|
(302,428
|
)
|
|
|
(1,120,938
|
)
|
Loans receivable allowance, end of period
|
|
$
|
662,000
|
|
|
$
|
673,000
|
|
6. Accounts Receivable –
A breakdown of accounts receivables by segment is as follows:
March 31, 2020
|
|
|
Cellular
Retail
|
|
|
Direct to Consumer
|
|
|
Consumer
Finance
|
|
|
Total
|
|
Accounts receivable
|
|
$
|
134,151
|
|
|
$
|
2,204,478
|
|
|
$
|
22,888
|
|
|
$
|
2,361,517
|
|
Less allowance
|
|
|
—
|
|
|
|
(90,000
|
)
|
|
|
—
|
|
|
|
(90,000
|
)
|
Net accounts receivable
|
|
$
|
134,151
|
|
|
$
|
2,114,478
|
|
|
$
|
22,888
|
|
|
$
|
2,271,517
|
|
December 31, 2019
|
|
|
Cellular
Retail
|
|
|
Direct to Consumer
|
|
|
Consumer
Finance
|
|
|
Total
|
|
Accounts receivable
|
|
$
|
184,519
|
|
|
$
|
318,235
|
|
|
$
|
27,722
|
|
|
$
|
530,476
|
|
Less allowance
|
|
|
—
|
|
|
|
(13,000
|
)
|
|
|
—
|
|
|
|
(13,000
|
)
|
Net accounts receivable
|
|
$
|
184,519
|
|
|
$
|
305,235
|
|
|
$
|
27,722
|
|
|
$
|
517,476
|
|
A portion of accounts receivable are unsettled credit card sales from the prior one to five business days. This makes up 46% and 68% of the net accounts receivable balance at March 31, 2020 and December 31, 2019, respectively.
7. Inventory –
Inventories consist of:
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
Finished Goods
|
|
|
|
|
|
|
|
|
Cellular Retail
|
|
$
|
5,673,728
|
|
|
$
|
5,687,771
|
|
Direct to Consumer
|
|
|
3,195,325
|
|
|
|
2,888,483
|
|
Consumer Finance
|
|
|
812,644
|
|
|
|
819,437
|
|
Reserve
|
|
|
(864,000
|
)
|
|
|
(1,065,000
|
)
|
TOTAL
|
|
$
|
8,817,697
|
|
|
$
|
8,330,691
|
|
As a result of changes in the market for certain Company products and the resulting deteriorating value, carrying amounts for those inventories were reduced by approximately $864,000 and $1,065,000 at March 31, 2020 and December 31, 2019, respectively. These inventory write-downs have been reflected in adjustments to cost of goods sold in the statement of operations. Management believes that these reductions properly reflect inventory at lower of cost or market, and no additional losses will be incurred upon disposition.
8. Leases –
The Company lease accounting policy follows the guidance from ASC 842 - Leases, which provides guidance on the recognition, presentation and disclosure of leases in consolidated condensed financial statements.
Total components of operating lease expense for the real property asset class (in thousands) were as follows:
|
|
Three Months Ended
March 31, 2020
|
|
|
Three Months Ended
March 31, 2019
|
|
Operating lease expense
|
|
$
|
1,652
|
|
|
$
|
1,401
|
|
Variable lease expense
|
|
|
539
|
|
|
|
694
|
|
Total lease expense
|
|
$
|
2,191
|
|
|
$
|
2,095
|
|
Other information related to operating leases was as follows:
|
|
Three Months Ended
March 31, 2020
|
|
|
Three Months Ended
March 31, 2019
|
|
Weighted average remaining lease term, in years
|
|
|
2.97
|
|
|
|
2.60
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Discount Rate
|
|
|
5.8
|
%
|
|
|
5.9
|
%
|
Future minimum lease payments under operating leases as of March 31, 2020 (in thousands) were as follows:
|
|
Operating Leases
|
|
Remainder of 2020
|
|
|
$
|
4,381
|
|
2021
|
|
|
|
4,338
|
|
2022
|
|
|
|
2,781
|
|
2023
|
|
|
|
1,307
|
|
2024
|
|
|
|
645
|
|
2025
|
|
|
|
94
|
|
Thereafter
|
|
|
|
28
|
|
Total future minimum lease payments
|
|
|
|
13,574
|
|
Less: imputed interest
|
|
|
|
(1,217
|
)
|
Total
|
|
|
$
|
12,357
|
|
Current portion operating lease liabilities
|
|
|
$
|
5,049
|
|
Non-Current operating lease liabilities
|
|
|
|
7,308
|
|
Total
|
|
|
$
|
12,357
|
|
9. Notes Payable – Long Term –
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
Subsidiary subordinated note payable to seller with monthly interest only payments at 6%, guaranteed by PQH, maturing August 5, 2022 when the principal balance is due.
