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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2001
Commission File Number 0-303000
ZAP
(FORMERLY ZAPWORLD.COM)
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(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
CALIFORNIA 94-3210624
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
117 MORRIS STREET
SEBASTOPOL, CA 95472
(707) 824-4150
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:
None
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
Common Shares
Indicate by check mark whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|
Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. |X|
State issuer's revenues for its most recent fiscal year: $4,997,923.
The aggregate market value of the Company's voting common stock held by
non-affiliates as of March 29, 2002, based on the average Bid and Ask price on
that date was $669,364
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date
6,693,643 shares of common stock as of March 29, 2002.
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TABLE OF CONTENTS
PART I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis
Item 7. Financial Statements
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and Reports on Form 8-K
i
PART I
ITEM 1. DESCRIPTION OF BUSINESS
THE INFORMATION ON FORM 10-KSB CONTAINS FORWARD-LOOKING STATEMENTS BASED ON
CURRENT EXPECTATIONS, ESTIMATES AND PROJECTIONS ABOUT THE COMPANY'S INDUSTRY,
MANAGEMENT'S BELIEFS AND CERTAIN ASSUMPTIONS MADE BY MANAGEMENT.
On March 1, 2002, the Company filed a voluntary petition for relief under
Chapter 11 (the "Chapter 11 Filing") of the United States Bankruptcy Code (the
"Code") in the United States Bankruptcy Court for the Northern District of
California (the "Bankruptcy Court"). The Company is operating as
debtor-in-possession under the Code, which protects it from its creditors
pending reorganization under the jurisdiction of the Bankruptcy Court. As
debtor-in-possession, the Company is authorized to operate its business but may
not engage in transactions outside the ordinary course of business without
approval of the Bankruptcy Court.
A. BUSINESS DEVELOPMENT
ZAP (the "Company" or "ZAP") was incorporated under the laws of the State of
California, on September 23, 1994, as "ZAP Power Systems". The name of the
Company was changed to "ZAPWORLD.COM" on May 16, 1999 in order to increase our
visibility in the world of electronic commerce. We subsequently changed our name
to ZAP on June 18, 2001 in order to reflect our growth and entry into larger,
more traditional markets. The Company has grown from a single product line to a
full line of electric vehicle products. Most of the Company's domestic
manufacturing has been transferred to lower-cost overseas contract
manufacturers.
The Company was established to develop low cost electric vehicles to provide
alternative modes of transportation as a means of providing relief from the
emissions associated with gas powered vehicles and to become a leader in the
emerging light electric vehicle industry. The Company's objective is to leverage
its proprietary technology and name recognition to serve a number of high
potential markets in the electric bicycle, electric scooter, and other light
electric vehicle transportation industries. Since the Company's management
believed that the primary barrier to widespread use of electric vehicles was
their high cost, the Company's activity and revenue was initially derived from
development contracts with domestic government agencies and a foreign private
entity. These contracts were set up to develop low-cost Zero Air Pollution (or
ZAP) type electric vehicles. The Company continues to focus its research efforts
on making electric vehicles cost effective, while developing an international
distribution network for personal vehicle products.
The Company plans to develop proprietary technologies that are important
elements of the ZAP brand of personal electric vehicles. Each of these
components will be marketed under the ZAP brand name. In addition to new
electric vehicles, ZAP is currently focusing its development efforts on a new
generation of microprocessor drive controllers. The Company intends to further
expand its technological expertise through an aggressive plan of acquisitions of
companies with exciting new products in the electrical vehicle industry and
strategic alliances with certain manufacturers, distributors and sales
organizations.
B. BUSINESS OF ISSUER
The Company's business strategy has been to develop, acquire and commercialize
electric vehicles and electric vehicle power systems, that have fundamental
practical and environmental advantages over available internal combustion modes
of transportation that can be produced commercially on an economically
competitive basis. In 2001, the Company continued to enhance and broaden its
electric vehicle product line.
The Company also manufactures several electric motor systems. One of these is
sold as a kit to be installed by the customer on their own bicycle. The system
was designed to assist the rider during more difficult riding situations, rather
than as a replacement for pedaling. The Company also installs a motor system on
specially designed bicycles that the Company has manufactured under contract.
The completed bicycles, with motor, are then sold to the customer. Additionally,
the Company produces the electric scooter, known as the ZAPPY(R), which is
manufactured by the Company, using parts manufactured by various subcontractors.
The Company manufactures several electric motor vehicle kits. The batteries used
in these kits are standard batteries used in the computer industry for power
interrupt systems. The electronic system uses standard electronic components.
The Company has developed long-term purchase arrangements with its key vendors.
Strategic Refocus and Turnaround Business Strategy
The Company is developing a Plan of Reorganization with respect to its financial
affairs (including the Turnaround Business Strategy). In order to be confirmed,
the Plan of Reorganization must satisfy certain requirements of the Bankruptcy
Court, including that each claim in a particular class receive the same
treatment as each other claim in that class and that the Company be adequately
capitalized (upon emergence from Chapter 11) so that confirmation of the Plan of
Reorganization would not be followed by a liquidation or the need for further
reorganization.
To manage the downturn in our business, protect the Company's capitalization and
remedy the working capital shortage, the company immediately implemented the
following changes:
o Analyzed the causes for the declines and implemented changes
o Consolidated several offices
o Reduced staffing from approximately 100 employees to 23
o Reduced executive salaries up to 30%
o Developed a Contingency Plan
o Moved production to Taiwan
o Initiated certain acquisition discussions
ENVIRONMENTAL INITIATIVES AND LEGISLATION
Federal legislation was enacted to promote the use of alternative fuel vehicles,
including electric vehicles. Several States have also adopted legislation that
sets mandates for the introduction of electric vehicles. In 2003 the State of
California will require that 4% of the cars offered for sale are emission free
and 2% electric. However, there is strong political opposition to this mandate.
Foreign countries have also initiated either mandates or incentives for electric
vehicles or are planning such programs in the future. As ZAP commercializes new
transportation technology, it has been required to expend Company resources in
educating legislators of the benefits of these vehicles.
