<PAGE>
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES ACT OF 1934
For Quarter Ended: September 30, 1998
Commission File Number: 2-95465-S
WESTAR FINANCIAL SERVICES INCORPORATED
successor to
REPUBLIC LEASING INCORPORATED
(Exact name of registrant as specified in its charter)
Washington 91-1715252
(State or other jurisdiction of (IRS Employer Identification Number)
Incorporation or organization)
The Republic Building; Olympia, 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 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 2,187,300
Class Number of Shares Issued at January 31, 1998
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Westar Financial Services Incorporated and Subsidiaries
Consolidated Balance Sheet
as of September 30, 1998 and March 31, 1998
<TABLE>
<CAPTION>
September 30 March 31
(Unaudited)
--------- --------
<S> <C> <C>
Cash $ 600,288 $ 475,275
Accounts receivable, net of allowance
for credit losses 199,794 147,092
Credit enhancement receivable, net of
allowance for credit losses 1,042,049 855,848
Net investment in direct finance leases, net of
allowance for credit losses 670,012 18,533,096
Operating assets held for sale, net of allowance 8,079,961
Deferred tax asset 3,355,126 2,936,206
Less: valuation allowance (3,355,126) (2,936,206)
Other assets 509,657 484,066
---------- ----------
$ 11,101,761 $20,495,377
---------- ----------
---------- ----------
Accounts payable $ 563,609 $ 692,126
Notes payable - bank 9,099,649 19,057,701
Notes payable - other 7,162,886 2,756,635
Other liabilities 847,136 722,401
---------- ----------
17,673,280 23,228,863
---------- ----------
Redeemable preferred stock 1,548,000 4,073,000
---------- ----------
Common stock, no par value 3,239,795 3,239,795
Paid in capital - stock warrants 371,495 371,495
Accumulated deficit (11,730,809) (10,417,776)
---------- ----------
(8,119,519) (6,806,486)
---------- ----------
$ 11,101,761 $20,495,377
---------- ---------
---------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Westar Financial Services Incorporated and Subsidiaries
Consolidated Statement of Operations
For the three months and year to date September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Year to Date Ended
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues:
Earned income-direct financing
leases $ 187,756 $ 267,835 $ 623,035 $ 482,292
Revenues from assets sales and
securitizations 27,879,302 160,836 28,255,615 294,202
Revenues from operating leases 197,361 197,361
Administrative fee income 178,589 36,362 296,012 89,300
Service fee income 24,567 24,423 50,813 48,293
Other income 48,051 4,000 56,049 9,939
---------- --------- ---------- --------
Gross revenues 28,515,626 493,456 29,478,885 924,026
---------- --------- ---------- --------
Direct Costs:
Interest 350,135 298,758 802,840 520,501
Costs related to sales and
securitizations 27,561,448 152,581 27,946,816 271,163
Provision for credit losses 14,400 14,685 56,300 40,000
Depreciation expense - operating leases 125,645 125,645
Other 96,575 29,848 178,435 69,342
---------- --------- ---------- --------
Total direct costs 28,148,203 495,872 29,110,036 901,006
---------- --------- ---------- --------
Operating revenue 367,423 (2,416) 368,849 23,020
General and
administrative expenses 863,599 553,030 1,600,966 1,061,613
---------- --------- ---------- ---------
Operating loss before other expense
and income tax benefit (496,176) (555,446) (1,232,117) (1,038,593)
Non-cash interest expense 186,763 341,045
---------- --------- ---------- ---------
Loss before income tax benefit (496,176) (742,209) (1,232,117) (1,379,638)
Income tax benefit 168,700 252,351 418,920 469,077
Less: valuation allowance (168,700) (418,920)
---------- --------- ---------- ---------
Net Loss (496,176) (489,858) (1,232,117) (910,561)
Dividends on redeemable
preferred stock (35,797) (98,235) (80,916) (196,470)
---------- --------- ---------- ---------
Net loss applicable to
common stock $ (531,973) $ (558,093) $(1,313,033) $(1,107,031)
---------- --------- ---------- --------
---------- --------- ---------- --------
Net loss per common share $(.24) $(.33) $(.59) $(.63)
---- ---- ---- ----
---- ---- ---- ----
Weighted average number
of shares 2,187,300 1,765,967 2,187,300 1,751,633
---------- --------- ---------- --------
---------- --------- ---------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Westar Financial Services Incorporated and Subsidiaries
Consolidated Statement of Cash Flows
For the year to date ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net cash used in operating activities $ 8,522,586 $(7,738,997)
------------ -----------
Cash flows from investing activities:
Other (122,149) 36,694
------------ -----------
Net cash provided by (used in)
investing activities (122,149) 36,694
------------ -----------
Cash flows from financing activities:
Proceeds from(redemption of) redeemable
preferred stock (2,525,000)
Proceeds from issuance of common stock 108,000
Additions to notes payable to banks 16,856,742 8,558,884
Payments on notes payable to banks (26,814,794) (1,663,885)
Additions to notes payable - other 6,742,645 1,542,023
Payments on notes payable - other (2,336,393) (519,932)
Dividends paid on preferred stock (115,793) (196,470)
Origination costs (82,831)
------------ -----------
Net cash provided by financing activities (8,275,424) 7,828,620
------------ -----------
Net increase in cash 125,013 126,317
Cash:
Beginning of period 475,275 191,380
------------ -----------
End of period $ 600,288 $ 317,697
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The Company's consolidated annual financial statements presented in the 1998
Annual Report on Form 10-K of the Company includes a summary of 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
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 Washington
Massachusetts business trust beneficially owned by WestAF. The statements for
the three months and six months ended September 30, 1998 and 1997, 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 balances and transactions have been eliminated. The results of
operations for the three and six months ended September 30, 1998, 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 financial statements and notes
thereto included in Westar Financial Services Incorporated's 1998 Annual
Report on Form 10-K.
