** **

**FORM 10-Q**

 

**QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF THE SECURITIES ACT OF 1934**

 

**For Quarter Ended: September 30, 2001**

 

**Commission File Number: 2-95465-S**

** **

**WESTAR FINANCIAL SERVICES INCORPORATED**

(Exact name ofregistrant as specified in its charter)

** **

| **Washington**                                                  |   | **91-1715252**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State  or other jurisdiction of Incorporation or organization) |   | (IRS  Employer Identification Number) |
|                                                            |   |                                  |
| **The Financial Center 150 Israel Road SW; Tumwater, WA**       |   | **98501**                             |
| (Address  of principal executive office)                        |   | (Zip  Code)                           |
|                                                            |   |                                  |
| **(360) 754-6227**                                              |
| Registrant's  telephone number, including area code:       |

 

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during thepreceding 12 months and (2) has been subject to such filing requirements forthe past 90 days.

 

Yes: ý No o

Indicatethe number of shares outstanding of each of the issuer's classes of commonstock as of the latest practicable date:

Common Stock 2,348,210

Class Number of SharesIssued at November 3, 2001

 

 

PARTI. FINANCIAL INFORMATION

 

ITEM1. FINANCIAL STATEMENTS

 

Westar FinancialServices Incorporated and Subsidiaries

Consolidated Balance Sheets

As Of September 30, 2001 and March 31, 2001
|                                                                          |   | **September 30,** |       | **March 31,** |   |
|-------------------------------------------------------------------------------|--------|-------------------|------------|---------------|--------|
|                                                                          |   | **2001**          |       | **2001**      |   |
|                                                                          |   | **(Unaudited)**   |       |          |   |
| Assets                                                                        |   |              |       |          |   |
|                                                                          |   |              |       |          |   |
| Cash                                                                          |   | $                 | 7,924,256  |          | $      | 4,728,664 |   |
| Accounts receivable                                                           |   | 3,457,526         |       | 774,356       |   |
| Credit enhancement receivable, net                                            |   | 2,587,281         |       | 2,624,796     |   |
| Vehicles under operating leases  held for sale, net                           |   |              |       | 19,481,587    |   |
| Net investment in direct financing  leases, net                               |   | 474,390           |       | 1,878,762     |   |
| Deferred tax asset, net of  valuation allowance Of $4,524,287 and $5,599,662  |   |              |       |          |   |
| Fixed and other assets, net of  accumulated depreciation                      |   | 2,258,527         |       | 1,986,873     |   |
|                                                                          |   |              |       |          |   |
| Total Assets                                                                  |   | $                 | 16,701,980 |          | $      | 31,475,038 |   |
|                                                                          |   |              |       |          |   |
| Liabilities, Redeemable Preferred  Stock and Shareholders’ Deficit       |   |              |       |          |   |
|                                                                          |   |              |       |          |   |
| Accounts payable                                                              |   | $                 | 11,104,112 |          | $      | 8,142,562 |   |
| Notes payable to banks                                                        |   | 500,000           |       | 20,655,101    |   |
| Convertible, Subordinated notes  payable to affiliates and others             |   | 9,269,382         |       | 11,651,942    |   |
| Other liabilities                                                             |   | 6,784,276         |       | 5,086,792     |   |
|                                                                          |   |              |       |          |   |
| Total Liabilities                                                             |   | 27,657,770        |       | 45,536,397    |   |
|                                                                          |   |              |       |          |   |
| Redeemable preferred stock                                                    |   | 1,250,000         |       | 1,250,000     |   |
|                                                                          |   |              |       |          |   |
| Shareholders’ Deficit                                                    |   |              |       |          |   |
| Common stock, no par value                                                    |   | 3,716,627         |       | 3,716,427     |   |
| Paid in capital - stock warrants                                              |   | 371,495           |       | 371,495       |   |
| Accumulated deficit                                                           |   | (16,293,912       | )          | (19,399,281   | )      |
|                                                                          |   |              |       |          |   |
| Total Shareholders’ Deficit                                              |   | (12,205,790       | )          | (15,311,359   | )      |
|                                                                          |   |              |       |          |   |
| Total Liabilities, Redeemable  Preferred Stock and Shareholders’ Deficit |   | $                 | 16,701,980 |          | $      | 31,475,038 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

Westar Financial Services Incorporated andSubsidiaries

Consolidated Statements of Operations

For the three and six months ended September 30,2001 and 2000

(Unaudited)
|                                                  |   | **Three Months Ended** |        | **Six Months Ended** |   |
|-------------------------------------------------------|--------|------------------------|-------------|----------------------|--------|
|                                                  |   | **2001**               |        | **2000**             |   | **2001** |   | **2000** |   |
| Revenues                                              |   |                   |        |                 |   |   |   |   |   |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| Revenues from sales and  securitizations              |   | $                      | 141,310,218 |                 | $      | 57,063,616 |   | $ | 282,224,444 |   | $ | 92,533,466 |   |
| Revenues from lease originations                      |   | 2,930,238              |        | 1,173,080            |   | 5,441,378 |   | 1,913,570 |   |
| Revenues from operating leases                        |   | 2,230,226              |        | 1,107,004            |   | 4,166,955 |   | 1,945,131 |   |
| Service fee income                                    |   | 318,807                |        | 179,530              |   | 578,489 |   | 330,483 |   |
| Other income                                          |   | 44,450                 |        | 106,074              |   | 123,720 |   | 121,763 |   |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| Total revenues                                        |   | 146,833,939            |        | 59,629,304           |   | 292,534,986 |   | 96,844,413 |   |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| Direct Costs                                          |   |                   |        |                 |   |   |   |   |   |
| Costs related to sales and  securitizations           |   | 138,500,546            |        | 57,257,597           |   | 277,718,118 |   | 93,845,815 |   |
| Costs related to originating  leases                  |   | 754,370                |        | 387,200              |   | 1,422,305 |   | 496,100 |   |
| Depreciation expense on operating  leases             |   | 1,585,372              |        | 786,995              |   | 3,006,731 |   | 1,287,556 |   |
| Interest                                              |   | 195,039                |        | 405,644              |   | 374,417 |   | 682,710 |   |
| Other                                                 |   | 930,467                |        | 368,816              |   | 1,766,375 |   | 522,516 |   |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| Total direct costs                                    |   | 141,965,794            |        | 59,206,252           |   | 284,287,946 |   | 96,834,697 |   |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| Gross margin                                          |   | 4,868,145              |        | 423,052              |   | 8,247,040 |   | 9,716 |   |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| General and administrative  expenses                  |   | 2,381,207              |        | 1,659,750            |   | 4,618,047 |   | 3,238,188 |   |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| Income (Loss) before subordinated  Interest and taxes |   | 2,486,938              |        | (1,236,698           | )      | 3,628,993 |   | ($3,228,472 | ) |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| Subordinated debt interest expense                    |   | (218,814               | )           | (269,923             | )      | (466,127 | ) | (486,735 | ) |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| Income (loss) before federal income tax               |   | 2,268,124              |        | (1,506,621           | )      | 3,162,866 |   | (3,715,207 | ) |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| Income tax expense (benefit)                          |   | 780,884                |        | (512,251             | )      | 1,075,375 |   | (1,263170 | ) |
| Deferred income tax benefit                           |   | (780,884               | )           | 512,251              |   | (1,075,375 | ) | 1,263,170 |   |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| Net income (loss)                                     |   | 2,268,124              |        | (1,506,621           | )      | 3,162,866 |   | (3,715,207 | ) |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| Dividends on redeemable preferred  stock              |   | (28,905                | )           | (28,906              | )      | (57,497 | ) | (57,498 | ) |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| Net income (loss) applicable to common stock          |   | $                      | 2,239,219   |                 | $      | (1,535,527 | ) | $ | 3,105,369 |   | $ | (3,772,705 | ) |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| Basic earnings (loss) per share                       |   | $                      | .95         |                 | $      | (.65 | ) | $ | 1.32 |   | $ | (1.61 | ) |
|                                                  |   |                   |        |                 |   |   |   |   |   |
| Diluted earnings (loss) per share                     |   | $                      | .62         |                 | $      | (.65 | ) | $ | .90 |   | $ | (1.61 | ) |
|                                                       |        |                        |             |                      |        |  |  |  |  |  |  |  |  |  |  |

