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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-Q

~~(Mark~~QUARTERLY ~~One~~REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF 1934

~~/x/~~ ~~QUARTERLY~~For ~~REPORT~~Quarter ~~PURSUANT~~Ended: TODecember 31, ~~SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~2000

~~For~~ ~~the~~Commission ~~Quarterly~~File ~~Period~~Number: ~~Ended September 30, 2000~~2-95465-S

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 2-95465-S

WESTAR FINANCIAL SERVICES INCORPORATED
(Exact name of registrant as specified in its charter)

Washington		91-1715252
Washington (State or other jurisdiction of Incorporation or organization)		91-1715252 (IRS Employer Identification Number)
(State or other jurisdiction of Incorporation or organization)		(IRS Employer Identification Number)
The Financial Center; Tumwater, WA (Address of principal executive office)		98501 (Zip Code)
The Financial Center; Tumwater, WA		98501
(Address of principal executive office)		(Zip Code)

Registrant's telephone number, including area code: (360) 754-6227

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

Yes: ~~/x/~~ X No ~~/ /~~ :

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

Common Stock		2,348,~~120~~170
Class		Number of Shares Issued at ~~November~~February 19, ~~2000~~2001

PART I. FINANCIAL INFORMATION

~~Item~~ITEM 1. ~~Financial~~FINANCIAL ~~Statements~~STATEMENTS

Westar Financial Services Incorporated and Subsidiaries Consolidated Balance Sheets As Of ~~September~~December 3031, 2000 and March 31, 2000

		September 30 (Unaudited)			March 31
	December 31			March 31
Cash		$	947,920		$	1,401,243
	(Unaudited)
Accounts receivable, net of allowance for credit losses			924,537			385,602
Cash	$	4,088,868		$	1,401,243
Credit enhancement receivable, net of allowance for credit losses			2,648,308			2,218,897
Accounts receivable, net of allowance for credit losses		1,546,731			385,602
Operating leases held for sale, net of allowance for credit losses			2,064,816			2,827,830
Credit enhancement receivable, net of allowance for credit losses		2,613,503			2,218,897
Direct financing receivable, net of allowance for credit losses			2,943,332
Operating leases held for sale, net of allowance for credit losses		1,944,687			2,827,830
Deferred tax asset, net of valuation allowance of $5,976,201 and $4,709,778, respectively
Direct financing receivable, net of allowance for credit losses		2,265,192
Fixed and other assets			1,831,966			1,042,118
Deferred tax asset, net of valuation allowance of $5,849,719 and $4,709,778, respectively
		$	11,360,879		$	7,875,690
Fixed and other assets		2,043,804			1,042,118
Accounts payable		$	3,324,457		$	4,141,841
	$	14,502,785		$	7,875,690
Notes payable to banks			7,854,846			3,842,471
Accounts payable	$	7,070,532		$	4,141,841
Notes payable affiliates			12,223,075			8,822,514
Notes payable to banks		3,562,467			3,842,471
Other liabilities			2,844,190			2,181,848
Notes payable to affiliates		11,899,226			8,822,514
			26,246,568			18,988,674
Other liabilities		6,436,062			2,181,848
Redeemable preferred stock			1,250,000			1,250,000
	$	28,968,287			18,988,674
Common stock, no par value			3,716,177			3,716,177
Redeemable preferred stock		1,250,000			1,250,000
Paid in capital—stock warrants			371,495			371,495
Common stock, no par value		3,716,427			3,716,177
Accumulated deficit			(20,223,361	)		(16,450,656	)
Paid in capital — stock warrants		371,495			371,495
			(16,135,689	)		(12,362,984	)
Accumulated deficit		(19,803,424	)		(16,450,656	)
		$	11,360,879		$	7,875,690
		(15,715,502	)		(12,362,984	)
	$	14,502,785		$	7,875,690

See accompanying notes to consolidated financial statements.

Westar Financial Services Incorporated and Subsidiaries Consolidated Statements of Operations For the three months and ~~six~~nine months ended ~~September~~December 3031, 2000 and 1999 (Unaudited)

	Three Months Ended	~~Three Months Ended~~					Nine Months Ended	~~Six Months Ended~~
	2000	~~2000~~		1999	~~1999~~		2000	~~2000~~		1999	~~1999~~
Revenues:
Revenues from sales and securitizations		$	57,063,616		$	32,017,519		$	92,533,466		$	56,139,426
Revenues from originations, sales and securitizations	$	108,097,656		$	25,284,605		$	202,544,692		$	82,361,295
Revenues on direct financing assets			23,390						23,390			494
Earned interest on direct financing assets		48,003						71,393			494
Revenues from operating leases		1,829,611	~~1,107,004~~		423,284	~~368,839~~		3,774,742	~~1,945,131~~		1,247,318	~~824,034~~
Administrative fee income			1,173,080			485,872			1,913,570			937,264
Service fee income		187,554			98,463			518,037			242,254
Service fee income			179,530			81,965			330,483			143,791
Other income		14,434			11,430			112,807			144,655
Other income			82,684			129,341			98,373			133,225
Gross revenues		110,177,258			25,817,782			207,021,671			83,996,016
Gross revenues			59,629,304			33,083,536			96,844,413			58,178,234
Direct Costs:
Direct Costs:
Costs related to originations, sales and securitizations		104,775,922			24,507,661			198,621,737			80,467,319
Costs related to sales and securitizations			57,257,597			31,812,274			93,845,815			55,959,658
Interest		352,973			82,910			1,035,683			287,730
Interest			405,644			70,132			682,710			204,820
Depreciation expense on operating leases		1,087,130			277,897			2,374,686			865,955
Depreciation expense on operating leases			786,995			276,022			1,287,556			588,058
Origination fees		655,590						1,151,690
Origination fees			387,200						496,100
Provision for credit losses		7,500			7,500			22,500			58,000
Provision for credit losses			7,500			7,500			15,000			50,500
Other		635,764			133,966			1,143,280			463,971
Other			361,316			169,200			507,516			330,005
Total direct costs		107,514,879			25,009,934			204,349,576			82,142,975
Total direct costs			59,206,252			32,335,128			96,834,697			57,133,041
Gross margin		2,662,379			807,848			2,672,095			1,853,041
Gross Margin			423,052			748,408			9,716			1,045,193
General and administrative expenses		1,936,357			1,163,327			5,174,545			3,416,466
General and administrative expenses			1,659,750			1,185,090			3,238,188			2,253,139
Operating Income (loss)		726,022			(355,479	)		(2,502,450	)		(1,563,425	)
Loss before subordinated debt interest			(1,236,698	)		(436,682	)		(3,228,472	)		(1,207,946	)
Subordinated debt interest expense		(277,179	)		(190,575	)		(763,914	)		(553,411	)
Subordinated debt interest expense			(269,923	)		(191,438	)		(486,735	)		(362,836	)
Income (loss) before federal income tax benefit		448,843			(546,054	)		(3,266,364	)		(2,116,836	)
Loss before federal income tax benefit			(1,506,621	)		(628,120	)		(3,715,206	)		(1,570,782	)
Deferred Federal income tax benefit		(152,607	)		185,658			1,110,562			719,724
Income tax benefit
Less: change in valuation allowance		152,607			(185,658	)		(1,110,562	)		(719,724	)
Net loss			(1,506,621	)		(628,120	)		(3,715,206	)		(1,570,782	)
Net income (loss)		448,843			(546,054	)		(3,266,364	)		(2,116,836	)
Dividends on redeemable preferred stock		(28,906	~~(28,906~~)	)	(29,437	~~(32,548~~)	)	(86,404	~~(57,498~~)	)	(97,393	~~(67,956~~)	)
Net loss applicable to common stock		$	(1,535,527	)	$	(660,668	)	$	(3,772,704	)	$	(1,638,738	)
Net income (loss) applicable to common stock	$	419,937		$	(575,491	)	$	(3,352,768	)	$	(2,214,229	)
Weighted average number of shares		2,348,170	~~2,348,120~~		2,252,961	~~2,277,889~~		2,348,138	~~2,348,120~~		2,252,961	~~2,277,889~~
Net loss per common share		$	(.65	)	$	(.29	)	$	(1.61	)	$	(.73	)
Net income (loss) per common share	$	0.18		$	(.26	)	$	(1.43	)	$	(.98	)
Fully diluted earnings (loss) per share	$	0.15		$	(.26	)	$	(1.43	)	$	(.98	)

See accompanying notes to consolidated financial statements.