Although many government agencies are concerned about rising global air
pollution, it is expected that the Company will need to continue to expend
considerable resources in the future in the governmental process, and there
cannot be assurance that the current favorable governmental climate for these
zero emission vehicles will remain in the future.
RESEARCH AND PRODUCT DEVELOPMENT
The nature of the Company's business has required and will continue to require
expenditures for research and product development. The development and
introduction of new products are essential to establishing and maintaining
competitive advantage.
The Company's existing product line ,which includes new and planned
introductions is as follows:
ZAPPY(R)- This electric scooter is a stand-up, portable, lightweight scooter
featuring a 12-volt battery with a built-in charger and a collapsible frame. Its
patented design includes a unique folding mechanism and proprietary circuitry
which increases the efficiency and range of the vehicle. In the fourth quarter
last year, we introduced a new 2002 ZAPPY(R) Scooter which offered significant
upgrades over the previous design from its performance and construction to its
look. The ZAPPY(R) scooter accounts for the majority of our sales.
ZAPPY TURBO(TM) - The new ZAPPY TURBO is an improved version of the Company's
ZAPPY folding electric scooter. The ZAPPY TURBO's new electric propulsion system
offers improved acceleration and hill climbing, and has a "hi-performance" mode
that allows the scooter to reach speeds of 19.5 MPH. We started shipping this
item in March of 2002.
SWIMMY (TM)- The Swimmy was designed to give swimmers and snorkelers a boost in
the open water or to enjoy in a pool. It's as simple as grabbing onto the
handles and pulling a switch for an effortless ride through the water with a
quiet electrical assist. While ZAP already manufactures a Sea Scooter for scuba
divers, the strong interest in this product received thus far, indicates a
demand for a swimming pool version for children and fitness swimmers. The
SWIMMY(TM) is in the pre-production phase as of March 2002.
SEA SCOOTER(TM) -The Sea Scooter is an electric water scooter which pulls a
diver or swimmer through the water without gas emissions. It can also be used as
a water toy for swimming pools or for more efficient snorkeling.
POWERSKI(R)- This Powerful design offers skaters a new form of transportation,
exercise and pure skating fun. The two-wheeled device pulls the rider like a
water skier via two flexible poles that allow a skiing motion. With a top speed
of 15MPH, the POWERSKI can easily turn any paved surface into a downhill skiing
environment.
POWERBIKE(R) - The Powerbike is primarily a mountain bike with a new and
improved electric motor attached. It was designed to appeal to the low cost mass
merchant.
LEPTON - This electric vehicle is similar to a gas 50cc type scooter with a top
speed of 30 miles per hour. The Company purchases these items from an Italian
scooter manufacturer and expects sales primarily in resort and university
localities.
MICROPROCESSOR DRIVE CONTROLLERS- The Company is working to develop a series of
low cost proprietary motor controller microprocessors for all of its electric
vehicles, which is believed to increase efficiency and lower costs of operation.
Company funded research and development expense charged to operations in fiscal
years 2001and 2000 was $500,000 and $699,000 respectively.
SOURCES AND AVAILABILITY OF RAW MATERIALS
Materials, parts, supplies and services used in the Company's business are
generally available from a variety of sources. However, interruptions in
production or delivery of these goods could have an adverse impact on the
Company's manufacturing operations.
LICENSES, PATENTS AND TRADEMARKS
The Company has a number of patents and trademarks covering its electric
vehicles. The Company was issued its first United States Patent on February 13,
1996 on its electric motor power system for bicycles, tricycles, and scooters
(Patent #5,491,390). On September 30, 1997, the Company was issued its second
United States Patent on its electric motor system (Patent #5,671,821). On
December 15, 1998, the Company was issued a third United States Patent for its
ZAPPY scooter (Patent #5,848,660). On November 14, 2000, The Company was issued
a design patent on its ZAPPY(R) scooter (Des. No. 433,718).
ZAP also holds several trademarks: the trademark ZAP(R)was assigned to the
Company on September 23, 1994, (Reg. No. 1,794,866); the ELECTRICRUIZER(R)mark
was registered on April 2, 1999 (Reg. No. 2,248,753); the ZAPPY(R)mark was
registered on March 21, 2000 (Reg No. 2,330,894); the POWERBIKE(R)mark was
registered on June 1, 1999 under (Reg. No. 2,248,753). The trademark
ZAPWORLD.COM(R)was registered on July 25, 2000 (Reg.No. 2,371,240); the
trademark ZAP Electric Vehicle Outlet(R)was registered on March 28, 2000 ( Reg.
No. 2,335,090) and the mark Zero Air Pollution(R) was registered on February 28,
2000 (Reg No. 2,320,346).
The Company also acquired two patents as the result of the emPower acquisition
in December, 1999. One patent was for the powered roller skates (Patent
#6,059,062) and another for the powered skateboard (Patent #6,050,357). The
Company acquired all of the assets of Electric Vehicles Systems Inc, including
the PowerSki(R), trademark (registration #2,224,640) and two U.S. Patents,
(Patent #5,735,361) and (Patent #5,913,373). The Company also has a patent for
the Powered Scooter (Patent #115,434). With the purchase of Aquatic Propulsion
Technology Inc., on July 1, 2000, the Company acquired the following five
patents: submersible marine vessel issued June 13, 1995 (Patent #5,423,278),
personal submersible marine vehicle issued June 3, 1997 (Patent # 5,634,423),
submersible marine vessel issued on April 19, 1994 (Patent # 5,303,666) scuba
scooter issued on May 31, 1994 (Patent Des 347,418), and scuba scooter issued
June 6, 1995 (Patent Des 359,022)submersible marine vehicle issued February 19,
2002 (Patent # US D453,726 S). The Company also has several copyright
registrations for various advertisements that it uses to promote its products.
BACKLOG
The Company has a $299,000 backlog of orders and purchase contracts in hand for
electric vehicles as of March 29, 2002. The Company expects to fill its entire
backlog within the current fiscal year.