 

Seeaccompanying notes to consolidated financial statements.

 

Westar Financial Services Incorporated andSubsidiaries

Consolidated Statements of Cash Flows

For the six months ended September 30, 2001 and2000

(Unaudited)

 
|                                                      |   | **2001**     |       | **2000**    |   |
|-----------------------------------------------------------|--------|--------------|------------|-------------|--------|
|                                                      |   |         |       |        |   |
| Increase (Decrease) in Cash                               |   |         |       |        |   |
| Net cash provided by  (used in) operating activities |   | $            | 26,720,696 |        | $      | (6,775,431 | ) |
|                                                      |   |         |       |        |   |
| Net cash used in investing  activities                    |   | (587,354     | )          | (1,090,828  | )      |
|                                                      |   |         |       |        |   |
| Cash flows from financing  activities:                    |   |         |       |        |   |
| Proceeds from issuance of common  stock                   |   | 200          |       |        |   |
| Additions to notes payable to  banks                      |   | 247,698,064  |       | 92,850,632  |   |
| Payments on notes payable to banks                        |   | (267,853,165 | )          | (88,838,257 | )      |
| Additions to notes payable –  subordinated debt      |   |         |       | 4,014,944   |   |
| Payments on notes payable –  subordinated debt       |   | (2,382,560   | )          | (614,383    | )      |
| Preferred Stock dividend payments                         |   | (400,289     | )     |        |   |
|                                                      |   |         |       |        |   |
| Net cash provided by (used in)  financing Activities      |   | (22,937,750  | )          | 7,412,936   |   |
|                                                      |   |         |       |        |   |
| Net increase (decrease) in cash                           |   | 3,195,592    |       | (453,323    | )      |
|                                                      |   |         |       |        |   |
| Cash:                                                     |   |         |       |        |   |
| Beginning of period                                       |   | 4,728,664    |       | 1,401,243   |   |
|                                                      |   |         |       |        |   |
| End of period                                             |   | $            | 7,924,256  |        | $      | 947,920 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS

 

# **Basis of Presentation**

 

The Company's consolidated annualfinancial statements presented in the 2001 Annual Report on Form 10-K of theCompany includes a summary of significant accounting policies and should beread in conjunction with this Form 10-Q. The consolidated financial statementsinclude the results of operations of Westar Financial Services Incorporated(“Westar” or “West”), its 100% owned subsidiaries Westar Finance Holding Co.(“WestFH”),  Westar Auto Finance L.L.C.("WestAF"), a limited liability company owned 99% by the Company and1% by WestAH, and Westar Lease Origination Trust, a Massachusetts businesstrust registered in the state of Washington, beneficially owned by WestAF.

 

The statements for the six months endedSeptember 30, 2001 and 2000 are unaudited, condensed and do not contain allinformation required by accounting principles generally accepted in the UnitedStates of America to be included in a full set of annual financialstatements.  In the opinion ofManagement, all adjustments (consisting only of normal recurring adjustments)necessary to present fairly the consolidated results of operations for suchperiods are included.  All significantinter-company accounts and transactions have been eliminated. Preparingfinancial statements requires management to make estimates and assumptions thataffect the reported amounts of assets, liabilities, revenue and expenses. Theresults of operations for the six months ended September 30, 2001 (the interimperiod) are not necessarily indicative of the results of operations for theentire year.  The information includedin this Form 10-Q should be read in conjunction with Management’s Discussionand Analysis and the consolidated financial statements and notes theretoincluded in Westar Financial Services Incorporated 2001 Annual Report on Form10-K.

 

**GoingConcern**

 

As discussed in the Subsequent EventsNote to the Consolidated Financial statements, the decision of the Company'sprimary lender to terminate its obligation to make revolving credit loans andto discontinue its practice of purchasing leases originated by the Company hasseverely disrupted Westar's operations and has raised substantial doubt aboutWestar's ability to continue as a going concern.  Bank One is attempting to transfer servicing from Westar to athird party servicer without compensation to Westar.  Management is searching for alternative strategic relationshipsthat would allow it to resume originating leases.  Should management's efforts be unsuccessful in the near future itis likely that Westar may be forced to seek protection under the bankruptcylaws or to cease operations entirely. These financial statements do not include any adjuestments that mightresult from the outcome of this uncertainty.

 

# **Direct FinancingReceivables**

 

The Company repurchased the remainingstream of cash flows from the 1996-A and 1996-B Securitization from theIndustrial Bank of Japan in August 2000. The Company expects collection of theestimated net future cash flows of $474,390 by November 2001. The Company hasan allowance for uncollectable future cash flows in the amount of $25,000.

 

# **Fixed Assets and Other**

 

At September 30, 2001 and March 31, 2001,furniture, fixtures and equipment of $2,014,851 (net of accumulateddepreciation of $2,055,042) and $1,922,268 (net of accumulated depreciation$1,563,800) respectively, are included in fixed assets and other. They arestated at cost less accumulated depreciation and are depreciated on astraight-line basis over their estimated useful lives of 2 – 5 years. Includedin this total are assets subject to capital leases in the amount of $519,952(net of accumulated amortization of $466,115) and $623,174 (net of accumulatedamortization of $389,017) for the periods ended September 30, 2001 and March31, 2001, respectively. These assets are stated at cost and amortized over theterm of the lease.