Westar Financial Services Incorporated and Subsidiaries Consolidated Statements of Cash Flows For the ~~six~~nine months ended ~~September~~December 3031, 2000 and 1999 (Unaudited) Increase (Decrease) in Cash

	2000	~~2000~~		1999	~~1999~~
Net cash provided by (used in) operating activities		$	(6,775,431	)	$	$6,717,188
Net cash provided by operating activities	$	1,366,057		$	7,582,803
Cash flows used in investing activities:
Other		(1,475,390	~~(1,090,828~~)	)	(643,308	~~(476,776~~)	)
Net cash used in investing activities		(1,475,390	~~(1,090,828~~)	)	(643,308	~~(476,776~~)	)
Cash flows from financing activities:
Proceeds from issuance of common stock		250			70,000	~~70,000~~
Additions to notes payable to banks		191,418,543	~~92,850,632~~		68,614,535	~~45,700,660~~
Payments on notes payable to banks		(191,698,547	~~(88,838,257~~)	)	(76,852,677	~~(53,470,341~~)	)
Additions to notes payable—subordinated debt			4,014,944			1,315,771
Additions to notes payable — subordinated debt		4,070,007			1,395,771
Payments on notes payable—subordinated debt			(614,383	)		(234,557	)
Payments on notes payable — subordinated debt		(993,295	)		(291,732	)
Net cash provided by (used in) financing activities			7,412,936			(6,618,467	)
Net cash provided (used in) by financing activities		2,796,958			(7,064,103	)
Net decrease in cash			453,323			378,055
Net increase (decrease) in cash		2,687,625			(124,608	)
Cash:
Beginning of period		1,401,243	~~1,401,243~~		925,204	~~925,204~~
End of period		$4,088,868	~~947,920~~	$	$800,596	~~547,149~~

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

The Company's consolidated annual financial statements presented in the 2000 Annual Report on Form 10-K of the Company includes a summary of ~~significant~~ significant accounting policies and should be read in conjunction with this Form 10-Q. The consolidated financial statements include the accounts of Westar Auto Holding Co., Inc. ("WestAH"), a 100%-owned subsidiary of the Company, Westar Finance Holding Co. ("WestFH"), a 100%-owned subsidiary of the Company, Westar Auto Finance L.L.C. ("WestAF"), a limited liability company owned 99% by the Company and 1% by WestAH, and Westar Lease Origination Trust, a Massachusetts business trust registered in the state of Washington, beneficially owned by WestAF. The statements for the ~~six~~nine months ended ~~September~~ December 3031, 2000 and 1999, are unaudited, condensed and do not contain all information required by generally accepted accounting principles to be included in a full set of annual financial statements. In the opinion of Management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the results of operations for such periods are included. All significant inter-company accounts and transactions have been eliminated. The results of operations for the ~~six~~nine months ended ~~September 30~~December 31, 2000, are not necessarily indicative of the results of operations for the entire year. This information included in this Form 10-Q should be read in conjunction with Management's Discussion and Analysis and the consolidated financial statements and notes thereto included in Westar Financial Services Incorporated's 2000 Annual Report on Form 10-K.

Forward-Looking Statements

Although most of the information contained in this report is historical, certain statements contain ~~forward-looking~~forwardlooking information. To the extent these statements involve, without limitation, product development and introduction plans, the Company's expectations for growth, estimates of future revenues, expenses, profit, cash flow, balance sheet items, forecasts of demand or market trends for the Company's products and for the auto finance industry or any other guidance on future periods, these statements are ~~forward-looking~~forwardlooking and involve matters ~~which~~ which are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in such ~~forward-looking~~forwardlooking statements. Readers of this report should consider, along with other relevant information, the risks identified in this report and other risks identified from time to time in the Company's filings with the Securities and Exchange Commission, press releases and other communications.

Interest Paid

The Company paid cash for interest of $~~368~~555,~~042~~361 and $~~278~~221,~~688~~609 for the three months ended and $~~750~~1,~~310~~305,361 and $~~546~~768,~~243~~068 for the ~~six~~nine months ended ~~September~~ December 3031, 2000 and 1999, respectively. The change is due to increased volumes of assets warehoused.

~~Earnings~~Income (Loss) Per Common Share

~~Earnings~~Basic net income (loss) per common share is ~~computed~~net ~~using~~income ~~the~~(loss) ~~weighted-average~~less ~~number~~preferred ofstock ~~common~~dividend ~~shares~~requirements ~~outstanding~~dividend ~~for~~by the ~~three~~average ~~and~~number ~~six~~of ~~months~~common ~~ended September 30,~~shares ~~2000~~outstanding. ~~and~~Diluted ~~1999,~~net ~~respectively.~~income ~~Net~~ (loss) ~~used~~per incommon ~~the~~share ~~computation~~assumes issuance of ~~earnings~~the ~~per~~net ~~share~~incremental ~~has~~shares ~~been~~from ~~increased~~stock tooptions, ~~include~~warrants ~~the~~and ~~redeemable~~full ~~preferred~~conversion ~~stock~~of ~~dividends.~~all ~~Earnings~~dilutive ~~per~~convertible ~~share~~securities ~~does~~at ~~not include common~~the ~~stock~~later ~~warrants~~of orthe ~~common~~beginning ~~stock~~of ~~options,~~the asyear ~~their~~or ~~effect~~date isof ~~anti-dilutive~~issuance.

Direct Financing Receivables

The Company repurchased the stream of cash flows from the 1996-A and 1996-B Securitization from the Industrial Bank of Japan in August 2000. The Company will receive the cash flows over the

~~next~~ A ~~18 months.~~reconciliation ~~The~~of ~~Company~~the ~~has~~data anused ~~allowance~~ in the ~~amount~~calculation of ~~$44,000~~basic ~~set~~and updiluted toearnings ~~offset~~per ~~any~~share ~~uncollectable~~computations ~~accounts.~~for income (loss) from continuing operations is as follows:

			3 Months Ended 12/31/00		3 Months Ended 12/31/99			9 Months Ended 12/31/00			9 Months Ended 12/31/99
Basic Earnings (Loss) Per Share
	Net income (loss) applicable to common stock		$	419,937	$	(575,491	)	$	(3,352,768	)	$	(2,214,229	)
	Average common shares outstanding stock			2,348,170		2,252,961			2,348,138			2,252,961
Basic earnings (loss) per share			$	.18	$	(.26	)	$	(1.43	)	$	(.98	)
Dilutive Earnings (Loss) Per Share
	Net income (loss) applicable to common stock		$	419,937	$	(575,491	)	$	(3,352,768	)	$	(2,214,229	)
	Add: Dividends on convertible preferred stock			1,387
		Interest on 10.5% convertible notes debt		105,863
Net income (loss) applicable to common stock plus assumed conversions			$	527,187	$	(575,491	)	$	(3,352,768	)	$	(2,214,229	)
	Average common shares outstanding stock			2,348,170		2,252,961			2,348,138			2,252,961
	Add: Stock Options			91,500
		Stock Warrants		159,056
		Convertible preferred stock		259,873
		Convertible notes payable		571,720
Average common shares outstanding stock on a fully diluted basis				3,430,319		2,252,961			2,348,138			2,252,961
Diluted earnings (loss) per share			$	.15	$	(.26	)	$	(1.43	)	$	(.98	)

Direct Financing Receivables

The Company repurchased the remaining stream of cash flows from the 1996-A and 1996-B Securitization from the Industrial Bank of Japan in August 2000. The Company expects collection of the estimated future cash flows of $2,310,777 over the next 11 months. The Company has an allowance for uncollectable future cash flows in the amount of $55,585.