INTEREST PAID
The Company paid cash for interest of $837,229 and $230,720 for the three
months and $1,226,877 and $352,821 for the six months ended September 30,
1998 and 1997, respectively. The increase is due to increased warehouse
financing costs, which is a result of increased lease origination volume.
EARNINGS PER SHARE
Earnings (loss) per share is computed using the weighted-average number of
common shares outstanding for the three months and six months ended September
30, 1998 and 1997, respectively. Net loss used in the computation of earnings
per share has been increased to include the redeemable preferred stock
dividends. The outstanding shares used in the earnings per share calculation
have been adjusted for the 2-for-1 stock split paid in June 1996. Earnings
per share does not include common stock warrants or common stock options as
the effect is anti-dilutive.
FEDERAL INCOME TAX
The Company recorded a 100% valuation allowance against its deferred tax
asset in the fourth quarter of fiscal 1998. Recording the valuation allowance
resulted in (non-cash) net income tax expense in that year as compared to tax
benefits recorded in prior years. The deferred tax asset is available for an
average of 12 years to offset future reported tax liabilities.
PREFERRED STOCK REDEMPTION
In May 1998, the Company announced that preferred shareholders accepted the
Company's offer to redeem or exchange their shares of Series 1, Series 2 and
Series 3 Preferred at face value. Originally, the 2,823 shares of Series 1, 2
and 3 Preferred Stock were to be redeemed by December 31, 2000. The Company
redeemed 1,088, 231 and 631 shares for Series 1, 2 and 3, respectively at par
value in the amount of $1,950,000 using the proceeds from the issuance of
subordinated
<PAGE>
convertible debt in May 1998. As part of the redemption, the preferred
shareholders exercised their warrants to purchase Westar's common stock.
In May 1998, the Company entered into an agreement with an officer to redeem
his Series 3 Preferred Stock with a par value of $500,000 for a note payable
in the amount of $500,000. The note bears interest at the rate of 9.25% which
is paid quarterly. The note matures on April 1, 1999. As part of the
redemption, the preferred shareholder exercised its warrants to purchase
Westar's common stock
SUBORDINATED DEBT ISSUANCE
In April 1998, the Company entered into an agreement with PLMC, LLC, which is
owned by two directors and unrelated parties, to borrow $400,000 in the form
of subordinated debt. The note was to be repaid no later than June 30, 1998
with interest at the rate of 9%. This note was repaid in full on May 13, 1998.
In May 1998, the Company issued $4,000,000 in subordinated convertible notes
to PLMC, LLC, which is owned by two directors and other unrelated parties.
The note is due May 2003 and bears interest at the rate of 10.5% per annum.
The note is convertible into 20% of the Company's common stock.
WAREHOUSE FACILITY
In July 1998, agreements were reached with Bank One which set the warehouse
line at $15,000,000 and for Bank One to purchase $25 million of Westar's
leases in a securitized transaction.
SECURITIZATION TRANSACTION
In August 1998, the Company's origination/issuer/titling securitization
structure, Westar Lease Origination Trust, completed its third securitization
of $27.5 million of automobile lease-backed securities in a private-placement
offering. The Company's proceeds from the securitization were reduced by a
cash reserve in the amount of $273,000, which is anticipated to be received
out of future cash flows from the pool of contracts sold. The Company
continues to service the leases securitized. Because the leases sold in the
August transaction were finance leases, they are accounted for in accordance
with SFAS 125.
REPURCHASE CREDIT FACILITY
In July 1998, the Company agreed with T&W Financial Corporation, a related
entity, to establish a $2 million non-recourse lease repurchase credit
facility. In July, the company sold $1.6 million of leases into the facility
at an average interest rate of 9.5% per year. The Company repurchased the
$1.6 million of leases in August 1998.
SUBSEQUENT EVENTS
In November 1998, the Company's origination/issuer/titling securitization
structure, Westar Lease Origination Trust, completed its fourth
securitization of $14.4 million of automobile lease-backed securities in a
private-placement offering. The Company's proceeds from the securitization
were reduced by a cash reserve in the amount of $94,000, which is to be
received in 60 monthly payments in the amount of $1,572. The Company
continues to service the leases securitized. Because the leases sold in the
November transaction were operating leases, they are accounted for in
accordance with SFAS 13.