 

# **Federal Income Tax**

 

TheCompany provides a 100% valuation allowance against the deferred tax assetbalance. Increases in the deferred tax asset allowance offset the tax benefitrelated to the temporary differences creating the deferred tax asset and resultin no federal income tax benefit for the corresponding period. Likewise,decreases in the deferred tax asset and related valuation allowance are offsetby the tax expense on the book income and result in no federal income taxexpense for the corresponding period. The deferred tax asset is primarilycomprised of federal tax net operating losses, which are available for anaverage of 13 years to offset future reported tax liabilities. During the firstsix months of fiscal 2002, the Company utilized $1,075,375 of the deferred taxasset to offset estimated income taxes. The remaining deferred tax asset of$4,524,287 is offset by the valuation allowance.

 

# **Interest Paid**

 

The Company paid cash for interest of$959,894 and $749,477 for the six months ended September 30, 2001 and 2000,respectively. Included in the total was $209,522 and $246,752 of interest paidto affiliates during the first six months ended September 30, 2001 and 2000respectively.

 

**Redeemable PreferredStock**

 

During the second quarter of fiscal year2002, the Company paid $400,289 in accrued dividends to the affiliate holder ofthe preferred stock.

 

**IncomePer Common  Share**

 

Basic net income per common share is netincome less preferred stock dividend requirements divided by the average numberof common shares outstanding. Diluted net income per common share assumesissuance of the net incremental shares from stock options, warrants and fullconversion of all dilutive convertible securities at the later of the beginningof the year or date of issuance.

 

A reconciliation of the data used in thecalculation of basic and diluted earnings per share computations for incomefrom continuing operations is as follows:

 
|                                                                   |   | **Three Months Ended** |      | **Six Months Ended** |   |
|------------------------------------------------------------------------|--------|------------------------|-----------|----------------------|--------|
|                                                                   |   | **9/30/01**            |      | **09/30/00**         |   | **09/30/01** |   | **09/30/00** |   |
| **Basic Earnings (Loss) Per Share**                                    |   |                   |      |                 |   |   |   |   |   |
| Net income (loss)  applicable to common stock                          |   | $                      | 2,239,219 |                 | $      | (1,535,527 | ) | $ | 3,105,369 |   | $ | (3,772,705 | ) |
| Average common  shares outstanding                                |   | 2,348,203              |      | 2,348,120            |   | 2,348,187 |   | 2,348,120 |   |
| Basic earnings (loss)  per share                                       |   | $                      | .95       |                 | $      | (.65 | ) | $ | 1.32 |   | $ | (1.61 | ) |
|                                                                   |   |                   |      |                 |   |   |   |   |   |
| **Dilutive Earnings (Loss) Per Share**                                 |   |                   |      |                 |   |   |   |   |   |
| Net income (loss)  applicable to common stock                          |   | $                      | 2,239,219 |                 | $      | (1,535,527 | ) | $ | 3,105,369 |   | $ | (3,772,705 | ) |
| Dividends on  redeemable preferred stock                               |   | 28,905                 |      |                 |   | 57,497 |   |   |   |
| Interest on 10.5%  convertible subordinated notes                      |   | 105,000                |      |                 |   | 210,000 |   |   |   |
| Net income (loss)  applicable to common stock plus assumed conversions |   | $                      | 2,373,124 |                 | $      | (1,535,527 | )  | $ | 3,372,866 |   | $ | (3,772,705 | )  |
|                                                                   |   |                   |      |                 |   |   |   |   |   |
| Average common shares  outstanding                                     |   | 2,348,203              |      | 2,348,120            |   | 2,348,187 |   | 2,348,120 |   |
| Add: Stock Options                                                     |   | 182,898                |      |                 |   | 88,243 |   |   |   |
| Stock Warrants                                                         |   | 154,563                |      |                 |   | 153,123 |   |   |   |
| Convertible  subordinated notes payable                                |   | 753,701                |      |                 |   | 753,701 |   |   |   |
| Convertible preferred  stock                                           |   | 386,815                |      |                 |   | 386,815 |   |   |   |
| Average common shares  outstanding on a fully diluted basis            |   | 3,826,180              |      | 2,348,120            |   | 3,730,182 |   | 2,348,120 |   |
|                                                                   |   |                   |      |                 |   |   |   |   |   |
| Diluted earnings  (loss) per share                                     |   | $                      | .62       |                 | $      | (.65 | ) | $ | .90 |   | $ | (1.61 | ) |

 

Certainstock options  and warrants wereexcluded from the computation of earnings per share due to their antidilutiveeffect. The weighted average number of such options and warrant isapproximately 80,000 for the second quarter of fiscal year 2002 and 135,000 forthe six months period ended September 30, 2001.

 

**NotesPayable to Affiliates and Others**

 

Duringthe first quarter of 2001, the Company paid in full two subordinated notespayable totaling $2,200,000 plus accrued interest to Navidec, Inc. Two notesalso payable to Navidec totaling $1,500,000 which were previously due on July5, 2001 and August 25, 2001, are now due on demand.  No demand has been made to date and the Company continues toaccrue interest at the original note rate of 9%.

 

In June 2001, the Company extended S.Seel’s subordinated note payable in the amount of $250,000 from April 30, 2001to November 15, 2001.

 

The Company has three subordinated notespayable to & Capital, Partners LP totaling $3,000,000, which werepreviously due on August 15, 2001 and are now due on demand.  No demand has been made to date and theCompany continues to accrue interest at the original note rates of 9% to 9.5%.All other terms and conditions remain the same.

 

At September 30, 2001 and March 31, 2001,accrued interest in the amounts of $1,114,992 and $805,071 respectively, aredue on subordinated notes payable to affiliates and others, and are included inOther Liabilities.

 

**OtherLiabilities**

 

Other liabilities consist of thefollowing at September 30, 2001 and March 31, 2001:

 
|                                |   | **September  2001** |      | **March  2001** |   |
|-------------------------------------|--------|---------------------|-----------|-----------------|--------|
| Accrued Interest                    |   | $                   | 1,322,726 |            | $      | 1,403,000 |   |
| Sales/use tax                       |   | 707,074             |      | 538,000         |   |
| Cash/accounts  receivable investors |   | 3,888,011           |      | 2,416,500       |   |
| Others                              |   | 866,465             |      | 729,292         |   |
| Totals                              |   | $                   | 6,784,276 |            | $      | 5,086,792 |   |

 

**Stock OptionsGranted**

 

During the second quarter of fiscal year2002, the Company granted 118,100 incentive stock options under the CompanyIncentive stock option plan. The Company did not recognize any compensationexpense during the quarter under APB 25, as the exercise price was equal to thestock price on the date of grant.