Federal Income Tax

The Company provides a 100% valuation allowance against increases in the deferred tax asset balance. Increases in the deferred tax asset allowance offset the tax benefit related to the temporary differences creating the deferred tax asset and result in no federal income tax benefit for the corresponding period. Likewise, decreases in the deferred tax asset and related valuation allowances are offset by the tax expense on the book income and results in no federal income tax expense for the corresponding period. The deferred tax asset is primarily ~~comprised~~ comprised of tax net operating losses, which are available for an average of 13 years to offset future reported tax liabilities.

Notes Payable Banks

In January 1997, the Company entered into a working capital loan for $750,000 with Bank One. The loan was collateralized by a perfected first security position in the Company's interest in 1996 PIC-A & 1996 PIC-B. The Company repurchased the 1996 PIC-A and 1996 PIC-B in August 2000. The

Company replaced the collateral with a perfected first security position in the1999C PIC-B. The loan balance now totals $500,000 and is due March 31, 2002.

Notes Payable Affiliates

In June 2000, the Company entered into an agreement with & Capital to borrow $1,000,000 as subordinated debt. The note came due January 05, 2001 and is payable on demand.

In June 2000, the Company entered into an agreement with Navidec Inc. to borrow $1,000,000 as subordinated debt. The note is due June 5, 2001 and bears interest at the rate of 9%.

In July 2000, the Company entered into an agreement with Navidec, Inc. to borrow $1,000,000 as subordinated debt. The note is due July 5, 2001 and bears interest at the rate of 9%.

In August 2000, the Company entered into an agreement with Navidec, Inc. to borrow $500,000 as subordinated debt. The note is due August 25, 2001 and bears interest at the rate of 9%.

~~Securitization~~Other ~~or SBAS Transactions~~Liabilities

~~The~~Other ~~Company~~liabilities ~~completed~~include three and five Securities Based Asset Sales ("SBASs") or Asset Backed Securitizations ("ABS") transactions in the first and second quarter of fiscal 2001 respectively and in an aggregate amount of $35 and $57 million for a year to date total of $92 million. The Company's cash ~~proceeds from these transactions were reduced by a credit enhancement in the amount of $1.2 million~~ and ~~servicing~~accounts ~~cash~~receivable ~~reserves~~that ~~in the amount of $466K, which~~ are topayable ~~be received in 60 monthly payments. The Company continues~~ to ~~service~~ the ~~leases~~portfolio ~~securitized~~investors. The Company's proprietary origination/issuer/ titling securitization structure, Westar Lease Origination Trust, has completed twenty-five securitizations and sales of automobile lease-backed securities in private-placement offerings to date.

~~The leases~~Securitization ~~sold~~(ABS) inor ~~the~~SBAS ~~above transactions are operating leases and they are accounted for in accordance with SFAS 13.~~ Transactions

The Company completed eight Securities Based Asset Sales (SBAS) in the third quarter of fiscal 2001 for the total proceeds of $105.9M. The Company established servicing cash reserves in the amount of $726,771, which is to be received in 60 monthly payments. The Company continues to service the leases securitized.

The Company completed 15 SBASs or Asset Backed Securitizations (ABSs) in the nine months ended December 31, 2000 in an aggregate amount of $198M. The Company's proceeds from sales or securitizations were reduced by a credit enhancement in the amount of $1.3M and servicing cash reserves in the amount of $1.2M, which are to be received in 60 monthly payments. The Company continues to service the leases securitized. The Company's proprietary origination/titling securitization structure, Westar Lease Origination Trust, has completed thirty-three securitizations and sales of automobile lease-backed securities in private-placement offerings to date.

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

Subsequent Events

In ~~October 2000~~January 2001, the Company's origination/issuer/titling securitization structure, Westar Lease Origination Trust, completed its ~~twenty~~thirty-~~sixth~~forth and ~~twenty-seventh~~ thirty-fifth security based asset sales involving $~~22 million~~28.5M of automobile lease-backed securities in a private-placement ~~offering~~offerings. The Company's proceeds from the securitization were reduced by a cash reserve in the amount of $~~157~~196,~~000~~684, which is to be received in 60 monthly payments. The Company continues to service the leases securitized. The leases sold in the above ~~transaction are~~transactions were operating leases and they were ~~are~~ accounted for in accordance with SFAS 13 until the time of sale.

~~Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.~~ 7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS OVERVIEW

E In the last five years, Westar has recreated itself from a traditional commercial equipment lessor, to a prime credit consumer auto lessor competing within auto dealerships, to a leading Internet financier, and, presently, a four-~~COMMERCE~~channel ~~ORIGINATION~~financial ~~CHANNELS~~ portal.

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

Westar Financial Services Incorporated and its Subsidiaries provide prime credit quality consumer automobile lease financing through franchised automobile dealers in the western states and through its e-commerce origination channels throughout the United States. Westar has designed and developed a number of financing, lease servicing and risk management innovations. It is Management's opinion that Westar's proprietary decisioning and fulfillment capabilities are among the most scalable and marketable programs currently available and a valued investment in the Company's future. It is these capabilities that Management believes will lead to continued improvement in financial operations.

ORIGINATION

Dealer Direct Retail Leasing

Westar acquires automobile leases through its Dealer Direct Retail Leasing (DDRL) program. Westar offers DDRL to selected manufacturer-franchised automobile dealerships based on reputation, location and size. The Company attempts to meet the needs of its dealers through responsive customer service, extended hours operating across 361 business days a year, rapid funding, consistent buying practices and through competitive pricing. The Company maintains relationships with more than 400 dealers, or 2% of the national dealer body.

Internet

The Company has formed a strategic alliance with DriveOff.com, Inc., in which WEST iswas the exclusive financial portal for all of the transactions ~~generated~~ generated through the ~~Driveoff~~DriveOff.com site. InThe Company began originating transactions through DriveOff.com on September ~~2000~~28, ~~MSN~~1999. ~~CarPoint~~The ~~(jointing~~focus ~~owned~~of bythis ~~Ford~~3rd ~~and~~generation ~~Microsoft)~~Internet ~~agreed~~automobile acquisition channel was to ~~purchase~~significantly ~~DriveOff~~increase consumer satisfaction with the process while decreasing prices.~~Com~~ The program empowered consumers to negotiate new car purchases and financing 100% online. Consumers could design and build a vehicle at a firm price, ~~for~~arrange ~~which~~the ~~Westar~~financing ~~will~~and ~~continue~~schedule an appointment to beaccept delivery of the ~~exclusive~~ ~~financial~~vehicle ~~administrator~~from a dealer. ~~The~~Westar ~~Company~~proved its ability to originate, decision, commit to and fulfill loans and leases in a near-real time and with high degrees of consumer satisfaction.

6 DriveOff.com, Inc. was purchased by Microsoft's CarPoint, Inc. in September 2000 and closed in February 2001. The revenues generated through DriveOff.com, Inc. were approximately 1% of Westar's total revenues during the alliance period, less than the related expenses.

began originating transactions through DriveOff.com on September 28, 1999. Driveoff.com operates in 48 states as of September 30, 2000.