In December 1998, the Company's origination/issuer/titling securitization
structure,
<PAGE>
Westar Lease Origination Trust, completed its fifth and sixth securitization
of $5.2 and $5.9 million, respectively of automobile lease-backed securities
in private-placement offerings. The Company's proceeds from the
securitization were reduced by cash reserves in the amount of $34,000 and
$39,400, respectively, which will be received in 60 monthly payments in the
amount of $563 and $656, respectively. The Company continues to service the
leases securitized. Because the leases sold in the December transaction were
operating leases, they are accounted for in accordance with SFAS 13.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS AND CHANGES IN FINANCIAL POSITION
Six months ended September 30, 1998 compared to six months ended
September 30, 1997
- -----------------------------------------------------------------------------
Westar Financial Services Incorporated and its Subsidiaries provide prime
credit quality consumer automobile lease financing through franchised
automobile dealers in the Northwest Region of the United States. Westar has
designed and developed a number of financing, lease servicing and risk
management innovations. The Company has invested significant personnel, time
and resources its Dealer Direct Retail Leasing ("DDRL") program. While the
Company's statement of operations reports a net loss of approximately
$496,000 and $490,000 for the three months and a net loss of $1,232,000 and
$911,000 for the six months ended September 30, 1998 and 1997,
respectively, it is management's opinion that DDRL is one of the most
sophisticated and marketable retail leasing programs currently available and
a valuable investment in the Company's future.
Volumes of lease originations increased for the 4th consecutive quarter, from
114 leases costing $3.2 million in the prior year to 406 leases costing $11.2
million in the current period. The credit quality of originated leases
remained constant, with average FICO scores of 693 in the prior period
compared to 695 in the current period. Lease originations for the six months
increased from 278 costing $8.0 million in the prior year to 692 costing
$19.2 million in the current period. The face value of leases serviced
increased from $34 million to $54 million.
Gross revenues increased $28,022,000, an increase from $493,000 the
comparable period of the prior year to $28,515,000 in the second quarter. On
a year-to-date basis, revenues increased $28,555,000, from $924,000 the prior
fiscal year to $29,479,000.
The increase in gross revenues during the quarter is primarily caused by a
securitization of leases held for sale of $27,758,700, an increase in
operating lease revenues of $197,000, an increase in administrative fees of
$142,000, and an increase of other income of $44,000, partially offset by a
decrease in earned income from direct financing leases of $80,000, and a
decrease from the sale of vehicles at lease termination of $38,000.
The year-to-date increase in gross revenues is primarily caused by a
securitization of leases held for sale for $27,758,700, an increase from the
sale of vehicles at lease termination of $202,700, an increase in operating
lease revenues of $197,000, an increase in administrative fees of $207,000,
an increase in earned income from direct financing leases of $141,000, and an
increase of other income of $46,000.
<PAGE>
The Company completed a securitization of leases during the second quarter.
The Company began booking leases held for sale as operating leases rather
than direct finance leases during the quarter, which increased operating
lease revenues and decreased earned income from direct financing leases.
During the six month period, operating lease revenues, earned income from
direct finance leases, administrative fees and other income increased due to
greater volumes of lease originations.
Direct costs increased $27,652,000 in the second quarter, from $496,000 the
comparable quarter of fiscal 1998 to $28,148,000. On a year-to-date basis,
direct costs increased $28,209,000, from $901,000 the prior fiscal year to
$29,110,000.
The increase in direct costs during the quarter is primarily caused by a
securitization of leases held for sale with a cost of $27,426,000, an
increase in depreciation expense of $126,000, an increase in other costs of
$67,000, and an increase in interest expense of $51,000. The increase in
direct costs during the current year-to-date is primarily caused by a
securitization of leases held for sale with a cost of $27,426,000, an
increase in interest expense of $282,000, an increase in depreciation expense
of $126,000, and an increase in other costs of $109,000.
The increase in direct costs reflects a securitization in the second quarter
and increased volumes of operating leases originated and warehoused during
the period. Depreciation is a cost component of operating leases. Because the
Company originated increased volumes of operating leases, depreciation
increased.
Operating revenue increased $370,000 the second quarter of fiscal 1999, from
$(3,000) the prior year to $367,000. For the six months, operating revenue
increased $346,000, an increase from $23,000 the prior fiscal year to
$323,000. The increase in operating revenue is a result of greater lease
origination volumes and the securitization of those leases. Each of Westar's
sales and securitizations in fiscal 1999 produced positive cash flow.
General and administrative expense increased $311,000 in the second quarter,
from $553,000 the comparable quarter of fiscal 1998 to $864,000. For the
quarter, the increase in general and administrative expense is a result of
increases in interest expense of $175,000, personnel expense of $98,000,
accounting expense of $64,000, and travel expense of $30,000. On a
year-to-date basis, general and administrative expense increased $539,000,
from $1,062,000 the prior fiscal year to $1,601,000. For the six months, the
increase is a result of increases in interest expense of $190,000, salaries
and wages of $155,000, consulting expense of $56,000, accounting expense of
$36,000, travel expense of $31,000, and insurance of $26,000.
The increase in interest expense reflects the issuance of $4 million of
subordinated debt. The increases in personnel costs are the result of
increased personnel in Risk Management, Finance and Operations recruited in
anticipation of greater lease origination volumes and geographic expansion of
the Company's operations away from the Northwestern Region ("NWR"). The
increase in accounting expense reflects the difference in timing of receipt
of an audit billing. The increase in consulting expense reflects enhancements
to the Company's proprietary LASIR system. The increase in travel expense is
a result of new personnel temporarily located away from Olympia, an increase
in the number of personnel travelling and the distance travelled, and initial
preparations to open a new market area, the Southwestern Region ("SWR"), with
an office in Phoenix. The other increases reflect costs associated with
greater volumes of lease originations in the period.
The reduction in non-cash interest expense is caused by original issuance
interest discount expense related to a subordinated debt borrowing the prior
year.