 

**Securitization(ABS) or SBAS Transactions**

 

The Company completed seven SecuritiesBased Asset Sales (“SBAS”) in each of the first and second quarters of fiscal2002, for a total of fourteen SBAS sales. Total proceeds from the sales were$282.2M. The Company established servicing cash reserves in the amount of$1.9M, which is to be received in 60 monthly payments. The Company will alsoreceive other fees depending upon the actual performance of the underlyingassets. The Company continues to service the leases securitized. The Companyanticipates that future securitizations or sales will be completed on an ABSbasis instead of an SBAS basis. ABS transactions typically result in less cashreceived at the time of sale but also result in higher margins.

 

The leases sold in the above transactionswere operating leases and they were accounted for in accordance with SFAS 13until the time of sale. Accordingly, rental payments collected before the saleof the operating leases were recognized as revenues from operating leases anddepreciation on equipment subject to these operating leases was recordedthrough the date of sale.

 

# **Subsequent  Events**

 

On November 7, 2001, the Company wasnotified by Bank One of an event of default on its credit facility in that theCompany had failed to complete a term securitization within the timeframedemanded by Bank One. As a result of the default, Bank One terminated itsobligation under the credit facility to make further loans to Westar.  The securitization attempt was complicatedby unexpected difficulties qualifying the residual value insurance policy andits issuing company for a term securitization. The effects of the 9/11 terrorist attacks on the capital markets and theInsurance Industry added to the difficulty of completing a securitization onthe schedule set by Bank One.

 

Bank One has expressed no interest incontinuing to purchase automobile leases originated by Westar and is attemptingto transfer servicing from Westar to a third party servicer.  The Company has ceased originatingautomobile leases and is actively seeking alternative strategic relationshipsto fund lease originations and either purchase or identify a purchaser of leaseportfolios originated by the Company. Management believes that they may be required to offer a substantialequity stake in the Company's common stock to attract such a relationship.  There can be no assurance that such arelationship, financing source or buyer will be found.  Should management's efforts be unsuccessfulin the near future it is likely that Westar may be forced to seek protectionunder the bankruptcy laws or to cease operations entirely.

 

## **ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND**

**RESULTSOF OPERATIONS.**

 

Althoughmost of the information contained in this report is historical, certainstatements contain forward-looking information.  To the extent these statements involve, without limitation,product development and introduction plans, the Company’s expectations forgrowth, estimates of future revenues, expenses, profit, cash flow, balancesheet items, forecasts of demand or market trends for the Company’s productsand for the auto finance industry or any other guidance on future periods,these statements are forward-looking and involve matters which are subject to anumber of risks and uncertainties that could cause actual results to differmaterially from those expressed in such forward-looking statements. Readers ofthis report should consider, along with other relevant information, the risksidentified in this report and other risks identified from time to time  in the Company’s filings with the Securitiesand Exchange Commission, press releases and other communications.

 

Theterrorist attacks that occurred in New York City and Washington, D.C. onSeptember 11, 2001, and the United States subsequent response to these eventshave resulted in a general economic slowdown that has adversely affected ourbusiness.  Economic slowdowns orrecessions in our primary market area may be accompanied by reduced demand forcredit, decreasing interest margins and declining values, which may in turnresult in a decrease in net earnings and an increased possibility of potentiallosses in the event of default.  Anysustained period of decreased economic activity, increased delinquencies, orlosses could limit our growth and negatively affect our results of operations.  We cannot predict the extent or duration ofthese events or their effect upon our business and operations.

 

BUSINESSOVERVIEW

 

Inthe last five years, Westar has recreated itself from a traditional commercialequipment lessor to a prime credit consumer auto lessor competing within autodealerships, to a leading Internet financier, and, presently, a four-channelfinancial portal.

 

As a financial portal, Westar canoriginates, decisions, commits to and fulfills consumer financings for its ownaccount or the accounts of others, using sophisticated decisioning tools andhigh speed communications to assure transparency to all parties in the process.Westar has created a business model where it is relatively indifferent as tothe nature of both the originator and the ultimate investor.

 

Westar Financial Services Incorporatedand its Subsidiaries can provide prime credit quality consumer automobile leasefinancing through franchised automobile dealers in the western states andthrough its e-commerce origination channels throughout the United States.Westar has designed and developed a number of financing, lease servicing andrisk management innovations. It is Management’s opinion that Westar’sproprietary decisioning and fulfillment capabilities are among the mostscalable and marketable programs currently available.

**ORIGINATION**

 

**DealerDirect Retail Leasing**

 

Westaracquires automobile leases through its Dealer Direct Retail Leasing (“DDRL”)program.  Westar offers DDRL to selectedmanufacturer-franchised automobile dealerships based on reputation, locationand size.  The Company attempts to meetthe needs of its dealers through responsive customer service, extended hoursoperating across 361 business days a year, rapid funding, consistent buyingpractices and competitive pricing.  TheCompany has contracts with more than 2,200 auto dealers.

 

**Internet**

 

The Company hadformed a strategic alliance with DriveOff.com, Inc., in which WEST was theexclusive financial portal for all of the transactions generated through theDriveOff.com site. The Company began originating transactions throughDriveOff.com on September 28, 1999. The focus of this 3rd generation Internetautomobile acquisition channel was to significantly increase consumersatisfaction with the process while decreasing prices. The program empoweredconsumers to negotiate new car purchases and financing 100% online. Consumerscould design and "build" a vehicle purchase at a firm price, arrangethe financing and schedule an appointment to accept delivery of the vehiclefrom a dealer. Westar proved its ability to originate, decision, commit to andfulfill loans and leases in a near-real time environment and with high degreesof consumer satisfaction.

 

DriveOff.com,Inc. was purchased by Microsoft's CarPoint, Inc. in September 2000 and closedin February 2001. The revenues generated through DriveOff.com, Inc. wereapproximately 1% of Westar's total revenues during the alliance period, lessthan the related expenses.

 

**Intranet**

 

The Intranet conduit duplicates theoperation of Westar’s Internet channel except that the business model and technologyare placed within the webspace of another organization, only visible to andusable by members of the host organization. This business model aligns itselfwith organizations that have extraordinary consumer credibility and intenselyloyal constituents. It seeks organizations that wish to deliver value through apositive auto purchasing experience. Likely candidates for Intranet alliancesinclude large affinity membership organizations, banks or insurance companies.Westar would earn a fee each time a consumer transaction passes through itsdecisioning process.

 

Westar retainsfor its own account the prime credit leases originated by the Internet andIntranet channels.