This 3rd generation Internet automobile acquisition channel is focused on significantly increasing consumer satisfaction with the process while decreasing prices to the consumer. The program empowers consumers to negotiate new car purchases and financing 100% online. Consumers are able to design and "build" a vehicle at a firm price, arrange the financing and schedule an appointment to accept delivery of the vehicle from a dealer.

Intranet

The Intranet conduit duplicates the operation of Westar's Internet channel except that the ~~entire DriveOff~~ business model and technology are placed within the webspace of another organization, only visible to and usable by members of the host organization. This business model aligns itself with organizations that have extraordinary consumer credibility and ~~intensely~~ intensely loyal constituents. It seeks organizations that ~~want~~wish to deliver value through a positive auto experience. Likely candidates for Intranet alliances include large affinity membership organizations, banks or insurance companies. As the exclusive financial hub and fulfillment agent for DriveOff, Westar earns a fee each time a consumer transaction passes through its decisioning process.

~~Westar and DriveOff are piloting an Intranet effort with Costco Wholesale Corporation (NASD: COST) in five Denver warehouses. The pilot program is expected to last until Winter, 2000.~~ 8

~~Westar~~ ~~has~~to andeliver ~~agreement~~value ~~with~~through ~~First~~a ~~Union~~positive ~~Capital~~auto ~~Markets~~experience. ~~Group~~Likely ~~("First~~candidates ~~Union"), which provides~~ for ~~its~~Intranet ~~support~~alliances ofinclude ~~Westar's~~affinity ~~Internet~~membership ~~and~~organizations, ~~Intranet~~banks ~~operations~~or ~~through~~insurance acompanies. ~~loan~~Westar ~~purchase arrangement~~would ~~with~~earn ~~WEST~~a ~~for~~fee upeach totime a ~~$1 billion~~consumer ~~annually~~transaction ofpasses ~~loans~~through ~~originated~~its ~~through~~decisioning ~~DriveOff~~process.~~com.~~

Westar ~~retains~~has retained for its own account the prime credit leases originated by the Internet and Intranet channels.

Private Label

Westar's Private Label channel is designed to offer other financial services firms access to Westar's LASIRpro©< decisioning technology and processes. With LASIRpro, a bank with a consumer automobile leasing need, but without its own capability, can use Westar's technology and processes for real -time, real -world decisioning and commitments. This allows the originating entity to preserve its market presence by serving its dealers and consumers while making nearly instantaneous credit, asset and pricing decisions. Westar receives either fee income or on all, or a portion of the ~~originationed~~originated assets for its services. Westar initiated Private Label activities with ~~the Maitland, Florida office of~~ AmSouth Bancorporation (NYSE: ASO) and has begun the service in all of AmSouth's markets. Westar ~~has~~ also ~~begun~~began to provide Mellon Bank (NYSE: MEL) Private Label services in August 2000 in the Mid-Atlantic States.

The ~~company~~Company is negotiating with other financial institutions in both the Intranet and Private Label channels.

Management believes the diversification provided by ~~four~~multiple origination channels allows the Company to build a sustainable competitive advantage by using its proprietary leading edge decisioning and communications technologies and its proprietary lease securitization capabilities.

Westar's proprietary LASIRpro system, risk management techniques, innovative decisioning and communications technology and diversified funding strategy are designed to allow the Company to price its products to yield an above-average return on investment while offering the most credit worthy consumers lower effective finance rates.

7 The Company intends to increase its client base in each of its origination channels by continuing to expand its existing dealer relationships within its current geographic market and to engage additional institutional clients in the e-commerce origination channels.

~~The~~RESULTS ~~Company~~OF ~~intends~~OPERATIONS toAND ~~increase~~CHANGES ~~its~~IN ~~client~~FINANCIAL base in each of its e-commerce origination channels as well as lease originations by continuing to expand its existing dealer relationships within its current geographic market and to engage additional institutional clients in the e-commerce origination channels. POSITION

~~RESULTS~~ Three OFmonths ~~OPERATIONS~~and ~~AND~~nine ~~CHANGES IN FINANCIAL POSITION Six~~ months ended ~~September~~December 3031, 2000 compared to ~~six~~three months and nine months ended ~~September~~December 3031, 1999.

InThe Company's ~~the~~statement ~~last~~of ~~five~~operations ~~years,~~reports ~~Westar~~net ~~has~~income ~~recreated~~in ~~itself~~the ~~from~~third aquarter ~~traditional~~of ~~commercial~~approximately ~~equipment~~$449,000, ~~lessor~~up to$1.9M from a ~~prime~~net ~~credit~~loss ~~consumer~~of ~~auto~~$1.5M ~~lessor~~in ~~competing~~the ~~within~~prior ~~auto~~quarter. The Company's ~~dealerships,~~statements toof operations report a ~~leading~~net ~~Internet~~loss ~~financier,~~of approximately $3.3M and, ~~presently~~$2.1M for the nine months ended December 31, a2000 ~~four-channel~~and ~~financial~~1999, ~~portal~~respectively.

AsLease aoriginations ~~financial~~increased ~~portal,~~from ~~Westar~~817 ~~originates,~~leases ~~decisions,~~costing ~~commits~~$25M to ~~and~~3,582 ~~fulfills~~leases ~~consumer~~costing ~~financings~~$105M for ~~its~~the ~~own~~three ~~account~~months orended ~~the~~December ~~accounts of others~~31, ~~using~~1999 ~~sophisticated~~and ~~decisioning~~2000 ~~tools~~ and ~~high~~increased ~~speed~~from ~~communications~~2,541 toleases ~~assure~~costing $80M ~~transparency~~ to ~~all~~6,942 ~~parties~~leases incosting $199M for the ~~process~~nine months ended December 31, 1999 and 2000. ~~Westar~~The ~~has~~outstanding ~~created~~face avalue ~~business~~of ~~model~~leases ~~where~~serviced ittotaled is12,483 ~~relatively~~accounts ~~indifferent~~for as$317M. toThe ~~the~~credit ~~identity~~quality of originated leases remained steady, with average FICO scores of 740 in the ~~ultimate~~current ~~investor~~period.

~~Westar~~Gross ~~Financial~~revenues ~~Services~~for ~~Incorporated~~the ~~and~~quarter ~~its~~ended ~~Subsidiaries~~December ~~provide~~31, ~~prime~~2000 ~~credit~~increased ~~quality~~327% ~~consumer~~from ~~automobile~~$25.8M ~~lease financing through franchised automobile dealers~~ in the ~~western states~~comparable ~~and~~quarter ~~through~~to ~~its~~$110.2M ~~e-commerce~~and ~~origination~~increased ~~channels~~146% ~~throughout~~for the ~~United~~nine ~~States.~~months ~~Westar~~ended ~~has~~December ~~designed~~31, ~~and~~2000 from ~~developed~~$84.0M ain ~~number~~the ofcomparable ~~financing,~~period ~~lease~~to ~~servicing and risk management innovations~~$207.0M. ~~While~~The ~~the~~increase ~~Company's~~in ~~statement~~total ofgross ~~operations~~revenues ~~reports~~was adirectly ~~net~~related ~~loss~~to ofthe ~~approximately~~338% ~~$1,507,000~~increase ~~and~~in ~~$628,000~~lease volumes for the three months and ~~$3,715,000~~the ~~and~~173% ~~$1,571,000~~increase for the ~~six~~ nine months ended ~~September 30,~~ ~~2000~~December ~~and 1999~~31, ~~respectively,~~2000. itThe issignificant ~~management's~~increase ~~opinion~~in ~~that~~volumes ~~Westar's~~enabled ~~proprietary~~WEST ~~decisioning~~to ~~and~~complete ~~fulfillment capabilities are one of the most scalable and marketable programs currently available and a valued investment in the Company's future.~~

Volume of lease originations increased from 884 leases costing $23M to 1,987 leases costing $52M for the three months ended September 30, 1999 and 2000 and increased from 1,728 leases costing $48M to 3,242 leases costing $94M for the six months ended September 30, 1999 and 2000. The outstanding face value of leases serviced totaled 8,987 accounts for $258M. The credit quality of originated leases improved, from average FICO scores of 710 in the prior quarter to 734 in the current period.