<PAGE>
The reduction in dividends on preferred stock reflects the redemption of
preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires substantial cash to implement its business strategy.
Cash is used to: (i) acquire leases and the underlying vehicles; (ii) pay
operating expenses; (iii) satisfy working capital requirements; (iv) pay debt
service; (v) pay sales and securitization costs, including amounts required
for credit enhancement, if any; and (vi) pay preferred stock dividends. Many
of these cash requirements increase as the Company's volumes of lease
origination increase. A substantial portion of the Company's revenues in any
period might represent revenues from sales or securitizations of leases, if
any, but a portion of the cash underlying such revenues is generally received
over the life of the leases. The Company retains the servicing of securitized
leases and receives the related servicing income for the securitized pools.
The Company has historically been successful in meeting its liquidity needs,
principally through borrowings from financial institutions under its
warehouse line, securitizations and whole lease sales, portfolio sales and
sales of equity and debt securities.
Westar was the third company in the nation to structure a free standing lease
securitization, an accomplishment of a limited number of companies. The
Company was the first to originate multiple securitizations from within a
single special purpose entity and to originate a tax benefit transfer from
within a securitization. The Company believes that its unique bankruptcy
remote structure, its "Carlson Trust," is more efficient and cost effective
than alternative structures in use by others.
The Company plans to continue to sell leases as they are produced, either
through securitizations in the institutional capital markets, through private
placements on a "whole lease" basis with commercial banks or other
sophisticated investors or on a flow basis with commercial banks.
The revolving credit facility provided by Bank One is the primary source of
cash to finance the acquisition of vehicle leases until they are sold. Westar
and Bank One have agreed to a warehouse facility of $15 million on a
non-recourse basis as well as a "whole lease" purchase facility of $25
million (in November, 1998), both in addition to the $28 million
securitization completed in August. After repayment of borrowings from Bank
One under the warehouse line, the net proceeds from securitizations or sales
provide a source of cash for future acquisition of vehicle leases and general
and administrative expenses. Each of Westar's sales and securitizations in
fiscal 1999 produced positive cash flow.
Though there can be no assurance of their success, the Company is currently
in negotiations to obtain additional financings to provide for planned growth
over the next several years.
It is the opinion of management that, as of September 30, 1998, the liquidity
sources discussed above are sufficient to meet the Company's immediate cash
flow needs in the normal course of business.
PART II. OTHER INFORMATION
<PAGE>
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(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
<PAGE>
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,
L.L.C. as Borrower, Republic Leasing Incorporated as
Guarantor and Bank One, Columbus, N.A., as 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 10-K 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 10-K dated September 9, 1997.
10.6 The Promissory Note between Westar Financial Services
Incorporated and & Capital Inc., as the lender dated
April 15, 1997 incorporated by reference to the Exhibit
to Form 10-Q 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 10-Q dated November
13, 1997.
10.8 The Amended agreement between Westar Financial Services
Incorporated and & Capital, Partners, L.P., as the
lender dated October 20, 1997 incorporated by reference
to the Exhibit to Form 10-Q dated November 13, 1997.
10.9 The Amended agreement between Westar Financial Services
Incorporated and & Capital, Partners, L.P., as the
lender dated February 9, 1998 incorporated by reference
to the Exhibit to Form 10-Q dated February 17, 1998.
10.10 The Amended agreement between Westar Financial Services
Incorporated and Bank One as the lender dated
<PAGE>
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.
10.14 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.
10.15 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.
10.16 The promissory note between Westar Financial Services
Incorporated and Summit Capital as a lender dated May
1, 1998 incorporated by reference to the Exhibit to
Form 10-K dated February 17, 1999.
10.17 The promissory note between Westar Financial Services
Incorporated and PLMC, LLC, as a lender dated April
30, 1998 incorporated by reference to the Exhibit to
Form 10-Q dated March 1, 1999.
10.18 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
10.19 The Amended agreement between Westar Financial
Services Incorporated and Bank One, as the lender
dated June 25, 1998 incorporated by reference to the
Exhibit to Form 10-Q dated March 1, 1999.
10.20 The Second Amended agreement between Westar Financial
Services Incorporated and Bank One, as the lender
dated July 22, 1998.
10.21 The purchase/repurchase agreement between Westar
Financial Services Incorporated and T&W Financial
Services, dated July 23, 1998.
27. Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Regi-strant has duly caused this Report to be signed on its behalf by the
under-signed, thereunto duly authorized.
WESTAR FINANCIAL SERVICES INCORPORATED
March 1, 1998 R. W. Christensen, Jr., President
(Date) (Signature)
March 1, 1998 Warren Kornfeld, Senior Vice President, Finance
(Date) (Signature)
<PAGE>
Exhibit 10.20
SECOND AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
("Amendment") is made and entered into effective as of July 22, 1998 in
Columbus, Ohio, by and among WESTAR AUTO FINANCE, L.L.C., a Washington
limited liability company, as borrower (the "Company"), BANK ONE, NA, a
national banking association, as lender (the "Lender"), and ROBERT W.
CHRISTENSEN, JR., an individual, as indemnitor (the "Indemnitor").
RECITALS
THE FOLLOWING RECITALS ARE REPRESENTATIONS WITH RESPECT TO CERTAIN
FACTUAL MATTERS THAT FORM THE BASIS OF THIS AMENDMENT AND ARE AN INTEGRAL
PART OF THIS AMENDMENT.