** **

**PrivateLabel**

 

Westar’s Private Label channel isdesigned to offer other financial service firms access to Westar’s *LASIRpro*decisioning technology and processes. With LASIRpro, a bank with a need forconsumer automobile financing, but without its own capability, can use Westar’stechnology and processes for real-time, real-world decisioning and commitments.This allows the originating entity to preserve its market presence by servingits dealers and consumers while making nearly instantaneous credit, asset, andpricing decisions. Westar receives fee income on all or a portion of the originatedassets for its services. Westar’s Private Label partners currently includeAmSouth Bancorporation, Mellon Bank (acquired by Citizens Bank) and USAAFederal Savings Bank. The Company’s relationship will Mellon will beterminating in November but there will be no material impact on leaseoriginations since the dealer will be absorbed into the Company direct dealerprogram.

 

Management believes the diversificationprovided by multiple origination channels allows the Company to build asustainable competitive advantage by using its proprietary leading edgedecisioning and communications technologies and its proprietary leasesecuritization capabilities.

 

** **

**RESULTS OF OPERATIONS AND CHANGES IN FINANCIALPOSITION**

 

**Three and Six months ended September 30, 2001 compared tothree and six months ended September 30, 2000.**

 

The Company’s statement of operationsreports net income of $2,268,124 for the second quarter ended September 30,2001, an increase of $3,774,745 from a net loss of $(1,506,621) in the secondquarter of fiscal 2001. For the six months ended September 30, 2001, theCompany posted net income of $3,162,866 compared to a net loss of $(3,715,207)in the same period last year, an increase in net income of $6,878,073.

 

Gross revenues for the second quarter offiscal year 2002 was $146.8M, an increase of $87.2M or 146% over the secondquarter of fiscal 2001 amount of $59.6M. The increase in total gross revenueswas driven by the 148% increase in lease volumes for the second quarter. Theincreased volume enabled WEST to collect additional origination fees, operatinglease income and to complete seven Security Based Asset Sales in the secondquarter of fiscal 2002, totaling $141.3M. Origination fee income and operatinglease income was $2.9M and $2.2M, respectively, for the second quarter offiscal year 2002, representing increases of $1.7M or 142% and $1.1M or 100%over the second quarter of fiscal 2001 amounts. The Company retains allservicing rights to the assets sold, servicing income for the second quarterended September 30, 2001 was $318K, an increase of $139K or 78% from theprevious comparable quarter.

 

GrossRevenues for the first six months of fiscal year 2002 was $292.5M, an increaseof $195.7M or 202% over the first six months of fiscal year 2001 amount of$96.8M. Again, total revenues were driven by a 182% increase in lease volumesfor the first six months of fiscal 2002. During the first six months of fiscalyear 2002, WEST completed fourteen SBAS sales totaling $282.2M as compared witheight sales during the first six months of fiscal year 2001, totaling $92.5M.Origination fee income and operating lease income increased to $5.4M and $4.2Mrespectively, during the first six months of fiscal year 2002, representingincreases of $3.5M or 184% and $2.2M or 116% over the first six months offiscal 2001 amounts.

 

Lease originations for the second quarterof fiscal year 2002 were 4,925 costing $136.6M, an increase of 2,938 leasesover the second quarter of fiscal year 2001 originations of 1,987. Total leaseoriginations for the first six months of fiscal year 2002 were 9,148 ascompared to 3,242 for the first six months of fiscal year 2001. The increase inlease originations was directly due to the expansion of the Company’s dealernetwork and channel partners marketing efforts to originate additional volume.The outstanding face value of 24,447 leases serviced totaled $617M. The creditquality of originated leases remained steady, with average FICO scores of 724in the current period compared to 732 in the prior quarter.

 

Total direct costs for the second quarterof fiscal year 2002 were $142M representing an increase of $82.8M or 140%, overthe second quarter of fiscal year 2001 amounts of $59.2M. This was primarilydue to the increase in lease origination volumes, correlating to the number ofsales that were completed during the quarter. As a result of the increasedvolumes, costs from sales and securitizations increased $81.2M or 142% for thesecond quarter from $57.3M in the comparable quarter to $138.5M. Depreciationexpense also increased $798K or 101% in the second quarter of fiscal year 2002,from $787K in the second quarter of fiscal year 2001, to $1.6M. Due to theincrease in frequency of securitizations or sales and a decline in interest rates,interest costs decreased $211K or 52% in the second quarter from $406K in thecomparable quarter to $195K. Origination fees paid to channel partnersincreased $367K or 95% in the second quarter of fiscal year 2002, from $387K inthe second quarter of fiscal year 2001, to $754K.  The increase is due to the increases in lease originationvolumes. Other expenses increased by $561K or 155% during the second quarter offiscal year 2002, primarily due to insurance expense associated with the numberof new lease portfolios securitized.

 

Total direct costs for the first sixmonths of fiscal year 2002 were $284.3M an increase of $187.5M or 194% over thefirst six months of fiscal 2001 amount of $96.8M. Cost from sales andsecuritizations for the first six months of fiscal year 2002 was $277.7M, anincrease of $183.9M or 196% from the first six months of fiscal year 2001amount of $93.8M.  The increases aredirectly related to the increase in lease originations and the number of salesthat were completed during the first six months of this year. Other expensesfor the first six months of fiscal year 2002 have also increased due to numberof securizations completed. Depreciation increased by 134% and originations fees have increased by187%. Interest expense as explained above decreased during the first six monthsof fiscal year 2002 by $308K.

 

Gross margin for thesecond quarter of fiscal year 2002 was $4.9M, an increase of $4.4M or 1050%over the second quarter of fiscal year 2001 amount of 423K. Gross margin percentagewas 3.3% for the second quarter of fiscal year 2002 compared with .71% for thesecond quarter of fiscal year 2001. Gross margin for the first six months of fiscal year 2002 was $8.2Mcompared to $10K for the first six months of fiscal year 2001, representinggross margin percentages of 2.8% and 0.01%, respectively. The increases areprimarily due to increased origination volume, particularly in the PrivateLabel and DDRL business. Also, the Company’s cost of funds decreased,particularly throughout the second quarter of fiscal year 2002.

 

General andadministrative expenses for the second quarter of fiscal year 2002 was $2.4M,an increase of $721K or 43% over the second quarter of fiscal year 2001 amountof $1.7M. During the first six months of fiscal year 2002, G&A expensesincreased by $1.4M or 43% over the comparable period from last fiscal year. Theincreases are directly related to additional personnel costs, related benefits,rent expense and depreciation expense associated with servicing and maintainingadditional fixed assets. Even though general and administrative expenses haveincreased significantly in relationship to prior periods, G&A has onlyincreased by $144K for the second quarter from the first quarter ending June30, 2001.

 

 

### **RecentlyIssued Accounting Standards**

 

InJune 2001, the Financial Accounting Standards Board issued Statements ofFinancial Accounting Standards (“SFAS”) No. 141, Business Combinations.  SFAS No. 141 requires that the purchasemethod of accounting be used for all business combinations initiated after June30, 2001. Use of the pooling-of-interests method is no longer permitted. SFASNo. 142 also includes guidance on the initial recognition and measurement ofgoodwill and other intangible assets acquired in a business combination that iscompleted after June 30, 2001.