Gross revenues for the quarter September 30, 2000 increased 80% from $33.1M in the comparable quarter to $59.6M and increased 66% for the six months ended September 30, 2000 from $58.2M in the comparable period to $96.8M. The increase in total gross revenues was directly related to the 125% increase in lease volumes for the three months and the 88% increase for the six months ended September 30, 2000. The significant increase in volumes enabled WEST to complete $35.5M and $57.1M in Securitizations and Security Based Asset Sales in the first two quarters of fiscal 2001, respectively. Also as a result of the increased volumes, revenues from operating leases increased $738K or 200% for the quarter ended September 30, 2000 from $369K in the comparable quarter to $1.1M and increased $1.1M or 136% for the year to date from $824K in the comparable period to $1.9M. Administration fees increased $687K or 141% for the quarter from $486K in the comparable quarter to $1.2M and increased $977K or 104% for the six months ended $937K in the comparable period to $1.9M. As Westar retains all servicing rights to the assets sold servicing income has increased $98K or 119% for the quarter from $82K in the comparable quarter to $180K and increased $186K or 130% for the six months from $144K in the comparable period to $330K.

Direct costs increased $26.9M or 83% for the quarter ended September 30, 2000 from $32.3M in the comparable quarter to $59.2M and increased $39.7M or 69% for the six months ended September 30, 2000 from $57.1M in the comparable period to $96.8M primarily due to the increase in lease origination volumes. As a result of the increased volumes, costs from sales and securitizations increased $25.5M or 80% for quarter from $31.8M in the comparable quarter to $57.3M and increased

$37.8M or 68% for the six months from $56M in the comparable period to $93.8M. Depreciation expense also increased $511K or 185% for the three months from $276K in the comparable quarter to $787K and increased $700K or 119% for the six months from $588K in the comparable period to $1.3M. Due to the increase in lease volumes being warehoused prior to securitization or sales, interest costs increased $336K or 480% for the quarter from $70K in the comparable quarter to $406K and increased $478K or 233% for the six months ended September 30, 2000 from $205K in the comparable period to $683K. Origination fees is a new expense directly related to the Private Label origination channel.

Gross margins decreased approximately $325K or 43%, from $748K to $423K from the quarter ended September 30, 1999 and decreased approximately $1M or 99% from $1M to $10K from the six months ended September 30, 1999. The decrease is primarily due to the Company's decision during the first quarter to use aggressive pricing to rapidly develop a leadership position in its new origination channels, particularly in its Private Label activities through two of its institutional origination partners on the east coast. After achieving its volume and penetration goals in those markets, the Company implemented a series of three price increases in the period from late June to late-August to increase margins while continuing to accelerate origination volumes in the new channels. The effect of the price increases, though fully in effect only during the final month of the quarter, increased margins from the second quarter of 1999 by $826K, or 1.3% of total revenues.

General and administrative expenses increased by approximately $475K or 40%, from $1.2M in the first quarter of 1999 to $1.6M and increased $985K or 44% from $2.3M for the six months ended September 30, 1999 to $3.3M for the six months ended September 30, 2000. This is primarily due to opening three new distribution channels for financial transaction originations. The most significant increases in general and administrative expense occurred in salaries and benefits, rent expense and depreciation expense.

During the next year, the Company expects to create relatively substantial growth in originations, decisionings, commitments and fulfillments as well as in managed assets. Management expects margins from fee income and income earned from its portfolio to increase at least as rapidly as volumes. A significant portion of the difference will be the result of the scalability which Management believes Westar will realize from its significant investments in technology, innovative processes and alliance channels and its highly skilled and motivated Team Members.

While Westar expects to continue to face intense competition from other firms, particularly the largest banks, financial services companies, the financial subsidiaries of automobile manufacturers and various types of "dot.com" startups, the Company is presently unaware of any direct competitor with the same breadth of enterprise as the Company.

LIQUIDITY AND CAPITAL RESOURCES

The Company requires substantial cash to implement its business strategy, including cash to: (i) acquire vehicles; (ii) pay sales or securitization costs; (iii) satisfy requirements for working capital, credit enhancement receivable and servicing cash reserves; (iv) pay operating expenses; (v) satisfy debt service; (vi) pay preferred stock dividends; (vii) implement its e-commerce expansion; and, (viii) invest in technology, systems and personnel. A substantial portion of the Company's revenues in any period results from sales or securitizations of leases in such period, but in a securitization transaction a portion of the cash underlying such revenues is received over the life of the leases. The Company has historically been successful in meeting its liquidity needs through internal cash flow, borrowings from financial institutions, securitizations and SBASs, portfolio sales and sales of equity and debt securities.

In the second quarter of fiscal 2001, the Company received $1.5 million from subordinated promissory notes. The notes have no prepayment penalties and are to be repaid with interest, calculated at 9%. These funds are being utilized for working capital requirements and will be repaid

~~with~~$35.5M, ~~future~~$57.1M ~~proceeds~~and ~~from~~$108.1M ~~operations~~in Origination's, ~~additional~~Securitizations ~~equity~~and orSecurity ~~debt~~Based ~~financing~~Asset Sales in the first, ifsecond ~~any.~~and ~~Currently~~third quarters of fiscal 2001, ~~these~~respectively. ~~notes~~Origination ~~mature~~fee ~~over~~income increased $1.7M or 370% for the ~~next~~quarter 12 from $460K in the comparable quarter to $2.2M and increased $2.7M or 193% for the nine months ~~with~~ended from $1.~~0 million~~4M ~~due~~in onthe ~~July 5~~comparable period to $4.1M. Also as a result of the increased volumes, ~~2001~~revenues from operating leases increased $1.4M or 331% for the quarter ended December 31, 2000 from $423K in the comparable quarter to $1.8M and increased $2.6M or 200% for the nine months ended from $1.~~5 million~~2M ~~due~~in onthe ~~August 25~~comparable period to $3.8M. As Westar retains all servicing rights to the assets sold, ~~2001~~servicing income has increased $90K or 92% for the quarter from $98K in the comparable quarter to $188K and increased $276K or 114% for the nine months from $242K in the comparable period to $518K.

ToDirect ~~diversify~~costs ~~funding~~increased ~~strategies~~$82.5M or 330% for the quarter ended December 31, 2000 from $25.0M in the ~~Company~~comparable isquarter ~~negotiating~~to ~~several~~$107.5M ~~Asset~~and ~~Backed~~increased ~~Commercial~~$122.2M ~~Paper~~or ~~("ABCP")~~149% ~~facilities~~for ~~with~~the nine months ended December 31, 2000 from $82.1M in the comparable period to $204.3M primarily due to the increase in lease origination volumes. As a ~~number~~result of ~~banks~~the increased volumes, costs from sales and securitizations increased $80.3M ~~The~~or ~~diversification~~328% offor ~~funding~~the ~~strategies~~quarter from $24.5M in the comparable quarter to $104.8M and increased $118.2M or 147% for the nine months from $80.5M in the comparable period to $198.7M. isDepreciation ~~intended~~expense also increased $822K or 296% for the three months from $278K in the comparable quarter to ~~improve~~$1.1M ~~long-term~~and ~~business~~increased ~~performance~~$1.4M or 162% for the nine months from $866K in the comparable period to $2.3M. Due to the increase in lease volumes being warehoused prior to securitization or sales, ~~strengthen~~interest costs increased $270K or 325% for the ~~Company's~~quarter ~~competitive~~from ~~position~~$83K in the comparable quarter to $353K and ~~build~~increased $712K or 247% for the nine months ended December 31, 2000 from $288K in the comparable period to $1.0M. Origination fees are a ~~sustainable~~new ~~competitive~~expense ~~advantage~~directly related to the Private Label origination channel.