A. The Lender agreed to loan to the Company the maximum sum of
$25,000,000.00 (the "Revolving Credit Commitment") pursuant to the terms and
conditions of a certain Amended and Restated Revolving Credit Agreement dated
as of July 22, 1997 by and between the Company and the Lender (the "Restated
Revolving Credit Agreement"). Certain capitalized terms which are not
otherwise defined herein shall have the meanings ascribed to them in the
Restated Revolving Credit Agreement;
B. To evidence the Company's borrowings from time to time under the
Revolving Credit Commitment (collectively, the "Revolving Credit Loans"), the
Company executed a certain Amended and Restated Revolving Credit Note dated
July 22, 1997 (the "Restated Note"), whereby the Company promised to pay to
the order of the Lender, on or before July 12, 1998, the Revolving Credit
Loans, together with interest as set forth in the Restated Revolving Credit
Agreement;
C. To secure the Restated Revolving Credit Agreement and the Restated
Note, the Lender and the Company entered into a certain Amended and Restated
Company Security Agreement dated as of July 22, 1997 (the "Restated Security
Agreement");
D. In further consideration of the Lender entering into the Restated
Revolving Credit Agreement, the Indemnitor agreed, by a certain Amended and
Restated Validity Agreement dated as of July 22, 1997, to indemnify the
Lender as set forth therein (the "Restated Validity Agreement");
E. In further consideration of the Lender entering into the Restated
Revolving Credit Agreement, the Lender and the Company entered into a certain
Amended and Restated Agreement with Respect to Prevention and Resolution of
Disputes dated as of July 22, 1997 (the "Restated Dispute Resolution
Agreement");
F. The Company, the Lender and the Indemnitor pursuant to the terms of
the First Amendment to Restated Revolving Credit Agreement (the "First
Amendment") amended the Restated Revolving Credit Agreement, the Restated
Note and the other Loan Documents effective as of June 25, 1998 to increase
the maximum amount of the Revolving Credit Commitment from $25,000,000 to
$26,000,000.
G. The Lender is still the holder and beneficiary of the Restated
Revolving Credit Agreement as amended by the First Amendment (as so amended,
the "Restated Revolving Credit Agreement"), Restated Note, Restated Security
Agreement, Restated
<PAGE>
Validity Agreement and Restated Dispute Resolution Agreement (such documents,
together with all other documents related thereto, are hereinafter
collectively referred to as the "Loan Documents"); and
H. The Company, the Lender and the Indemnitor desire to amend the
Revolving Credit Agreement, the Restated Note and the other Loan Documents to
reduce the maximum amount of the Revolving Credit Commitment from $26,000,000
to $15,000,000, extend the maturity of the Restated Note to July 31, 1999 and
add automobile installment loan contracts to the assets which may be funded
with the proceeds of Revolving Credit Loans under the Revolving Credit
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the agreement and undertakings of
Borrowers and Lender to amend the Loan Documents, and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
1. All terms and conditions of the Restated Revolving Credit Agreement
shall remain in full force and effect without change except as follows:
(a) Paragraph L of the Recitals on page 3 of the Restated Revolving
Credit Agreement is hereby amended by replacing "$26,000,000" with
"$15,000,000."
(b) The first paragraph Section 2.1 of the Restated Revolving Credit
Agreement is hereby amended by replacing "Twenty-Six Million Dollars
($26,000,000)" with "Fifteen Million Dollars ($15,000,000)" and by
replacing "July 12, 1998" with "July 31, 1999."
(c) Clause (iii) in the second paragraph of Section 2.1 of the
Revolving Credit Agreement is hereby amended in its entirety to read as
follows:
(iii) the Eligible Lease Amount of Leases being financed with the
proceeds of the Revolving Credit Loan and the Eligible Installment
Loan Amount of Installment Loans being financed with the proceeds of
the Revolving Credit Loan."
(d) Section 2.2(a) of the Restated Revolving Credit Agreement is
hereby amended by replacing "July 12, 1998" with "July 31, 1999."
(e) Section 2.2(c)(ii) of the Restated Revolving Credit Agreement is
hereby amended in its entirety to read as follows:
(ii) The Company shall use the proceeds from the sale of Pooled
Interest Certificates to repay all or a portion of the principal
amount of, and accrued interest on, related outstanding Revolving
Credit Loans. The Company shall be required to repay the entire
principal amount of each outstanding Revolving Credit Loan within
six months following the date on which the related Asset-Specific
Trust Interests were purchased with the proceeds of such Revolving
Credit Loan; provided, however, that the Company may elect at the time
Eligible Leases and/or Eligible Installment Loans related to such
Asset-Specific Trust Interests are being reallocated to the Pooled
Interest Portfolio evidenced by such Pooled Interest Certificates to
reallocate Eligible Leases and/or Eligible Installment Loans having
an aggregate combined Eligible Lease Amount plus Eligible Installment
Loan Amount of up to
<PAGE>
$1,000,000 to new Asset-Specific Trust Interests in which event the
principal amount of the then outstanding Revolving Credit Loans may
be reduced to an amount which does not exceed the Borrowing Base of
such reallocated Eligible Leases and/or Eligible Installment Loans.
In no event may an Eligible Lease or Eligible Installment Loan be
reallocated to a new Asset-Specific Trust Interest more than once.