COMPETITIVE CONDITIONS
The competition to develop and market electric vehicles has increased during the
last year and is expected to continue to increase. The electric bicycle industry
has four (4) major manufacturers and a large group of small companies. The major
manufacturers are Honda, Suzuki, Sanyo and Yamaha. They mainly sell products to
Japan and Europe. The other group of manufacturers is much smaller in size and
sales volume. These manufacturers have products that sell into the U.S.,
European, and Asian markets.
There are also other manufactures, both large and small, of personal electric
vehicles. The principal competitive advantages of the Company are its ownership
of fundamental technology, its trade-name and its potential ability to be a low
cost manufacturer through domestic and international connections, and its
distribution network. In order to reduce costs the Company's production
activities have been transferred to lower cost Taiwanese outside contract
manufacturers. This move also enables the Company to concentrate on its
marketing and sales efforts. The Company also currently benefits from its high
name recognition in the electric vehicle industry coupled with a rapidly
developing business on its Internet website ZAPWORLD.COM. The Company offers one
of the broadest lines of personal electric vehicles currently available.
According to published reports, the Company believes it currently holds a
leading electric bicycle and scooter market position in the United States.
EMPLOYEES
As of March 29, 2002, the Company had a total of 23 employees. This is a
decrease of 53 employees from 2001. The Company's performance is substantially
dependent upon the services of its executive officers and other key employees,
as well as on its ability to recruit, retain and motivate other officers and key
employees. Competition for qualified personnel is intense and there are a
limited number of people with knowledge of and experience in the electric
vehicle industry. The loss of services of any of its officers or key employees,
or its inability to hire and retain a sufficient number of qualified employees,
will harm the Company's business.
ITEM 2. DESCRIPTION OF PROPERTY.
The chart below contains a summary of our principal facilities.
LOCATION USE NUMBER OF SQUARE FEET
-------- --- ---------------------
117 Morris Street Office, Production, and R&D 8,200
6784 Sebastopol Avenue Distribution Center 9,800
The above buildings are located in Sebastopol, California. The Company leases
all of its manufacturing, research and office facilities. All of the leases are
term leases and none include options to purchase. The Company's property
consists primarily of manufacturing equipment and office computer systems. It is
management's opinion that the Company's insurance policies cover all insurance
requirements of the landlords. The Company owns the basic tools, machinery and
equipment necessary for the conduct of its production, research and development,
and vehicle prototyping activities. During 2001, the Company closed five rental
locations as a cost savings measure. Management believes that the above
facilities are generally adequate for present operations.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is subject to legal proceedings and claims in the
ordinary course of business, including employment-related and trade related
claims.
On March 1, 2002, the Company filed a voluntary petition for reorganization
under Chapter 11 of the U. S. Bankruptcy Code with the U. S. Bankruptcy Court,
Northern District, in Santa Rosa, California. As a result of the filing of
voluntary petitions under Chapter 11 of the United States Bankruptcy Code, it is
anticipated that claims will be asserted in excess of those amounts set forth in
the Company's books and records, and that the Company will dispute and file
objections to certain of such claims. The Company's management cannot express
any opinion as to the likelihood of an outcome respecting any claims asserted or
to be asserted in the Chapter 11 cases, including claims resulting from the
assumption or rejection of leases and executory contracts and various other
claims.
Generally, legal actions to enforce or otherwise effect repayment of all
prepetition liabilities as well as all pending litigation against the Company
are stayed while the Company continues to operate its business as
debtor-in-possession.
In light of the Chapter 11 filing the following three lawsuits have been stayed:
On September 28, 2001, we were notified by the Lashman Family Partnership, which
holds a security interest on the intellectual property rights to ZAP products
selling under the name Sea Scooter, that we are in default on our Promissory
Note of $158,000 issued to them in connection with our acquisition of Aquatic
Propulsion Technologies, Inc. We were further notified that the Lashman Family
Partnership has foreclosed on the patents and, henceforth, we will be infringing
the patents should we continue to manufacture and market the Sea Scooter brand.
We dispute the accuracy of the default, and we are looking for a buyer of the
Promissory Note and the intellectual assets.
On September 6, 2001, we were served with a complaint from Hampel Technologies,
Inc. for a collection in the amount of $49,324.16. We filed a timely answer
denying the allegations set forth therein with the County of Sonoma Superior
Court. This action as been stayed as a result of the bankruptcy filing.
On August 8, 2001, we were served with a complaint from Northern California
Collection Service Inc. for a collection in the amount of $63,000. We filed an
answer offering a general denial to each allegation on September 10, 2001 with
the County of Sacramento Superior Court. This action as been stayed as a result
of the bankruptcy filing.
The Company has filed a lawsuit on March 8, 2002 against International Service
Group in the Superior Court of the State of California County of San Mateo,
Northern Branch. The compliant is for breach of contract and negligence over the
theft of electric scooters transferred to their custody.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year-end December 31, 2001.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Common Stock has been listed on the Nasdaq SmallCap Market under the symbol
"ZAPP" since May 22, 2000. On February 14, 2002, the Company received a Nasdaq
staff determination notice indicating that the Company's common stock would be
subject to delisting from the Nasdaq National Market System for failure to
comply with certain Marketplace Rules. These rules requires that the Company's
common stock maintain a minimum bid price of $1.00. Under this rule, the Company
has until August 13, 2002, to comply. If the Company meets certain listing
criteria it may be granted an additional 180 day grace period to demonstrate
compliance. On March 1, 2002 , ZAP was suspended from trading on the Nasdaq
SmallCap Market due to our Chapter 11 Bankruptcy filing. On March 20, 2002, we
resumed trading under the symbol "ZAPPQ".
On March 21, 2002, the listing qualifications section of Nasdaq notified ZAP
that Nasdaq intends to delist ZAP from The Nasdaq Stock Market for failure to
comply with Marketplace Rules 4330(a)(1), 4330(a)(3), 4310(c)(2)(B and
4310(c)(13). The Nasdaq delisting notice stated their determination was based on
concerns raised by ZAP's recent filing for reorganization under Chapter 11 of
the U.S. Bankruptcy Code, concerns regarding the residual equity interest of the
existing listed security holders, and ZAP's failure to meet quantitative
requirements for continued Nasdaq listing. The Nasdaq staff noted that ZAP does
not meet the minimum net tangible assets and stockholder's equity requirements.