|
|
$
|
789,216
|
|
|
$
|
789,216
|
|
Subsidiary note payable to a financial institution, with monthly principal and interest payments of $6,692, bearing interest at 5.5%, secured by substantially all assets of the subsidiary, and maturing January 4, 2024.
|
|
|
280,002
|
|
|
|
296,035
|
|
Total
|
|
|
1,069,218
|
|
|
|
1,085,251
|
|
Less current maturities
|
|
|
(66,362
|
)
|
|
|
(65,414
|
)
|
|
|
$
|
1,002,856
|
|
|
$
|
1,019,837
|
|
10. Cash Dividends –
Date Declared
|
Record Date
|
Dividend Per Share
|
Payment Date
|
Dividend Paid
|
February 13, 2020
|
February 28, 2020
|
$0.05
|
March 9, 2020
|
$463,289
|
11. Revenue –
Revenue generated from contracts with customers and recognized per ASC 606 primarily consists of sales of merchandise and services at the point of sale and compensation from Cricket Wireless. As a Cricket Wireless authorized retailer, we earn compensation from Cricket Wireless for activating a new customer on the Cricket Wireless network, activating new devices for existing Cricket Wireless customers (back-end compensation) and upon an existing Cricket Wireless customer whom we originally activated on the Cricket Wireless GSM network making a continuing service payment (CSP).
Due to COVID-19 and at the request of Cricket Wireless, the Cellular Retail segment temporarily closed approximately 75 retail locations in March 2020. In conjunction with the request, Cricket Wireless notified the Company that it would be providing supplemental commissions for the store closures. Supplemental commissions related to the closed locations of approximately $285,000, as reported to us by Cricket, was included in revenue in the three-month period ended March 31, 2020.
Revenue generated from short-term lending agreements in the Consumer Finance segment and from Company investments are recognized in accordance with ASC 825.
Total net sales of merchandise,
which exclude sales taxes, are generally recorded as follows:
|
●
|
Cellular Retail – net sales reflects the transaction price at point of sale when payment is received or receivable, the customer takes control of the merchandise and, applicable to devices, the device has been activated on the Cricket Wireless network. The sale and activation of a wireless device also correlates to the recording of back-end compensation from Cricket Wireless. Sales returns are generally not material to our financial statements.
|
|
●
|
Direct to Consumer – net sales reflect the transaction price when product is shipped to customers, FOB shipping point, reduced by variable consideration. Shipping and handling fees are also included in total net sales. Variable consideration is comprised of estimated future returns and merchandise credits which are estimated based primarily on historical rates and sales levels.
|
|
●
|
Consumer Finance - net sales reflects the transaction price at point of sale when payment in full is received and the customer takes control of the merchandise. Sales returns are generally not material to our financial statements.
|
Services revenue from customer paid fees is generally recorded at point of sale when payment is received and the customer receives the benefit of the service. CSP compensation from Cricket Wireless is recorded as of the time certain Cricket Wireless customers make a service payment, as reported to us by Cricket Wireless.
Recognized as revenue per ASC 825, Consumer Finance loan fees and interest on cash advance loans are recognized on a constant-yield basis ratably over a loan’s term. 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 recognizes fees on pawn loans on a constant-yield basis ratably over the loans’ terms, less an estimated amount for expected forfeited pawn loans which is based on historical forfeiture rates.
See Note 15, Segment Information, for disaggregation of revenue by segment.