~~Westar~~Gross ~~was~~margins ~~the~~increased ~~third~~approximately ~~Company~~$1.9M inor ~~the~~235%, ~~nation~~from $808K to ~~structure~~$2.7M afrom ~~free~~the ~~standing~~quarter ~~lease~~ended ~~securitization~~December 31, 1999 and ~~the~~increased ~~first~~approximately to$800K ~~originate~~or ~~multiple~~42% ~~securitizations~~from $1.9M to $2.7M from ~~within~~the anine ~~single~~months ~~bankruptcy~~ended ~~remote structure~~December 31, ~~and~~1999. The increase is primarily due to ~~originate~~three areasons. ~~tax~~First, ~~benefit~~the ~~transfer~~Company ~~from~~implemented ~~within~~price aincreases ~~securitization.~~just Asprior to the beginning of ~~September 30,~~the ~~2000~~third quarter. Second, the Company ~~has~~increased ~~completed~~its ~~twenty-five~~origination ~~securitizations~~volume, ~~and~~particularly ~~sales~~in ~~while~~its ~~it retains~~Private ~~the~~Label ~~servicing~~business. ofFinally, the ~~portfolios~~Company's ~~and~~cost ~~receives~~of ~~servicing~~funds ~~income~~decreased, ~~through~~particularly towards the ~~life~~end of the ~~lease~~third quarter.

~~The~~General ~~Company~~and ~~entered~~administrative ~~into~~expenses anincreased ~~agreement~~by ~~with~~approximately ~~Bank~~$700K ~~One~~or 58%, ~~Columbus~~from NA$1.2M in ~~July 1995~~the ~~which~~third ~~was~~quarter ~~expanded~~of in1999 ~~November 1996~~to ~~from~~$1.9M ~~the~~and ~~initial~~increased $~~12 million~~1.8M ~~limit~~or to 53% from $~~25 million~~3.4M Infor ~~September 1999,~~the ~~Management~~nine ~~renewed~~months ended ~~the~~December ~~financing~~31, ~~facility~~1999 atto $~~25 million~~5.2M ~~The~~for ~~line~~the ofnine ~~credit~~months ~~has~~ended ~~expired~~December ~~and~~31, ~~the~~2000. ~~Company~~This is ~~currently~~primarily ~~renegotiating~~due ~~the~~to ~~terms~~opening ~~and expects~~three ~~these~~new ~~changes~~distribution tochannels befor infinancial ~~place~~transaction byoriginations, ~~the~~combined ~~end~~with staffing ofto ~~the~~meet ~~third~~future ~~quarter~~growth expectations. The ~~Company~~most ~~must~~significant ~~comply~~increases ~~with~~in ~~certain~~general ~~restrictive~~and ~~loan~~administrative ~~covenants~~expenses occurred in salaries and benefits, rent expense and depreciation expense.

~~This~~During ~~revolving~~the ~~credit~~next ~~warehouse~~year, ~~facility~~the isCompany ~~utilized~~expects asto ~~interim~~create ~~financing~~relatively ~~for~~substantial ~~the~~growth ~~acquisition~~in oforiginations, ~~vehicle~~decisionings, ~~leases~~commitments ~~until~~and ~~sufficient~~fulfillments ~~volume~~as iswell ~~achieved~~as toin ~~sell~~managed ~~such~~assets. ~~leases~~Management expects ~~through~~margins anfrom ~~ABS or~~fee ~~SBAS~~income ~~transaction.~~and ~~The~~income ~~net~~earned ~~proceeds~~ from ~~the~~its ~~sales~~portfolio ofto ~~originated~~increase ~~leases~~more ~~provide~~rapidly athan ~~source~~volumes. ofA ~~cash~~significant ~~for~~portion ~~repayment~~ of ~~related borrowings under~~ the ~~warehouse~~difference ~~line~~will ~~thus~~be ~~providing additional availability of credit to fund future vehicle purchases. Remaining proceeds not used to repay~~ the ~~warehouse~~result ~~line provide a source~~ of ~~cash~~scalability, ~~for~~which ~~payment of short-term liabilities and general and~~Management ~~administrative~~believes ~~expenses.~~Westar ~~Management anticipates increased originations coupled with higher margins~~ will ~~generate~~realize ~~additional~~from ~~cash~~its ~~flows~~significant toinvestments bein ~~utilized~~technology, ~~for~~innovative ~~working~~processes ~~capital~~and ~~requirements.~~alliance ~~At September 30,~~channels ~~2000~~and ~~the~~its ~~unused~~highly ~~portion~~skilled ofand ~~the~~motivated ~~warehouse~~Team ~~line is $4~~Members.~~6 million.~~

ItWhile isWestar ~~the~~expects ~~opinion~~to ofcontinue ~~Management~~to ~~that,~~face asintense ofcompetition ~~September 30,~~from ~~2000~~other firms, ~~the~~particularly ~~liquidity sources discussed above in conjunction with subsequent events noted below are sufficient to meet~~ the ~~Company's~~largest ~~immediate~~banks, ~~cash~~financial ~~flow~~services ~~needs~~companies ~~for operations~~ and ~~for~~ the ~~acquisition~~financial subsidiaries of automobile ~~leases~~manufacturers, in the ~~normal course of business. The~~ Company is ~~currently~~presently inunaware ~~negotiations~~of toany ~~obtain~~direct ~~additional~~competitor ~~capital~~with ~~through both~~the ~~private~~same ~~and~~breadth ~~public~~of ~~financing~~enterprise toas ~~provide for~~ the Company~~'s planned growth over the next several years~~. ~~There can be no assurance that such negotiations will be successful.~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

The Company originates and warehouses, until sufficient volumes are pooled for securitization or sold through portfolio sale transactions, fixed-rate assets. The Company is at risk from interest rate fluctuations while the assets are being warehoused. The Company recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effect of interest rate fluctuations on earnings. Assuming an instantaneous increase or decrease of one percentage point in interest rates applied to all leased assets pooled in a typical $30 million securitization, the Company's after-tax earnings on the transaction would change by approximately $700,000. The Company has developed sophisticated models to assess the sensitivity of its earnings to changes in market interest rates and will

beLIQUIDITY ~~able~~AND toCAPITAL use various tools available, such as interest rate swaps and pre-funding rate caps, to minimize the risks associated with the effect of changing prices. These models and tools provide management both the information needed to make timely pricing decisions as well as market alternatives to manage and minimize risk. In a rising rate environment the Company's gross margin will tend to narrow. RESOURCES

~~Fluctuations in~~The ~~used~~Company ~~vehicle~~requires ~~prices~~substantial ~~are~~cash ~~another~~to ~~market~~implement ~~risk~~its business strategy, including cash to: ~~which~~(i) acquire ~~the~~vehicles; ~~Company~~(ii) pay issales ~~exposed.~~or securitization ~~Unexpected~~costs; ~~changes~~(iii) satisfy requirements for working capital, credit enhancement receivables and servicing cash reserves; (iv) pay operating expenses; (v) satisfy debt service; (vi) pay preferred stock dividends; (vii) implement its expansion; and, (viii) invest in technology, systems and personnel. A substantial portion of the ~~used~~Company's revenues ~~vehicle~~in ~~market~~any ~~not~~period ~~only~~results ~~impact~~from ~~credit~~sales ~~losses~~or securitizations of leases in such period, but ~~also~~in a securitization transaction a portion of the cash underlying such revenues is received over the life of ~~residual~~the ~~losses~~leases. The Company ~~minimizes~~has ~~credit~~historically ~~loss~~been ~~exposure~~successful ~~through~~in meeting its ~~SBAS~~liquidity ~~transactions~~needs through internal cash flow, borrowings from financial institutions, securitizations (ABSs) and ~~minimizes~~SBASs, ~~residual~~portfolio sales ~~exposure~~and ~~through~~sales aof ~~residual~~equity ~~value~~and ~~assurance~~debt ~~program~~securities.