In addition, ZAP has failed to pay $23,335 in listing fees due to Nasdaq dating
from the third quarter of 2001. Finally, the Nasdaq staff noted that the
company's bid price of its common stock had closed below the $1 per share
minimum requirements, required by Marketplace Rule 4310(c)(4), for more than
thirty days. ZAP had notified the Nasdaq staff that the company is currently
exploring various strategic alternatives for the Company, including, among other
things, merging with two private companies, as part of their plan of
reorganization, in order to increase the Company's equity and assets.
The Nasdaq staff has determined to delist the company's securities from The
Nasdaq Stock Market on the opening of business of April 1, 2002, subject to the
company's right to appeal the delisting of its securities from Nasdaq and a
hearing. ZAP requested a hearing before a Nasdaq Listing Qualifications Panel to
review the staff determination. ZAP has been granted a hearing which will stay
the delisting process pending the Panel's decision. ZAP cannot be sure that the
Panel will grant the company's request for continued listing.
The shareholders voted at our Annual Meeting on June 16, 2001 to change our
corporate name from ZAPWORLD.COM to ZAP.
On June 28, 2001, we entered into a settlement agreement to avoid threatened
litigation whereby we agreed to repurchase 50% of the 1,250,357shares of Common
Stock held by Ridgewood ZAP, LLC, (Ridgewood) one of several funds managed by
Robert Swanson and Douglas Wilson, both of whom were members of our board of
directors. The terms of the agreement require us to pay $1.5 million in the form
of a 6% interest-bearing Promissory Note, interest payable semi-annually with
principal due in three installments, the first of which is for $500,000 and is
due on June 27, 2002, the second of $500,000 is due six months later, and the
third is due six months after the second.
The remaining one-half of Ridgewood stock is to bepurchased by certain holders
of our Series A-1 and Series A-2 Preferred Stock in $100,000 monthly
installments (subject to certain adjustments) starting February 1, 2002 with the
purchase price per share to be 91% of the lowest closing bid price for the prior
twenty-day trading period. Since no purchases have been made through March 29,
2002, ZAP is liable as discussed below.
To the extent the amount paid by the Preferred Shareholders for the Ridgewood
stock is less than $1.5 million, the difference is to be added to the Promissory
Note and that amount is to be paid by the Company at the rate of $100,000 per
month. Thus, the Company is contingently liable for any short-fall in the
purchase price paid by the Preferred Shareholders. In the event of a default,
Ridgewood may convert the remaining balance of the Promissory Note into shares
of Common Stock at a price one-third of the then market price.
Mr. Robert Swanson and Mr. Douglas Wilson resigned from the Board of Directors
on July 31, 2001.
As of March 29, 2002, there were 6,693,643 shares of Common Stock outstanding
held by 1,893 shareholders. The following table sets forth the high and low
prices of the Common Stock as reported on the OTC Bulletin Board through the
second quarter of 2000, and the high and low prices per share as reported on the
NASDQ Small Cap Stock exchange for the third quarter of 2000 through March 29,
2002.
2002 2001 2000
High Low High Low High Low
---- --- ---- --- ---- ---
(through
3/29/2002)
First Quarter .... $ 0.33 $ 0.09(1) $ 3.06 $ 1.12 $10.00 $ 8.00
Second Quarter ... -- -- 2.55 0.90 6.00 5.44
Third Quarter .... -- -- 1.75 0.51 5.87 5.31
Fourth Quarter ... -- -- 0.43 0.17 3.25 2.50
(1) During this quarter, the stock was briefly halted from trading on NASDAQ as
the result of ZAP's filing for Chapter 11 Bankruptcy protection
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on its Common Stock and
presently intends to retain its future earnings, if any, to fund the development
of its business and, therefore does not anticipate paying any cash dividends in
the future
RECENT SALES OF UNREGISTERED SECURITIES.
Since inception in 1994, the Company has issued or sold unregistered securities
in the amounts, at the times, for the consideration and pursuant to the
exemptions from registration provided by the Securities Act of 1933, as amended
(the "Act"), as follows:
On March 27, 2001, pursuant to an exemption under Section 4(2) of the Act, the
company granted options to purchase 220,000 shares of common stock to employees.
On April 26, 2001, pursuant to an exemption under Section 4(2) of the Act, the
Company issued 5,188 shares of common stock to settle the final acquisition of
EMB.
On December 19, 2001, pursuant to an exemption under Section 4(2) of the Act,
the Company issued 50,000 shares of common stock as stock bonuses to employees
in consideration of the rescission of all previously unexercised stock options.
On December 19, 2001, pursuant to an exemption under Section 4(2) of the Act,
the Company granted options to purchase 1,445,000 shares of common stock to
employees. At the same time, the Company granted options to purchase 700,000
shares of common stock to Members of the Board of Directors and another 25,000
options to an outside consultant.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
OVERVIEW
FORWARD-LOOKING STATEMENTS IN THIS RELEASE ARE MADE PURSUANT TO THE "SAFE
HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT
LIMITATION, CONTINUED ACCEPTANCE OF THE COMPANY'S PRODUCTS, INCREASED LEVELS OF
COMPETITION FOR THE PRODUCTS AND TECHNOLOGICAL CHANGES, THE COMPANY'S DEPENDENCE
UPON THIRD PARTY SUPPLIERS, INTELLECTUAL PROPERTY RIGHTS, AND OTHER RISKS
DETAILED FROM TIME TO TIME IN THE COMPANY'S PERIODIC REPORTS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
Our company, ZAP, was incorporated in California in 1994 under the name "ZAP
Power Systems." We design, assemble, manufacture and distribute electric
vehicles, including electric scooters, electric bicycle power kits,electric
bicycles, electric motorcycles, electric wheelchairs, and electric water
scooters, and other personal electric and non-electric transportation vehicles.