 

### ** LIQUIDITY AND CAPITAL RESOURCES**

 

TheCompany requires substantial cash to implement its business strategy, includingcash to: (i) acquire vehicles; (ii) satisfy requirements for working capital;(iii) pay operating expenses; (iv) satisfy debt service payments; (v) paypreferred stock dividends; (vi) implement its expansion; and, (vii) invest intechnology, systems and personnel. A substantial portion of the Company’srevenues in any period results from sales or securitizations of leases in suchperiod but in a securitization transaction a portion of the cash underlyingsuch revenues is received over the life of the leases. The Company hashistorically been successful in meeting its liquidity needs through internalcash flow, borrowings from financial institutions, ABS and SBAS transactions,and sales of equity and issuances of debt securities. Westar was the thirdCompany in the nation to structure a free standing lease securitization and thefirst to originate multiple securitizations from within a single bankruptcyremote structure and to originate a tax benefit transfer from within asecuritization. As of September 30, 2001, the Company had completed fifty-threesecuritizations and sales while it retains the servicing of the portfolios andreceives servicing income through the life of the leases. The Company iscurrently actively pursuing additional equity strategies to supplement itsliquidity needs.

 

Netcash flows from operations were $26.4M for the six months ended September 30,2001, up from $(6.8)M  in the prioryear. This increase reflects the $3.1M in net income up from the $(3.8)M lossfrom the comparable period in the prior year. The significant increase relatesto the increase in the number of securitizations or sales that were completed,from eight for the six months ended September 30, 2000 to fourteen in fiscalyear 2002. Each sale generated positive cash flow after paying down thecorresponding notes payable balance to the bank.

 

TheCompany invested $287K in property and equipment during the three months endedSeptember 30 2001, the majority of which is focussed on its LASIRproenhancements.

 

Totalliabilities as of September 30, 2001 were $27.7M, down from $45.5M from theprior fiscal year end. This decrease reflects the timing of asset sales andrepayment of subordinate debt.

 

TheCompany entered into an agreement in November 1995 with Bank One, Columbus NAfor a $12M warehouse facility. On an annual basis, the Company re-evaluates itsinterim financing needs considering the expected future timing of sales andsecuritizations.  In November 2000, theCompany renewed the financing facility for $25M.  Subsequent to September 30, 2001, the Company entered into anagreement to amend the amended and restated revolving credit agreement withBank One. The agreement temporarily increased the Company’s warehouse facilityfrom $25M to $50M until November 18, 2001. The agreement also amended certain loan covenants and extended theoverall maturity date of the credit facility to December 31, 2001.  The agreement also contained variouslimitations on credit advances during this time.  One of the limitations imposed was that the Company was to have anon-contingent commitment for an interim funding facility by November 12,2001.  The Company was not able tosecure the required commitment and as a result, on November 7, 2001 the Companyreceived a notice of default on its credit facility from Bank One and is nolonger able to obtain advances from Bank One to fund lease orginations. Underthe original credit agreement the Company has certain loan covenants. AtSeptember 30, 2001, the Company was not in compliance with three creditagreement covenants. The bank had waived these covenant violations through September30, 2001.

 

OnNovember 7, 2001, the Company ceased originating transactions and beganreturning unfunded leases to originating auto dealers.

 

Thisrevolving credit warehouse facility is utilized as interim financing for theacquisition of vehicle leases until sufficient volume is achieved to sell suchleases through an ABS or SBAS transaction. After repayment of the relatedborrowings from Bank One, the net proceeds from the sales of originated leasesprovide a source of cash for future originations of vehicle leases, short-termliabilities and general and administrative expenses. Increased originationscoupled with higher margins have been relied upon by Westar to generateadditional cash flows to be utilized for working capital requirements. At September30, 2001 the unused portion of the warehouse line was $25M.

 

During the first quarter of fiscal year2002, the Company entered into an agreement with & Capital Partners, LP toextend three notes totaling $3M. The notes were due on August 15, 2001 and arenow due on demand. 

 

At September 30, 2001, the Company hadtwo notes payable to Navidec, which total $1.5M. One note payable in the amountof $1M was due July 5, 2001, and is now due on demand. The second note payablein the amount of $500K was due on August 25, 2001 and is also now due ondemand. 

 

It is the opinion of Management theliquidity sources discussed above in conjunction with subsequent events notedbelow are not sufficient to meet the Company’s immediate cash flow needs foroperations and for the acquisition of leases in the normal course ofbusiness.  The Company is seeking astrategic partner with the ability to fund lease originations.  Management believes that they may berequired to offer a substantial equity stake in the Company’s common stock toattract such financing and is willing to offer for sale a controlling interestin the Company’s stock to a strategic buyer. However, there can be no assurance that a financing source or buyer willbe found. Failure to identify such a source or a buyer may require the Companyto cease operations and liquidate the Company's assets.

 

As discussed in the "SubsequentEvents" note to the consolidated financial statements, the decision of theCompany's primary lender to terminate its obligation to make revolving creditloans and to discontinue its practice of purchasing leases originated by theCompany has severely disrupted Westar's operations and has raised substantialdoubt about Westar's ability to continue as a going concern.  Bank One is also attempting to transferservicing from Westar to a third party servicer without compensation toWestar.  Management is searching foralternative strategic relationships that would allow it to resume originatingleases.  Should management's efforts beunsuccessful in the near future it is likely that Westar may be forced to seekprotection under the bankruptcy laws or to cease operations entirely.

 

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK**

 

The Company is exposed to a variety ofmarket risks, including the effects of changes in interest rates, inflation andused automobile valuations. The Company monitors the effect of changes ininterest rates relative to other factors that also affect earnings, such asunit lease production. The Company monitors and manages these financialexposures as an integral part of its overall risk management program.

 

The Company originates and warehouses,until sufficient volumes are pooled for securitization or sold throughportfolio sale transactions, fixed-rate assets. The Company is at risk frominterest rate fluctuations while the assets are being warehoused since theoverall sale proceeds could be impacted by changes in interest rates. TheCompany recognizes the unpredictability of financial markets and seeks toreduce the potentially adverse effect of interest rate fluctuations onearnings. Assuming an instantaneous increase or decrease of one percentagepoint in interest rates applied to all leased assets pooled in a typical $25Msecuritization, the Company’s after-tax earnings on the transaction wouldchange by approximately $600K. The Company has developed sophisticated modelsto assess the sensitivity of its earnings to changes in market interest ratesand will be able to use various tools available, such as interest rate swapsand pre-funding rate caps, to minimize the risks associated with the effect ofchanging prices. These models and tools provide Management both the informationneeded to make timely pricing decisions as well as market alternatives tomanage and minimize risk. In a rising rate environment theCompany’sgross margin will tend to narrow.