~~The~~Westar ~~effect~~was ofthe ~~inflation~~third onCompany ~~general~~in ~~and~~the ~~administrative~~nation ~~expenses~~to ~~over~~structure a free standing lease securitization and the ~~past~~first ~~several~~to ~~years~~originate ~~has~~multiple ~~been~~securitizations ~~negligible.~~from ~~Inflation~~within isa ~~not~~single ~~expected~~bankruptcy remote structure and to ~~impact~~originate ~~earnings~~a intax benefit transfer from within a securitization. As of December 31, 2000, the ~~ensuing twelve~~Company has completed thirty-~~month~~three ~~period~~securitizations and sales while retaining the servicing of the portfolios and receives servicing income through the life of the lease.

The Company entered into an agreement with Bank One, Columbus NA in July 1995 which was expanded in November 1996 from the initial $12M limit to $25M. In November 2000, Management renewed the financing facility at $25M until November 2001. At December 31, 2000 the Company had received a waiver of certain loan covenants through March 31, 2001.

This revolving credit warehouse facility is utilized as interim financing for the acquisition of vehicle leases until sufficient volume is achieved to sell such leases through an ABS or SBAS transaction. The net proceeds from the sales of originated leases provide a source of cash for repayment of related borrowings under the warehouse line thus providing additional availability of credit to fund future vehicle purchases. Remaining proceeds not used to repay the warehouse line provide a source of cash for payment of short-term liabilities and general and administrative expenses. Management anticipates increased originations coupled with higher margins will generate additional cash flows to be utilized for working capital requirements. At December 31, 2000 the unused portion of the warehouse line was $21M.

It is the opinion of Management that, as of December 31, 2000, the liquidity sources discussed above in conjunction with subsequent events noted below are sufficient to meet the Company's immediate cash flow needs for operations and for the acquisition of leases in the normal course of business. The Company may elect to obtain additional capital through both private and public financing in order to provide for the Company's planned growth over the next several years. There can be no assurance that such capital will be available to the Company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

applied to all leased assets pooled in a typical $30M securitization, the Company's after-tax earnings on the transaction would change by approximately $700,000. The Company has developed sophisticated models to assess the sensitivity of its earnings to changes in market interest rates and will be able to use various tools available, such as interest rate swaps and pre-funding rate caps, to minimize the risks associated with the effect of changing prices. These models and tools provide Management both the information needed to make timely pricing decisions as well as market alternatives to manage and minimize risk. In a rising rate environment the Company's gross margin will tend to narrow.

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

In June 1998, the FASB issued Statement of Financial Accounting Standard No. 133, (SFAS No. 133), Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including derivative instruments embedded in other contracts, and hedging activities. SFAS No. 133, as amended, is effective for the Company's fiscal year ending March 2002. Westar does not expect SFAS No. 133 to have significant effect on its financial condition or results of operations.

In September 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities—a replacement for FASB Statement no. 125 ("FAS 140"). The new statement, FAS 140, revises the standards for accounting for securitizations and for other transfers of financial assets and collateral. FAS 140 also requires certain disclosures that were not required under FASB Statement No. 125. Because Westar originations are operating leases and are accounted for in accordance with SFAS 13 the Company does not expect the adoption and implementation to effect its results of operations or financial condition.

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

PART II. OTHER INFORMATION

ITEM ~~Item~~ 1. ~~Legal~~LEGAL ~~Proceedings~~PROCEEDINGS

None

~~Item~~ITEM 2. ~~Changes~~CHANGES inIN ~~Securities~~SECURITIES

None

~~Item~~ITEM 3. ~~Defaults~~DEFAULTS ~~Upon~~UPON ~~Senior~~SENIOR ~~Securities~~SECURITIES

None

~~Item~~ITEM 4. ~~Submission~~SUBMISSION ofOF ~~Matters~~MATTERS toTO aA ~~Vote~~VOTE ofOF ~~Security~~SECURITY ~~Holders~~HOLDERS

None.

~~Item~~ITEM 5. ~~Other~~OTHER ~~Information~~INFORMATION

None

~~Item~~ITEM 6. ~~Exhibits~~EXHIBITS ~~and~~AND ~~Reports~~REPORTS onON ~~Form~~FORM 8-K

12 (a) Index to Exhibits

2.

Plan of acquisition, reorganization, arrangement, liquidation or succession

2.1: Plan and Agreement of Merger between Westar Financial Services Incorporated and Republic Leasing Incorporated incorporated by reference to the Exhibit to Form 10-K dated June 11, 1996.

3.

Articles of Incorporation and Bylaws

3.1: The Articles of Incorporation of Westar Financial Services Incorporated filed on February 13, 1996 incorporated by reference to the Exhibit to Form 10-K dated June 11, 1996.
3.2: The Bylaws of Westar Financial Services Incorporated adopted on February 21, 1996 incorporated by reference to the Exhibit to Form 10-K dated June 11, 1996.

4.

Instruments defining the rights of security holders, including indentures.

4.1: Designation of Rights and Preferences of Republic Leasing Incorporated Series 1 Preferred Stock incorporated by reference to the Exhibit to Form 10-K dated June 11, 1996.
4.2: Designation of Rights and Preferences of Republic Leasing Incorporated Series 2 Preferred Stock incorporated by reference to the Exhibit to Form 10-K dated June 11, 1996.
4.3: Designation of Rights and Preferences of Republic Leasing Incorporated Series 3 Preferred Stock incorporated by reference to the Exhibit to Form 10-K dated June 11, 1996.
4.4: Designation of Rights and Preferences of Republic Leasing Incorporated Series 4 Preferred Stock incorporated by reference to the Exhibit to Form 10-K dated June 11, 1996.

10.		Material Contracts.
10.1		Republic Leasing Incorporated 1994 Stock Option Plan incorporated by reference to the Exhibit to Form 10-K dated June 11, 1996.
10.2		The Letter Agreement between Republic Leasing Incorporated and The Industrial Bank of Japan, Limited dated March 3, 1995 incorporated by reference to the Exhibit to Form 10-K dated June 11, 1996.
10.3		Revolving Credit Agreement among Westar Auto Finance, LLC. as Borrower, Republic Leasing Incorporated as Guarantor and Bank One, Columbus, N.A., as the lender dated July 12, 1995 incorporated by reference to the Exhibit to Form 10-K dated June 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 to Form 10K dated June 11, 1996.
10.5		The Promissory Note between Westar Financial Services Incorporated and Mud Bay Holdings Ltd., as a lender dated January 15, 1997 incorporated by reference to the Exhibit to Form 10K dated September 19, 1997.
10.6		The Promissory Note between Westar Financial Services Incorporated and & Capital Inc., as a lender dated April 15, 1997 incorporated by reference to the Exhibit to Form 10K dated September 22, 1997.
10.7		The Amended and Restated Revolving Credit Loan Agreement between Westar Financial Services Incorporated and Bank One, as the lender dated July 22, 1997 incorporated by reference to the Exhibit to Form 10K dated November 13, 1997.
10.8		The Amended agreement between Westar Financial Services Incorporated and & Capital, Inc., as the lender dated October 20, 1997 incorporated by reference to the Exhibit to Form 10K dated November 13, 1997.
10.9		The Amended agreement between Westar Financial Services Incorporated and & Capital, Inc., as the lender dated February 9, 1998 incorporated by reference to the Exhibit to Form 10Q dated February 17, 1998.
10.10		The Amended agreement between Westar Financial Services Incorporated and Bank One, as the lender dated October 27, 1997 incorporated by reference to the Exhibit to Form 10-Q dated February 17, 1998.
10.11		The Amended agreement between Westar Financial Services Incorporated and Bank One, as the lender dated March 31, 1998 incorporated by reference to the Exhibit to Form 10-K dated February 17, 1999.
10.12		The Amended agreement between Westar Financial Services Incorporated and Mud Bay, as the lender dated August 31, 1998 incorporated by reference to the Exhibit to Form 10-K dated February 17, 1999.
10.13		The Amended agreement between Westar Financial Services Incorporated and Cathy Carlson, as the lender dated April 30, 1998 incorporated by reference to the Exhibit to Form 10-K dated February 17, 1999.
1.14		The Amended agreement between Westar Financial Services Incorporated and & Capital, Inc., as the lender dated August 31, 1998 incorporated by reference to the Exhibit to Form 10-K dated February 17, 1999.
1.15		The Amended agreement between Westar Financial Services Incorporated and & Capital, Inc., as the lender dated August 31, 1998 incorporated by reference incorporated by reference to Form 10-K dated February 17, 1999.