On March 1, 2002, The Company filed a voluntary petition for relief under
Chapter 11 (the "Chapter 11 Filing") of the United States Bankruptcy Code (the
"Code") in the United States Bankruptcy Court for the Northern District of
California (the "Bankruptcy Court"). The Company is operating as
debtor-in-possession under the Code, which protects it from its creditors
pending reorganization under the jurisdiction of the Bankruptcy Court. As
debtor-in-possession, the Company is authorized to operate its business but may
not engage in transactions outside the ordinary course of business without
approval of the Bankruptcy Court. A statutory creditors committee has been
appointed.
As part of the Chapter 11 reorganization process, the Company has attempted to
notify all known or potential creditors of the Chapter 11 Filing for the purpose
of identifying all pre-petition claims against the Company . Substantially all
of the Company's liabilities ("pre-petition liabilities") are subject to
settlement under a plan of reorganization. Generally, legal actions to enforce
or otherwise effect repayment of all pre-petition liabilities as well as all
pending litigation against the Company are stayed while the Company continues to
operate its business as debtor-in-possession. The Company can only pay
pre-petition obligations with the approval of the Bankruptcy Court. Schedules
have been filed by the Company with the Bankruptcy Court setting forth its
assets and liabilities as of the filing date as reflected in the Company's
accounting records. Differences between amounts reflected in such schedules and
claims filed by creditors will be investigated and either mutually resolved or
subsequently adjudicated before the Bankruptcy Court. The ultimate amount and
settlement terms for such liabilities are subject to a plan of reorganization.
There can be no assurance that any reorganization plan that is effected will be
successful. Under the Code, the Company may elect to assume or reject real
property leases, employment contracts, personal property leases, service
contracts and other executory pre-petition contracts, subject to the review of
the Bankruptcy Court. Parties affected by any such rejections may file
pre-petition claims with the Bankruptcy Court in accordance with bankruptcy
procedures. The Company cannot presently determine or reasonably estimate the
ultimate liability that may result from rejecting leases or from filing of
claims for any rejected contracts, and no provisions have been made for the
majority of these items.
The Company sells its electric vehicles to retail customers, international
distributors, law enforcement agencies, electric utility companies, bicycle
dealerships, motorsport dealers, its dealers and mail order catalogs. Products
are also available for purchase on the Company's Internet site, which is
ZAPWORLD.COM. The Company sells to mail order catalogs and selected customers on
various credit terms. Many of the smaller dealerships are sold on a cash-on
-delivery basis. The Internet and retail sales are primarily paid for with a
credit card or personal check before shipment of the product.
The Company's overall goal is to dominate the personal electric vehicle industry
market. The Company's primary growth strategy is to increase net sales by
augmenting its marketing and sales force, by increasing distribution channels
through mass retail organizations and wholesale distributors both domestically
and overseas, by setting up retail outlet stores that specialize in electric
vehicle transportation as well as franchise stores to assist in the retail
arena. Through the acquisition of RAP Group, Inc., the Company has a proof of
concept and showcase successful retailer of electric vehicles. Strategic
alliances with leaders in the industry are also of equal importance, and these
alliances will be broadened through this Plan. The Company intends to increase
its production capability through contract manufacturers to meet the increasing
demand for its product. Product improvements, new product introductions, and the
expansion of the ZAP electric outlet network will continue to enlarge ZAP's
presence in the electric vehicle industry. The Company has recently moved the
majority of its production activities overseas to contract manufacturers, which
will maximize cost savings and enable it to focus on sales and distribution of
its products, without the high cost of keeping a manufacturing facility.
Furthermore through the acquisitions and mergers with RAP Group, Inc. and
Voltage Vehicles, the Company will be able to drastically cut overhead by
combining resources, and management.
SUMMARY COMMENTS REGARDING RESULTS FOR 2001. Our overall performance for the
year ended December 31, 2001 was adversely affected by the following key
factors: the company experienced a drastic decline in orders and several of its
larger international customers failed to pay for products. ZAP attributes this
to the current world-wide economic situation. Unforeseen delays from suppliers
and a theft of two containers of product from a third party storage facility
also hurt holiday sales. The company's sales also suffered from trademark
infringements which resulted in an industry-wide flood of competing goods.
Additionally, ZAP was forced to reconsider and delay an equity financing because
of the poor conditions of the equity markets after September 11,2001.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000
NET SALES for the year ended December 31, 2001 were $5 million compared to $12.4
million in the prior year, a decrease of $7.4 million or 60%. Due to multiple
intellectual property rights violations by off- shore manufacturers, sales
dropped due to low cost "knock offs". The poor worldwide economy has negatively
affected our sales volume for both domestic and foreign distributors. Sales
prices were also pressured downward by liquidation sales (at 50% to 75% of their
costs) to one of the Company's largest competitors who has discontinued
business. Internet sales were $526,000 and $602,000 in 2001 and 2000
respectively. This represented a 13 % decrease for 2001. A total of $957,000 in
products was sold to one customer during the year ended December 31, 2000,
representing 19% of sales. In the year ended December 31, 2000, $1.1 million, or
9 % of net sales, was sold to one customer. Due to their financial difficulties,
this customer is no longer buying products from us.
GROSS PROFIT. Gross profit decreased as a percentage of net sales from 37% to a
gross loss of 17 % during the year ended December 31, 2001. The decline in the
gross margin percentage resulted from lower sales prices, which were reduced to
move product. Also the inventory carrying value was adjusted to reflect lower
realization values for certain items.
SELLING. Selling expenses in 2001 were $1.1 million. This was a decrease of
$1.1million or 50% from $2.2 million in 2000. As a percentage of sales, selling
expenses increased from 18% to 22%. Overall selling expenses decreased due to
less salaries, marketing and promotion costs.
GENERAL AND ADMINISTRATIVE EXPENSES for 2001 were $4.1 million as compared to
$3.8 million in 2000, which represents an increase of $300,000 over the prior
year. Due to staffing reductions and the consolidation of Company facilities
expenses such as salaries and benefits, rents and general office expenses were
less. However, expenses were greater in some of the following areas: higher
amortization of patents and goodwill, increase in bad debt expense, greater
professional fees due to financial fund raising costs and higher general
insurance liability expenses.