The Lender understands that in order for the Trust to create a Pooled
Interest Portfolio evidenced by such Pooled Interest Certificates,
it will be necessary for the Lender to release its security interest
in those Asset-Specific Trust Interests related to Trust Assets
being reallocated to such Pooled Interest Portfolio. Except during
the occurrence and continuation of an Event of Default, the Lender's
consent to the release of such security interest shall not be
unreasonably withheld."
(f) Section 2.4 of the Restated Revolving Credit Agreement is hereby
amended in its entirety to read as follows:
2.4 USE OF FUNDS. The proceeds of the Loan shall be used to fund
the purchase by the Company of Asset-Specific Trust Interests from
the Trust, and the Trust, in turn, shall use the proceeds from the
purchase of the Asset-Specific Trust Interests to originate
Eligible Leases and/or Eligible Installment Loans, it being the
intent of the parties that the Loan be a "Financing" satisfying the
conditions set forth in Section 5.1(a)(i) of the Trust Agreement.
(g) The Restated Revolving Credit Agreement is hereby amended by
adding thereto Section 5.18 to read in its entirety as follows:
5.18 CHARACTERISTICS OF INSTALLMENT LOANS AND FINANCED VEHICLES.
Each Installment Loan and to the extent applicable, each Financed
Vehicle will be (a) purchased by the Company in the ordinary course
of the Company's financing business; (b) originated by a Dealer in
the state of Washington (or such other states as shall be mutually
agreed to by the parties) in the ordinary course of its business
and in compliance with Westar's normal installment loan
underwriting policies and practices; (c) sufficient to create a
valid, subsisting and enforceable first priority security interest
in favor of the Company in the Financed Vehicle, which security
interest will be assignable by the Company to the Trust free of all
liens except for liens permitted by the Trust Agreement or the
Lease Purchase Agreement, (d) originated in compliance with and
will comply with all material applicable legal requirements, (e)
contain customary and enforceable provisions under the laws of the
jurisdiction governing the Installment Loan such that the rights
and remedies of the holder thereof are adequate for realization
against the collateral of the benefits of the security, (f) provide
for level monthly payments at a fixed rate of interest that fully
amortizes the amount financed by maturity, (g) require payments to
be made by the Obligor within 30 days after the date invoices for
payments are distributed, (h) an Installment Loan which has never
been extended, (i) an Installment Loan as to which the Obligor is
not bankrupt or currently the subject of a bankruptcy proceeding;
(j) not more than 60 days past due; and (k) and an Installment Loan
which satisfies the written underwriting criteria separately
delivered by the Lender to the Company which underwriting criteria
may be amended from time to time by agreement of the parties..
(h) Section 6.2(a)(iv) of the Restated Revolving Credit Agreement is
hereby amended to read in its entirety as follows:
<PAGE>
(iv) An aging report of all Leases and Installment Loans in form
and substance satisfactory to the Lender."
(i) Section 6.16 of the Restated Revolving Credit Agreement is hereby
deleted in its entirety.
(j) Section 7.9 of the Restated Revolving Credit Agreement is hereby
amended in its entirety to read as follows:
7.9 SALE OF ACCOUNTS. The Company shall not, and shall not permit
Westar or any subsidiary to, sell, assign or exchange any of its
Accounts or notes receivable with or without recourse except for
sales, assignments and exchanges of Installment Loans to or with
the Trust."
(m) Section 7.11 of the Restated Revolving Credit Agreement is hereby
amended by replacing "$2,200,000" each time it appears with "$2,500,000."
(n) Section 7.12 of the Restated Revolving Credit Agreement is hereby
amended by changing the minimum amount of Tangible Net Worth required from
April 1, 1997 and thereafter to "$2,500,000."
(o) Article 10 of the Restated Revolving Credit Agreement is hereby
amended by adding or restating in their entirety the following definitions:
"BORROWING BASE" shall mean 95% of the sum of the Eligible Lease
Amount plus the Eligible Installment Loan Amount."
"ELIGIBLE INSTALLMENT LOAN" shall mean an Installment Loan which as
of any date satisfies the criteria set forth in Section 5.18."
"ELIGIBLE INSTALLMENT LOAN AMOUNT" shall mean, as of any date, the
outstanding principal balance of the Installment Loan."
"ELIGIBLE LEASE" shall mean a Lease which as of any date satisfies
the criteria set forth in Section 5.17."
"FINANCED VEHICLE" shall mean any new or up to two model year old
used automobile or light-duty truck which secures an Obligor's
indebtedness under an Installment Loan."
"OBLIGOR" shall mean the lessee under a Lease or the borrower under
an Installment Loan."
"TRUST ASSETS" shall mean the Installment Loans, the Financed
Vehicles, the Leases, the Leased Vehicles, each certificate of
title or other evidence of ownership of a Leased Vehicle, each
certificate of tile or other evidence of the Company's security
interest in a Financed Vehicle and all other property defined as
"Trust Assets in the Trust Agreement."
2. All terms and conditions of the Restated Note shall remain in full
force and effect without change except as follows:
(a) The heading of the Restated Note is hereby amended by
replacing" $26,000,000" with "$15,000,000" and "July 22, 1998" with
"July 31, 1999."
<PAGE>
(b) The first paragraph of the Restated Note is hereby amended by
replacing "Twenty-Six Million Dollars ($26,000,000)" with "Fifteen Million
Dollars ($15,000,000)" and by replacing "July 12, 1998" with
"July 31, 1999."