 

Fluctuations in used vehicle prices areanother market risk to which the Company is exposed. Unexpected changes in theused vehicle market not only impact credit losses, but also residual values.The Company minimizes credit loss exposure through its SBAS transactions andminimizes residual exposure through a residual value insurance program.

 

The effect of inflation on general andadministrative expenses over the past several years has been negligible.Inflation is not expected to impact earnings in the ensuing twelve-monthperiod.

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None

 

ITEM 2. CHANGES IN SECURITIES

 

None

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

On November 7, 2001, the Company wasnotified by Bank One of an event of default on its credit facility in that theCompany had failed to complete a term securitization within the timeframedemanded by Bank One.  As a result ofthe default. Bank One terminated its obligation under the credit facility tomake further loans to Westar.  TheCompany ceased originating automobile leases and is actively seekingalternative strategic relationships to fund lease originations and eitherpurchase or identify a purchaser of lease portfolios originated by theCompany.  Management believes that theymay be required to offer a substantial equity stake in the Company's commonstock to attract such financing and is willing to offer for sale a controllinginterest in the Company's stock to a strategic buyer.  There can be no assurance that a financing source or buyer willbe found.  Should management's effortsbe unsuccessful in the near future it is likely that Westar may be forced toseek protection under the bankruptcy laws or to cease operations entirely.

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

On September 24, 2001, the Company heldan annual meeting to elect two directors, Robert L. Lovely and Michael S.Kranitz for term ending in 2004 and to ratify BDO Seidman, LLP as the Company’sIndependent Certified Public Accountants. Four other directors, R. W.Christensen, Jr., David C. Soward,  JoelI. Davis and Charles S. Seel continued in office after the meeting.  The following table summarizes the resultsof the meeting:

 
|               |   | **Votes  Cast For** |   | **Votes  Withheld** |   | **Votes  Cast Against** |   | **Votes  Abstain** |   | **Total** |   |
|--------------------|--------|---------------------|--------|---------------------|--------|-------------------------|--------|--------------------|--------|-----------|--------|
| Robert L. Lovely   |   | 1,808,594           |   | 3,550               |   |                    |   |               |   | 1,812,144 |   |
| Michael S. Kranitz |   | 1,809,194           |   | 2,950               |   |                    |   |               |   | 1,812,144 |   |
| BDO SEIDMAN, LLP   |   | 1,743,294           |   |                |   | 58,350                  |   | 10,500             |   | 1,812,144 |   |

 

Therewas no other business that came before the meeting.

 

ITEM5.  OTHER INFORMATION

 

None

 

ITEM6.  EXHIBITS AND REPORTS ON FORM 8-K

 

(a)  Index to Exhibits

 

2.  Plan of acquisition, reorganization,arrangement, liquidation

orsuccession

 

2.1  Plan and Agreement of Merger between WestarFinancial

Services Incorporatedand Republic Leasing Incorporated

incorporated byreference to the Exhibit to Form 10-K

dated June 11, 1996.

 

3.  Articles of Incorporation and Bylaws

 

3.1  The Articles of Incorporation of WestarFinancial

Services Incorporatedfiled on February 13, 1996

incorporated byreference to the Exhibit to Form 10-K

dated June 11, 1996.

 

3.2  The Bylaws of Westar Financial ServicesIncorporated

adopted on February 21,1996 incorporated by reference to

the Exhibit to Form 10-Kdated June 11, 1996.

 

4.  Instruments defining the rights of securityholders, including

indentures.

 

4.1  Designation of Rights and Preferences ofRepublic Leasing

Incorporated Series 1Preferred Stock incorporated by

reference to the Exhibitto Form 10-K dated

June 11, 1996.

 

4.2  Designation of Rights and Preferences ofRepublic Leasing

Incorporated Series 2Preferred Stock incorporated by

reference to the Exhibitto Form 10-K dated

June 11, 1996.

 

4.3  Designation of Rights and Preferences ofRepublic Leasing

Incorporated Series 3Preferred Stock incorporated by

reference to the Exhibitto Form 10-K dated

June 11, 1996.

 

4.4  Designation of Rights and Preferences ofRepublic Leasing

IncorporatedSeries 4 Preferred Stock incorporated by

referenceto the Exhibit to Form 10-K dated

June11, 1996.

 

10.  Material Contracts.

 

10.1                                RepublicLeasing Incorporated 1994 Stock Option Plan incorporated by reference to theExhibit to Form 10–K dated June 11, 1996.

 

10.2                                TheLetter Agreement between Republic Leasing Incorporated and The Industrial Bankof Japan, Limited dated March 3, 1995 incorporated by reference to the Exhibitto Form 10–K dated June 11, 1996.

 

10.3                                RevolvingCredit Agreement among Westar Auto Finance, LLC. as Borrower, Republic LeasingIncorporated as Guarantor and Bank One, Columbus, N.A., as the lender datedJuly 12, 1995 incorporated by reference to the Exhibit to Form 10–K datedJune 11, 1996.

 

10.4                                Amendment,dated February 15, 1996, to the Revolving Credit Agreement with Bank One,Columbus, N.A., dated July 12, 1995 incorporated by reference to the Exhibit toForm 10–K dated June 11, 1996.

 

10.5                                ThePromissory Note between Westar Financial Services Incorporated and Mud BayHoldings Ltd., as a lender dated January 15, 1997 incorporated by reference tothe Exhibit to Form 10–K dated September 19, 1997.

 

10.6                                The PromissoryNote between Westar Financial Services Incorporated and & Capital Inc., asa lender dated April 15, 1997 incorporated by reference to the Exhibit to Form10–K dated September 22, 1997.

 

10.7                                TheAmended and Restated Revolving Credit Loan Agreement between Westar FinancialServices Incorporated and Bank One, as the lender dated July 22, 1997incorporated by reference to the Exhibit to Form 10–K dated November 13,1997.

 

10.14                                The Amendedagreement between Westar Financial Services Incorporated and & Capital,Inc., as the lender dated October 20, 1997 incorporated by reference to theExhibit to Form 10–K dated November 13, 1997.

 

10.15                                The Amendedagreement between Westar Financial Services Incorporated and & Capital,Inc., as the lender dated February 9, 1998 incorporated by reference to theExhibit to Form 10–Q dated February 17, 1998.

 

10.10                                TheAmended agreement between Westar Financial Services Incorporated and Bank  One, as the lender dated October 27, 1997incorporated by reference to the Exhibit to Form 10-Q dated February 17, 1998.

 

10.11                                The Amendedagreement between Westar Financial Services Incorporated and Bank One, as thelender dated March 31, 1998 incorporated by reference to the Exhibit to Form10-K dated February 17, 1999.