RESEARCH AND DEVELOPMENT was $500,000 in 2001 as compared to $699,000 in 2000,
which represents a $199,000 or 28% decrease. As a percentage of net sales,
Research and Development increased to 10% of sales compared to 6% for year-ended
2000. Expense cost decreases were the result of less spending on research and
development. Also, due to cash conservation measures some new product
development projects have been rescheduled.
IMPAIRMENT OF INTANGIBLES The major factor contributing to the expense of $2.6
million was the write-off of certain goodwill,trademarks and patents. In
accordance with a generally accepted accounting principles , that requires a
review all intangible items like goodwill and patents for impairment, the
Company conducted an extensive valuation at year end 2001. Thus, the current
carrying value of certain items were adjusted to reflect a lower recoverability
of future cash generation from those patents and goodwill.
OTHER INCOME(EXPENSE) decreased $314,000 from income of $269,000 in 2000 to an
expense of $44,000 in 2001. This decrease can be attributed to less interest
income on investments due to lower outstanding bank balances. Also the Company
received a $67,000 grant during the year from a state agency for a Neighborhood
Electric Vehicle demonstration in 2000.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
NET SALES for the year ended December 31, 2000 were $12.4 million compared to
$6.4 million in the prior year, an increase of $6 million or 93%. The Company
experienced such a dramatic increase due to a vastly expanded customer base with
larger retailers and distributors plus the addition of new products in 2000.
Fourth quarter sales for 2000 increased $2.3 million over the fourth quarter in
1999, which can be attributable to exceptionally strong holiday sales. Internet
sales were $602,800 and $259,100 in 2000 and 1999 respectively. This represented
a 132% increase for 2000. A total of $1.1 million in products was sold to one
customer during the year ended December 31, 2000, representing 9% of sales. In
the year ended December 31, 1999, $680,000, or 11% of net sales, was sold to one
customer.
GROSS PROFIT. Gross profit increased as a percentage of net sales to 37% from
31% during the year ended December 31, 2000. The increase is primarily due to
product mix and is also the result of the Company's emphasis to improve product
margins through greater cost controls and production efficiencies. It should
also be noted that the gross profit percentage in 1999 was adversely impacted as
the result of a one-time sale to a large distributor at a significant discount
in the third quarter of 1999.
SELLING. Selling expenses in 2000 were $2.2 million. This was an increase of $1
million or 83% from $1.2 million in 1999. As a percentage of sales, selling
expenses remained consistent at 18% for both 2000 and 1999. This increase was
due to higher salaries and benefits as a result of expanding sales and marketing
personnel and greater expenses for marketing and promotional items.
GENERAL AND ADMINISTRATIVE EXPENSES for 2000 were $3.8 million as compared to
$1.9 million in 1999, which represents an increase of $1.9 million over 1999. As
a percentage of sales, the General and Administrative Expenses remained fairly
consistent at 30% of sales for 2000 and 1999. The current year's increase was
due to higher salaries and benefits, greater expenses for consulting and
temporary labor, higher depreciation and amortization expenses as a result of
the current year acquisitions, increased general and liability insurance
premiums which are partially calculated on net sales for the year and finally
due to higher rent expense.
RESEARCH AND DEVELOPMENT was $698,800 in 2000 as compared to $364,600 in 1999,
which represents a $334,200 or 92% increase. As a percentage of net sales,
Research and Development remained consistent at 6% in 2000 and 1999. The overall
increase during the year was due to higher salary expense and greater R&D
activities.
OTHER INCOME increased $188,000 from $81,000 in 1999 to $269,000 in 2000. This
increase can be attributed to $121,000 for higher interest earned on a
commercial paper money market fund from the proceeds of the issuance of
Preferred Stock. Also the Company received a $67,000 grant during the year from
a state agency for a Neighborhood Electric Vehicle demonstration.
INTEREST EXPENSE was $21,000 for the year ended 2000, which represents a
$246,000 decrease from $267,000 in 1999, which is the result of lower
outstanding debt in 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company used cash from operations of $2.4 million and $3.7 million during
the years ended December 31, 2001 and 2000 respectively. Cash used in operations
in 2001 was the result of the net loss incurred for the year of $9.2million,
offset by net non-cash expenses of $3.4 million and the net change in operating
assets and liabilities resulting in a further cash use of $3.4 million . Cash
used in operations in 2000 was the result of the net loss incurred for the year
of $1.9 million, which was offset by net non-cash expenses of $725,000, and the
net change in assets and liabilities resulting in a further use of cash of $2.5
million.
Investing activities used cash of $242,000 during the year ended 2001. Investing
activities used cash for the purchase of fixed assets. In the year ended
December 31, 2000, investing activities used cash of $528,000 which was used for
the purchase of fixed assets, additional capitalized patent costs, intangibles
and the purchase of Electric Motorbike, Inc.
Financing activities used cash of $55,000 during the year ended December 31,
2001 while cash of $4.5 million was provided in the year-ended December 31,
2000. For 2001, cash was provided by the extinguishments of notes due from
shareholders. In 2000, the Company received $4.5 million in proceeds from the
issuance of $5 million of Convertible Preferred Stock to a small group of
private investors. The stock may be converted into common stock over a
three-year period at a specified price, which is contained in the Securities
Purchase Agreement between ZAPWORLD.COM and the investors. . A dividend is also
attached to the stock at a rate of 6% per annum. The dividend is payable in
common stock or cash at the discretion of the Company on June 30 each year or
when the preferred stock is converted into common shares. The investors also
received warrants that expire in five years to purchase an additional 1.2
million shares of common stock at an exercise price ranging from $5.43 to $5.98.