3. All terms and conditions of the Restated Security Agreement shall
remain in full force and effect without change except as follows:
(a) Paragraph A of the recitals of the Restated Security Agreement is
hereby amended by replacing "$26,000,000" with "$15,000,000."
(b) Section 6(b) of the Restated Security Agreement is hereby amended
in its entirety to read as follows:
(b) NEGATIVE PLEDGE. It shall not, without the prior written
consent of the Lender, (i) sell, assign or transfer any Collateral,
or, except pursuant to the terms of the assigned contracts, any
Installment Loans, Financed Vehicles, Leases or Leased Vehicles
(ii) grant or create or permit to exist any lien, encumbrance,
pledge or security interest on, or in any of the Collateral or any
other personal property, real property or fixtures of the Company
except such as have not been prohibited pursuant to Section 7.2 of
the Revolving Credit Agreement, (iii) permit any levy or attachment
to be made against any of the Collateral, or (iv) file any
financing statement with respect to any of the Collateral, except
financing statements in favor of the Lender and except such as have
not been prohibited pursuant to Section 7.2 of the Revolving Credit
Agreement."
4. All terms and conditions of the Restated Validity Agreement shall
remain in full force and effect without change except that paragraph A of the
recitals to such agreement is hereby amended by replacing "$26,000,000" with
"$15,000,000".
5. The Company hereby represents and warrants that it is in full
compliance with all terms, conditions, covenants, agreements, stipulations,
representations and warranties under the Loan Documents and the Company hereby
reaffirms the same as of the date hereof.
6. The Company and the Indemnitor each covenant to perform and observe
all covenants, agreements, stipulations and conditions on it or his respective
part to be performed under the Loan Documents.
7. Except as specifically modified herein, the Loan Documents shall
remain in full force and effect in all respects according to their original
terms, covenants and conditions as security for the unpaid balance of the
indebtedness and interest thereon evidenced by the Restated Revolving Credit
Agreement and the Restated Note, and nothing in this Amendment shall affect or
impair any rights and powers which Lender may have thereunder.
8. The Company shall pay or cause to be paid and save Lender harmless
against liability for the payment of all reasonable out of pocket expenses,
including counsel fees and disbursements, incurred or paid by Lender in
connection with the negotiation, development, preparation, execution and
performance of this Amendment.
9. This Amendment may be simultaneously executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same instrument.
<PAGE>
10. This Amendment is binding upon, and shall inure to the benefit of, the
parties hereto and their respective heirs, successors and assigns; provided,
however, that neither the Company nor the Indemnitor may assign or transfer
their respective rights or duties under this Amendment or the Loan Documents
without the prior written consent of Lender.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
LENDER: INDEMNITOR:
BANK ONE, N.A.
By:
---------------------------- --------------------------------
Robert N. Kent, Jr. ROBERT W. CHRISTENSEN, JR.,
individually
<PAGE>
COMPANY:
WESTAR AUTO FINANCE, L.L.C.,
a Washington limited liability company
By WESTAR AUTO HOLDING CO.,
a Washington Corporation, Manager
By:
------------------------------
Robert W. Christensen, Jr.
President
<PAGE>
Exhibit 10.21
LESSEE:
WESTAR FINANCIAL SERVICES, INCORPORATED
ADDRESS:
P.O. Box 919
EQUIPMENT
505 E. Union Ave., Suite 300
Olympia WA 98507
LOCATION:
Olympia WA 98507 (Thurston County)
EQUIPMENT & VENDOR(S): SEE SCHEDULE "A" ATTACHED HERETO AND MADE A PART HEREOF
TERMS: 48 Monthly Rentals of $41,454.35 + Applicable WA Tax of 0.00 =
$41,454.35 (U.S.)
SECURITY DEPOSIT: $ _____________
TERMS AND CONDITIONS OF LEASE
1. LEASE. Lessee hereby leases from Lessor, and Lessor leases to Lessee,
the personal property described above, together with any replacement
parts, additions, repairs or accessories now or hereafter incorporated
in or affixed to it (hereinafter referred to as the "Equipment").
2. ACCEPTANCE OF EQUIPMENT. Lessee agrees to inspect the Equipment and to
execute an Acknowledgment and Acceptance of Equipment by Lessee notice
as provided by Lessor, after the Equipment has been delivered and after
Lessee is satisfied that the Equipment is satisfactory in every respect
Lessee hereby authorizes Lessor to insert in this Lease serial numbers
or other identifying data with respect to the Equipment.