 

10.12                                TheAmended agreement between Westar Financial Services Incorporated and Mud Bay,as the lender dated August 31, 1998 incorporated by reference to the Exhibit toForm 10-K dated February 17, 1999.

 

10.13                                 TheAmended agreement between Westar Financial Services Incorporated and CathyCarlson, as the lender dated April 30, 1998 incorporated by reference to theExhibit to Form 10-K dated February 17, 1999.

 

10.14                                TheAmended agreement between Westar Financial Services Incorporated and &Capital, Inc., as the lender dated August 31, 1998 incorporated by reference tothe Exhibit to Form 10-K dated February 17, 1999.

 

10.15                                TheAmended agreement between Westar Financial Services Incorporated and &Capital, Inc., as the lender dated August 31, 1998 incorporated by referenceincorporated by reference to Form 10-K dated February 17, 1999.

 

10.16                                TheAmended agreement between Westar Financial Services Incorporated and SummitCapital Resources as the lender dated May 1, 1998 incorporated by reference toForm 10-K dated February 17, 1999.

 

10.17                                Thepromissory note between Westar Financial Services Incorporated and PLMC, LLC,as a lender dated April 30, 1998 incorporated in reference to Form 10-Q datedMarch 1, 1999.

 

10.18                                Thepromissory note between Westar Financial Services Incorporated and PLMC, LLC,as a lender dated May 11, 1998 incorporated by reference to the Exhibit to Form10-Q dated March 1, 1999.

 

10.19                                TheAmended agreement between Westar Financial Services Incorporated and Bank One,as a lender dated June 25, 1998 incorporated by reference to the Exhibit toForm 10-Q dated March 1, 1999.

 

10.20                                TheSecond Amended agreement between Westar Financial Services Incorporated andBank One, as the lender dated July 22, 1998 incorporated by reference to theExhibit to Form 10-Q dated March 1, 1999.

 

10.21                                Thepurchase/repurchase agreement between Westar Financial Services Incorporatedand T&W Financial Services, dated July 23, 1998 incorporated by referenceto the Exhibit to Form 10-Q dated March 1, 1999.

 

10.22                                Theamended agreement for the Westar Financial Services Incorporated 1994 StockOption Plan dated April 26, 1999 incorporated by reference to the Exhibit toForm 10-K dated June 25, 1999.

 

10.23                                Theamended agreement between Westar Financial Services Incorporated and Bank One,as the lender dated May 1, 1999 incorporated by reference to the Exhibit toForm 10-K dated June 25, 1999.

 

10.24                                Theamended agreement between Westar Financial Services Incorporated and &Capital, Inc., as the lender dated April 1, 1999 incorporated by reference tothe Exhibit to Form 10-K dated June 25, 1999.

 

10.25                                Theamended agreement between Westar Financial Services Incorporated and &Capital, Inc., as the lender dated April 1, 1999 incorporated by reference tothe Exhibit to Form 10-K dated June 25, 1999.

 

10.26                                Theamended agreement between Westar Financial Services Incorporated and adirector, as the lender dated May 24, 1999 incorporated by reference to theExhibit to Form 10-K dated June 25, 1999.

 

10.27                                Theagreement between Westar Financial Services Incorporated and Puget SoundInvestors, as the lender dated June 1, 1999 incorporated by reference to theExhibit to Form 10-K dated June 25, 1999.

 

10.28                                Theamended agreement between Westar Financial Services Incorporated and &Capital, Partners, L.P., as the lender dated December 1, 1999 incorporated byreference to the Exhibit to Form 10-Q dated January 28, 2000.

 

10.29                                Theamended agreement between Westar Financial Services Incorporated and &Capital, Partners, L.P., as the lender dated December 1, 1999 incorporated byreference to the Exhibit to Form 10-Q dated January 28, 2000.

 

10.30                                Theamended agreement between Westar Financial Services Incorporated and adirector, as the lender dated December 1, 1999 incorporated by reference to theExhibit to Form 10-Q dated January 28, 2000.

 

10.31                                Theamended agreement between Westar Financial Services Incorporated and PugetSound Investors, dated December 1, 1999 incorporated by reference to theExhibit to Form 10-Q dated January 28, 2000.

 

10.32                                Theamended agreement between Westar Financial Services Incorporated and Bank One,dated December 1, 1999 incorporated by reference to the Exhibit to Form 10-Qdated January 28, 2000.

 

10.33                                Theamended agreement between Westar Financial Services Incorporated and &Capital, Partners, L.P., as the lender dated March 10, 2000 incorporated byreference to the Exhibit to Form 10-K dated July 14, 2000.

 

10.34                                Theamended agreement between Westar Financial Services Incorporated and &Capital, Partners, L.P., as the lender dated March 10, 2000 incorporated byreference to the Exhibit to Form 10-K dated July 14, 2000.

 

10.35                                Theamended agreement between Westar Financial Services Incorporated and adirector, as the lender dated March 10, 2000 incorporated by reference to theExhibit to Form 10-K dated July 14, 2000.

 

10.36                                Theamended agreement between Westar Financial Services Incorporated and PugetSound Investors, dated March 10, 2000 incorporated by reference to the Exhibitto Form 10-K dated July 14, 2000.

 

10.37                                Theamended agreement between Westar Financial Services Incorporated and Bank One,dated March 10, 2000 incorporated by reference to the Exhibit to Form 10-Kdated July 14, 2000.

 

10.38                                Theamended agreement between Westar Financial Services Incorporated and Bank One,as the lender dated July 31, 1999 incorporated by reference to the Exhibit toForm 10-K dated July 14, 2000.

 

10.39                                Theagreement between Westar Financial Services Incorporated and  Navidec, Inc., as the lender dated  January 7, 2000 incorporated by reference tothe Exhibit to Form 10-K dated July 14, 2000.

 

10.40                                Theamended agreement between Westar Financial Services Incorporated and Navidec,Inc., as the lender dated March 31, 2000 incorporated by reference to theExhibit to Form 10-K dated July 14, 2000.

 

10.41                                Theagreement between Westar Financial Services Incorporated and & Capital,Partners L.P., as the lender dated June 5, 2000, incorporated by reference tothe Exhibit to form 10-Q dated August, 21, 2000.

 

14 (b) Reports onForm 8-K

 

None

 

SIGNATURES

 

Pursuantto the requirement of the Securities Exchange Act of 1934, the Regi-

stranthas duly caused this Report to be signed on its behalf by the under-

signed,thereunto duly authorized.

 
|              | WESTAR FINANCIAL  SERVICES INCORPORATED |
|-------------------|-----------------------------------------|
|              |                                    |
| December 14, 2001 | R. W. Christensen,  Jr., President      |
| (Date)            | (Signature)                             |
|              |                                    |