During 2000, the Company issued 3,000 shares of Preferred Stock Series A-1 and
2,000 shares of Preferred Stock Series A-2. Both series are immediately
convertible into common stock at the lesser of the fixed price of $4.50 for the
Series A-1 and $5.91 for the Series A-2, or at the variable conversion price
determined as follows: (1) on or before the first anniversary date, the amount
of 85% of the average of the three lowest closing prices over the 22 trading
days prior to conversion, (2) thereafter and or before the second anniversary,
the amount of 80% of the average of the three lowest closing prices over the 22
days prior to conversion, and (3) thereafter and on or before the day prior to
the third anniversary date, the amount of 70% of the average of the three lowest
closing prices over the 45 trading days prior to conversion. As of March 29,
2002, there were 861 shares of Series A-1 Convertible Preferred Stock
outstanding and 1,664 shares of Series A-2 Convertible Preferred Stock
outstanding. All preferred stockholders are subject to automatic conversion to
common stock three years from the date of purchase. ZAP has not honored any
recent conversion requests since we believe that these contracts will be
rejected in the plan of reorganization .The Company also believes that the
preferred stock and any dividends, or fees or penalties allowed will be part of
the consideration of the reorganization plan.
Dividends are cumulative and accrue at 6% per year and are payable on June 30th
of each year or on conversion date. Dividends are payable in cash or in common
stock at the Company's option. All preferred stockholders are subject to
automatic conversion to common stock three years from the date of purchase.
At December 31, 2001 the Company had cash of $ 842,000 as compared to $3.5
million at December 31, 2000. The Company's working capital(deficit) at December
31, 2001 was ($134,000) compared to $7.1 million at December 31, 2000. The
decrease in cash and working capital is primarily due to funding of ongoing
corporate operations.
On June 28, 2001, the Company entered into an agreement with Ridgewood ZAP, LLC,
wherein,among other things, , the Company purchased 625,178 shares of ZAP common
stock from Ridgewood for a note in the amount of $1,500,000. The note bears
interest at 6%, payable semiannually with principal due in $500,000 installments
starting with the first installment 12 months from the date of the Note and then
continuing every 6 months thereafter. Upon default, the Ridgewood Note can be
converted into shares of Common stock at the option of the payee.
Pursuant to the Ridgewood settlement agreement, certain preferred shareholders
agreed to purchase a certain percentage of the remaining 625,179 shares of
common stock held by Ridgewood. The purchase price is set at 91% of the lowest
Bid Price during the 20-day period preceding the purchase or 93% if the lowest
bid closing price should be $12 or more. Every month, starting February 1, 2002,
each shareholder is obligated to purchase shares for an amount that is
determined as the greater of $100,000 or 50% of the stated value of preferred
stock converted by such shareholder in the prior calendar month. The
shareholders purchase obligation expires in June 2003 at the latest. If the
aggregate amount thus paid by the shareholders is more than $1,500,000 the
principal amount of the Company's note payable shall be reduced by such excess.
If the aggregate amount paid by the shareholders is less, the note is increased
by such shortfall. The amount of such increase shall be amortized at the rate of
$100,000 per month plus applicable interest. Accordingly, the Company is
contingently liable for any shortfall in the purchase price paid by the
preferred shareholders, up to $1,500,000. As of March 29, 2002 no shares have
been purchased pursuant to the agreement.
We may not be able to meet our future cash requirements for the rest of the
current fiscal year unless new financing is obtained. Toward this end, we have
held discussions with various parties, but no formal agreements have been
reached to date. Moreover, we will require substantial capital to execute our
Plan of Reorganization and the Plan of Reorganization must be approved in the
short term to remain a going concern. We will need short term outside
investments on a continuing basis to finance our current operations. Our
revenues for the foreseeable future may not be sufficient to attain
profitability. We expect to continue to experience losses for the near future.
In order to finance our working capital requirements we are currently seeking
both debt and equity investments with several investors, but there can be no
assurances that we will obtain this capital or that it will be obtained on terms
favorable to us. If we do not obtain short term financing, we may not be able to
continue as a going concern and the Company may have to convert to a Chapter 7
bankruptcy. We do not have a bank line of credit and there can be no assurance
that any required or desired financing will be available through bank
borrowings, debt, or equity offerings, or otherwise, on acceptable terms. If
future financing requirements are satisfied through the issuance of equity
securities, investors may experience significant dilution in the net book value
per share of common stock and there is no guarantee that a market will exist for
the sale of the Company's shares.
On March 15, 2002, we announced the signing of memorandums of understanding to
acquire three privately owned companies involved in alternate fueled vehicles,
automotive transfer and sales and distribution businesses. On March 28, 2002, we
announced that we discontinued negotiations with Daybreak Auto and that we
signed Agreements to Merge with RAP and Voltage Vehicles. ZAP's management feels
that the remaining two planned mergers will enhance ZAP's financial base and
provide access to the two companies' services and relationships. Both merger
agreements with ZAP are contingent upon ZAP's Plan of Reorganization being
approved by its creditors and shareholders and confirmed by the U.S. Bankruptcy
Court. We are in the process of preparing ZAP's Plan of Reorganization and
Disclosure Statement that will be mailed to all stakeholders upon approval by
the Bankruptcy Court.
In addition to the above working capital needs, our other capital needs are to
fund our growth strategy, which includes increasing our shopping mall presence,
improving and increasing distribution channels, establishing company owned and
franchised ZAP stores, introducing new products, improving existing product
lines, and developing a strong corporate infrastructure.
SEASONALITY AND QUARTERLY RESULTS
Our business is subject to seasonal influences. Sales volumes in the bicycle
industry typically slow down during the winter months, November to March, in the
U.S. As we are marketing worldwide, we are not impacted 100% by U.S.
seasonality.
INFLATION
Our raw materials are sourced from stable, cost-competitive industries. As such,
we do not foresee any material inflationary trends for our raw material sources.
CRITICAL ACCOUNTING POLICIES
The Company's most critical accounting policies mainly relate to the going
concern status assumed for the Company and the related use of estimates in the
valuation of certain assets and liabilities. In particular, at December 31, 2001
intangibles,inventories,receivables and other assets valuations are entirely
dependent on the Company continuing to operate as a going concern. The value of
these assets on a liquidation basis would likely be significantly less than
their currently recorded net book values.