None

1.16		The Amended agreement between Westar Financial Services Incorporated and Summit Capital Resources as the lender dated May 1, 1998 incorporated by reference to Form 10-K dated February 17, 1999.
1.17		The promissory note between Westar Financial Services Incorporated and PLMC, LLC, as a lender dated April 30, 1998 incorporated in reference to Form 10-Q dated March 1, 1999.
1.18		The promissory note between Westar Financial Services Incorporated and PLMC, LLC, as a lender dated May 11, 1998 incorporated by reference to the Exhibit to Form 10-Q dated March 1, 1999.
1.19		The Amended agreement between Westar Financial Services Incorporated and Bank One, as a lender dated June 25, 1998 incorporated by reference to the Exhibit to Form 10-Q dated March 1, 1999.
1.20		The Second Amended agreement between Westar Financial Services Incorporated and Bank One, as the lender dated July 22, 1998 incorporated by reference to the Exhibit to Form 10-Q dated March 1, 1999.
1.21		The purchase/repurchase agreement between Westar Financial Services Incorporated and T&W Financial Services, dated July 23, 1998 incorporated by reference to the Exhibit to Form 10-Q dated March 1, 1999.
1.22		The amended agreement for the Westar Financial Services Incorporated 1994 Stock Option Plan dated April 26, 1999 incorporated by reference to the Exhibit to Form 10-K dated June 25, 1999.
1.23		The amended agreement between Westar Financial Services Incorporated and Bank One, as the lender dated May 1, 1999 incorporated by reference to the Exhibit to Form 10-K dated June 25, 1999.
1.24		The amended agreement between Westar Financial Services Incorporated and & Capital, Inc., as the lender dated April 1, 1999 incorporated by reference to the Exhibit to Form 10-K dated June 25, 1999.
1.25		The amended agreement between Westar Financial Services Incorporated and & Capital, Inc., as the lender dated April 1, 1999 incorporated by reference to the Exhibit to Form 10-K dated June 25, 1999.
1.26		The amended agreement between Westar Financial Services Incorporated and a director, as the lender dated May 24, 1999 incorporated by reference to the Exhibit to Form 10-K dated June 25, 1999.
1.27		The agreement between Westar Financial Services Incorporated and Puget Sound Investors, as the lender dated June 1, 1999 incorporated by reference to the Exhibit to Form 10-K dated June 25, 1999.
1.28		The amended agreement between Westar Financial Services Incorporated and & Capital, Partners, L.P., as the lender dated December 1, 1999 incorporated by reference to the Exhibit to Form 10-Q dated January 28, 2000.
1.29		The amended agreement between Westar Financial Services Incorporated and & Capital, Partners, L.P., as the lender dated December 1, 1999 incorporated by reference to the Exhibit to Form 10-Q dated January 28, 2000.
1.30		The amended agreement between Westar Financial Services Incorporated and a director, as the lender dated December 1, 1999 incorporated by reference to the Exhibit to Form 10-Q dated January 28, 2000.

1.31		The amended agreement between Westar Financial Services Incorporated and Puget Sound Investors, dated December 1, 1999 incorporated by reference to the Exhibit to Form 10-Q dated January 28, 2000.
1.32		The amended agreement between Westar Financial Services Incorporated and Bank One, dated December 1, 1999 incorporated by reference to the Exhibit to Form 10-Q dated January 28, 2000.
1.33		The amended agreement between Westar Financial Services Incorporated and & Capital, Partners, L.P., as the lender dated March 10, 2000 incorporated by reference to the Exhibit to Form 10-K dated July 14, 2000.
1.34		The amended agreement between Westar Financial Services Incorporated and & Capital, Partners, L.P., as the lender dated March 10, 2000 incorporated by reference to the Exhibit to Form 10-K dated July 14, 2000.
1.35		The amended agreement between Westar Financial Services Incorporated and a director, as the lender dated March 10, 2000 incorporated by reference to the Exhibit to Form 10-K dated July 14, 2000.
1.36		The amended agreement between Westar Financial Services Incorporated and Puget Sound Investors, dated March 10, 2000 incorporated by reference to the Exhibit to Form 10-K dated July 14, 2000.
1.37		The amended agreement between Westar Financial Services Incorporated and Bank One, dated March 10, 2000 incorporated by reference to the Exhibit to Form 10-K dated July 14, 2000.
1.38		The amended agreement between Westar Financial Services Incorporated and Bank One, as the lender dated July 31, 1999 incorporated by reference to the Exhibit to Form 10-K dated July 14, 2000.
1.39		The agreement between Westar Financial Services Incorporated and Navidec, Inc., as the lender dated January 7, 2000 incorporated by reference to the Exhibit to Form 10-K dated July 14, 2000.
1.40		The amended agreement between Westar Financial Services Incorporated and Navidec, Inc., as the lender dated March 31, 2000 incorporated by reference to the Exhibit to Form 10-K dated July 14, 2000.
1.41		The agreement between Westar Financial Services Incorporated and & Capital, Partners L.P., as the lender dated June 5, 2000, incorporated by reference to the Exhibit to form 10-Q dated August, 21, 2000.
1.42		The amended agreement between Westar Financial Services Incorporated and Bank One, as the lender dated November 30, 2000. [include agreement]
14 (b)		Reports on Form 8-K None

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the ~~undersigned~~under-signed, thereunto duly authorized.

	WESTAR FINANCIAL SERVICES INCORPORATED
November 3, 2000 (Date)	By:	/s/ R. W. CHRISTENSEN, JR. R. W. Christensen, Jr. President
November 3, 2000 (Date)	By:	/s/ CINDY A. KAY Cindy A. Kay Vice President & Controller

WESTAR FINANCIAL SERVICES INCORPORATED

February 9, 2001 (Date)		R. W. Christensen, Jr., President (Signature)
February 9, 2001 (Date)		Cindy A. Kay, Vice President & Controller (Signature)

QuickLinks

Westar Financial Services Incorporated and Subsidiaries Consolidated Balance Sheets As Of December 31, 2000 and March 31, 2000
Westar Financial Services Incorporated and Subsidiaries Consolidated Statements of Operations For the three months and nine months ended December 31, 2000 and 1999 (Unaudited)
Westar Financial Services Incorporated and Subsidiaries Consolidated Statements of Cash Flows For the nine months ended December 31, 2000 and 1999 (Unaudited) Increase (Decrease) in Cash
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES

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