3. DISCLAIMER OF WARRANTIES AND CLAIMS; LIMITATION OF REMEDIES. THERE ARE
NO WARRANTIES BY OR ON BEHALF OF LESSOR. Lessee acknowledges and agrees
by his signature below as follows:
(a) LESSOR MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED AS TO THE
CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, ITS FITNESS OR
SUITABILITY FOR ANY PARTICULAR PURPOSE, ITS DESIGN, ITS CAPACITY,
ITS QUALITY, OR WITH RESPECT TO ANY CHARACTERISTICS OF THE
EQUIPMENT;
(b) Lessee has fully inspected the Equipment which it has requested
Lessor to acquire and lease to Lessee, and the Equipment is in good
condition and to Lessee's complete satisfaction;
(c) Lessee leases the Equipment "as is" and with all faults;
(d) Lessee specifically acknowledges that the Equipment is leased to
Lessee solely for commercial or business purposes and not for
personal, family, household, or agricultural purposes;
(e) If the Equipment is not properly installed, does not operate as
represented or warranted by the supplier or manufacturer, or is
unsatisfactory for any reason, regardless of cause or consequence,
Lessee's only remedy, if any, shall be against the supplier or
manufacturer of the Equipment and not against Lessor;
(f) Provided Lessee is not in default under this Lease, Lessor assigns
to Lessee any warranties made by the supplier or the manufacturer
of the Equipment; lessee shall have no remedy for consequential or
incidental damages against lessor; and
<PAGE>
INITIALS:
(h) NO DEFECT, DAMAGE, OR UNFITNESS OF THE EQUIPMENT FOR ANY PURPOSE
SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR RELIEVE
LESSEE OF ANY OTHER OBLIGATION UNDER THIS LEASE.
4. CHOICE OF LAW, JURISDICTION AND VENUE. This Lease shall not be
effective until signed by Lessor at its principal place of business
listed above, Tacoma, WA, and shall be considered to have been made and
shall be construed under the laws of the State of Washington. Lessee
agrees that should any legal action, suit, or proceeding be initiated by
any party to this Agreement with regard to or arising out of this Lease,
or the Equipment covered hereby, such action shall be brought only in
the Superior Court of the State of Washington in and for Pierce County
and all parties consent to the jurisdiction of such Court as to all such
actions.
5. STATUTORY FINANCE LEASE. Lessee agrees and acknowledges that it is the
intent of both parties to this Lease that it qualify as a statutory
finance lease under Article 2A of the Uniform Commercial Code. Lessee
acknowledges and agrees that Lessee has selected both: (1) the
Equipment; and (2) the supplier from whom Lessor is to purchase the
Equipment. Lessee acknowledges that Lessor has not participated in any
way in Lessee's selection of the Equipment or of the supplier, and
Lessor has not selected, manufactured, or supplied the Equipment. lessee
is advised that it may have rights under the contract evidencing the
lessor's purchase of the equipment from the supplier chosen by lessee
and that lessee should contact the supplier of the equipment for a
description of any such rights.
6. ASSIGNMENT BY LESSEE PROHIBITED. Lessee is expressly prohibited from
making any assignment of this Lease, subleasing the Equipment or any
interest therein, pledging or transferring the Lease, or otherwise
disposing of the Equipment covered hereby, in the absence of prior
written consent of Lessor.
7. RENTAL PAYMENTS. Lessee agrees to pay rent in accordance with the terms
herein, the first monthly payment to be due on the _______ day of
________________, 19_______, and a like amount on the same day of each
succeeding calendar month thereafter, payments to be made at Lessor's
address set forth above, or as otherwise directed by Lessor.
(a) THIS LEASE IS NOT CANCELABLE OR TERMINABLE BY LESSEE.
(b) SEE REVERSE SIDE FOR ADDITIONAL TERMS AND CONDITIONS WHICH ARE A
PART OF THIS LEASE.
(c) LESSEE UNDERSTANDS AND ACKNOWLEDGES THAT NO BROKER OR SUPPLIER, NOR
ANY SALESMAN, BROKER, OR AGENT OF ANY BROKER OR SUPPLIER IS AN AGENT
OF LESSOR, NO BROKER OR SUPPLIER, NOR ANY SALESMAN, BROKER, OR AGENT
OF ANY BROKER OR SUPPLIER IS AUTHORIZED TO WAIVE OR ALTER ANY TERM OR
CONDITION OF THIS LEASE AND NO REPRESENTATION AS TO THE EQUIPMENT OR
ANY OTHER MATTER BY THE BROKER OR SUPPLIER, NOR ANY SALESMAN, BROKER,
OR AGENT OF ANY BROKER OR SUPPLIER, SHALL IN ANY WAY AFFECT LESSEE'S
DUTY TO PAY THE RENTALS AND TO PERFORM LESSEE'S OBLIGATIONS SET FORTH
IN THIS LEASE.
LESSEE ACKNOWLEDGES HAVING READ AND UNDERSTOOD ALL OF THE TERMS AND
PROVISIONS OF THIS LEASE, INCLUDING THE REVERSE SIDE HEREOF, AND AGREES TO BE
BOUND BY ALL OF THE TERMS AND PROVISIONS CONTAINED HEREIN UPON THE EXECUTION
OF THIS LEASE AGREEMENT OR EARLIER ACCEPTANCE OF THE LEASED EQUIPMENT.
LESSOR:
T & W FINANCIAL SERVICES COMPANY, L.L.C.
LESSEE:
WESTAR FINANCIAL SERVICES, INCORPORATED
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 600,288
<SECURITIES> 0
<RECEIVABLES> 1,241,843
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,101,761
<CURRENT-LIABILITIES> 13,673,280<F1>
<BONDS> 0
3,239,795
1,548,000
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,101,761
<SALES> 0
<TOTAL-REVENUES> 28,515,626
<CGS> 0
<TOTAL-COSTS> 28,148,203
<OTHER-EXPENSES> 863,599
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (496,176)
<INCOME-TAX> 0
<INCOME-CONTINUING> (496,176)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (531,973)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
<FN>
<F1>Unclassified balance sheet
</FN>
</TABLE>