12. Other Operating Expense –
A breakout of other expense is as follows:
|
|
For The Three Months Ended
|
|
|
|
March 31, 2020
|
|
|
March 31, 2019
|
|
Bank fees
|
|
$
|
560,978
|
|
|
$
|
504,981
|
|
Collection costs
|
|
|
78,069
|
|
|
|
77,715
|
|
Insurance
|
|
|
196,381
|
|
|
|
188,296
|
|
Management and advisory fees
|
|
|
211,003
|
|
|
|
202,146
|
|
Professional and consulting fees
|
|
|
380,496
|
|
|
|
553,622
|
|
Supplies
|
|
|
217,579
|
|
|
|
138,592
|
|
Gain on disposal
|
|
|
(7,737
|
)
|
|
|
(1,415
|
)
|
Other
|
|
|
647,549
|
|
|
|
600,655
|
|
|
|
$
|
2,284,318
|
|
|
$
|
2,264,592
|
|
13. Segment Information –
Segment information related to the three-month period ended March 31, 2020 and 2019 (in thousands) is as follows:
Thee Months Ended March 31, 2020
(in thousands)
|
|
|
Cellular Retail
|
|
|
Direct to Consumer
|
|
|
Consumer Finance
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
$
|
19,533
|
|
|
$
|
11,599
|
|
|
$
|
421
|
|
|
$
|
—
|
|
|
$
|
31,553
|
|
Fees and interest income
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,045
|
|
|
$
|
—
|
|
|
$
|
2,045
|
|
Total Revenue
|
|
$
|
19,533
|
|
|
$
|
11,599
|
|
|
$
|
2,466
|
|
|
$
|
—
|
|
|
$
|
33,598
|
|
Net income (loss)
|
|
$
|
1,184
|
|
|
$
|
1,176
|
|
|
$
|
225
|
|
|
$
|
(218
|
)
|
|
$
|
2,367
|
|
Total segment assets
|
|
$
|
35,495
|
|
|
$
|
15,307
|
|
|
$
|
8,347
|
|
|
$
|
35,157
|
|
|
$
|
94,306
|
|
Expenditures for segmented assets
|
|
$
|
336
|
|
|
$
|
118
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
454
|
|
Three Months Ended March 31, 2019
(in thousands)
|
|
|
Cellular Retail
|
|
|
Direct to Consumer
|
|
|
Consumer Finance
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
$
|
16,501
|
|
|
$
|
10,941
|
|
|
$
|
401
|
|
|
$
|
—
|
|
|
$
|
27,843
|
|
Fees and interest income
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,115
|
|
|
$
|
—
|
|
|
$
|
2,115
|
|
Total Revenue
|
|
$
|
16,501
|
|
|
$
|
10,941
|
|
|
$
|
2,516
|
|
|
$
|
—
|
|
|
$
|
29,958
|
|
Net income (loss)
|
|
$
|
571
|
|
|
$
|
650
|
|
|
$
|
233
|
|
|
$
|
(154
|
)
|
|
$
|
1,300
|
|
Total segment assets
|
|
$
|
34,253
|
|
|
$
|
13,968
|
|
|
$
|
8,429
|
|
|
$
|
36,039
|
|
|
$
|
92,689
|
|
Expenditures for segmented assets
|
|
$
|
229
|
|
|
$
|
34
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
263
|
|
14. Commitments and Contingencies –
Employment Agreements
Pursuant to the numerous employment agreements, bonuses of approximately $203,000 and $158,000 were accrued for the three months ended March 31, 2020 and 2019, respectively.
Assigned Leases
The Company’s Cellular Retail segment has transferred operations of many locations to other dealers and remains contingently liable under many lease agreements. Minimum lease payments of assigned or assumed non-cancelable operating leases related to transferred locations in which a release has not been obtained from the lessor are approximately $1,876,000 as of March 31, 2020.
Legal Proceedings
The Company is party to a variety of legal actions arising out of the normal course of business. Plaintiffs occasionally seek punitive or exemplary damages. The Company does not believe that such normal and routine litigation will have a material impact on its consolidated financial results.
15. Subsequent Events –
Dividend Declared
Our Board of Directors declared the following dividend:
Date Declared
|
Record Date
|
Dividend Per Share
|
Payment Date
|
May 5, 2020
|
May 22, 2020
|
$0.025
|
June 2, 2020
|
COVID-19
As of the date of this report, the Company’s Cellular Retail segment has reopened approximately 45 of the locations temporarily closed in March 2020. Cricket Wireless continued to provide supplemental commissions related to the store closures.
The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but may have a material impact on our business, financial condition and results of operations.
The significance of the impact of the COVID-19 outbreak on the Company’s businesses and the duration for which it may have an impact cannot be determined at this time.
We evaluated all events or transactions that occurred after March 31, 2020 through the date we issued these financial statements. During this period we did not have any other material subsequent events that impacted our financial statements.