GOING CONCERN ASSUMPTION
On March 1, 2002 the Company filed a voluntary petition for reorganization under
Chapter 11 of the U. S. Bankruptcy Code with the U.S. Bankruptcy Court. The
Company experienced a dramatic reduction in sales volume and incurred a
significant net loss during the year ended December 31, 2001. The Company also
experienced a significant loss in 2000. These losses and other factors resulted
in most of the Company's available cash resources being used to support
operating activities. In addition, the Company has assumed significant
commitments and obligations as described in the financial statements. These
factors, among others, raise substantial doubt about the Company's ability to
continue as a going concern.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Management has taken certain steps to revise the operating and financial
requirements of the Company, which it believes are sufficient to provide the
Company with the ability to continue in existence. These steps and management's
plans regarding these matters include the following:
On March 1, 2002 the Company filed a voluntary petition for reorganization under
Chapter 11 of the U. S. Bankruptcy Code with the U.S. Bankruptcy Court. The
first impact of the Chapter 11 filing was to stay certain legal proceedings that
had been instituted against the Company. Management also believes that the
Chapter 11 filing will allow the Company to reorganize and rethink its
direction, and to seek debtor-in-possession financing.
On March 15, 2002, we announced the signing of memorandums of understanding to
acquire three privately owned companies involved in alternate fueled vehicles,
automotive transfer and sales and distribution businesses. On March 28, 2002, we
announce that we have discontinued negotiations with Daybreak Auto and that we
signed Agreements to Merge with RAP and Voltage Vehicles. ZAP's management feels
that the remaining two planned mergers will enhance ZAP's financial base and
provide access to the two companies' services and relationships. Both merger
agreements with ZAP are contingent upon ZAP's Plan of Reorganization being
approved by its creditors and shareholders and confirmed by the U.S. Bankruptcy
Court. We are in the process of preparing ZAP's Plan of Reorganization and
Disclosure Statement that will be mailed to all stakeholders upon approval by
the Bankruptcy Court.
In order to finance the Company's working capital and other financing
requirements, management has initiated negotiating equity investments with
several sophisticated investors, although there is uncertainty that the Company
we will obtain this capital or that it will be obtained on terms favorable to
the Company.
GOODWILL
Goodwill consists of the excess consideration paid over net assets acquired and
are amortized over ten years. Impairment of goodwill is evaluated whenever a
triggering event is encountered. The impaired value is determined by reference
to cash flows anticipated from estimated proceeds from selling the related
technology and/or sales of products directly linked to the technology and assets
that gave rise to the goodwill.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management of the
Company to make estimates and assumptions affecting the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, as well as revenues and expenses during
the reporting period. The amounts estimated could differ from actual results.
Risks Related to Our Business
We have a history of losses, and we might not achieve or maintain profitability.
Our continuation as a going concern is directly dependent upon our ability to
increase sales and receive additional financing. We will require substantial
additional capital in the short term to remain a going concern. A substantial
portion of our growth in the past three years has come through acquisitions and
we may not be able to identify, complete and integrate future acquisitions,
including those with RAP and Voltage Vehicles which could adversely affect our
future growth and ability to receive approval of our Plan of Reorganization.
We may not have enough authorized shares of common stock. If our Plan of
Reorganization is not approved or if our if our shareholders do not approve an
amendment to the articles of incorporation increasing the number of authorized
shares of common stock , we may not be able to complete our proposed
acquisitions or obtain additional financing. We have not yet scheduled a
shareholder meeting in order to amend the articles of incorporation; however, we
plan to do so in the near future.
Currently, holders of our Series A-1 and Series A-2 Convertible Preferred Stock
have liquidation rights that are senior to the liquidation rights of our common
stockholders. Common stockholders will likely experience substantial dilution
when the holders of the Series A-1 and Series A-2 Convertible Preferred Stock
convert their shares into Common Stock. There is no minimum conversion price at
which the Series A-1 and Series A-2 Preferred Shareholders may convert. Upon
advice of counsel, ZAP has not honored any recent conversion requests since we
believe that these contracts are executory contracts and will be rejected in the
plan of reorganization .The Company also believes that the preferred stock and
any dividends, or fees or penalties allowed will be part of the consideration of
the reorganization plan.
Our stock may be delisted by the NASDAQ SmallCap Market. The result of delisting
from the Nasdaq National Market could be a reduction in the liquidity of any
investment in our common stock and an adverse effect on the trading price of our
common stock. Delisting could also reduce the ability of holders of our common
stock to purchase or sell shares as quickly and as inexpensively as they have
done historically. This lack of liquidity would make it more difficult for the
company to raise capital in the future. The Company has requested a hearing
before a Nasdaq Listing Qualifications Panel to review the staff determination.
ZAP has been granted a request for a hearing that will stay the delisting
process pending the Panel's decision. ZAP cannot be sure that the Panel will
grant the company's request for continued listing.
Other risks include, but are not limited to, the following:
We face intense competition which could cause us to lose market share.
Changes in the market for electric vehicles could cause our products to become
obsolete or lose popularity. We cannot assure you that growth in the electric
vehicle industry will continue and our business may suffer if growth in the
electric vehicle industry ceases or if we are unable to maintain the pace of
industry demands. We may be unable to keep up with changes in electric vehicle
technology and, as a result, may suffer a decline in our competitive position.
The failure of certain key suppliers to provide us with components could have a
severe and negative impact upon our business. Product liability or other claims
could have a material adverse effect on our business. We may not be able to
protect our internet address.
Our success is heavily dependent on protecting our intellectual property rights
PART II -- OTHER INFORMATION
ITEM 7. FINANCIAL STATEMENTS
CONTENTS
PAGE
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS......................... F-1
FINANCIAL STATEMENTS
Consolidated Balance Sheet........................................... F-2
Consolidated Statements of Operations................................ F-3
Consolidated Statement of Stockholders' Equity....................... F-4
Consolidated Statements of Cash Flows................................ F-5
Notes to Consolidated Financial Statements........................... F-7
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors
ZAP and Subsidiaries
We have audited the accompanying consolidated balance sheet of ZAP (formerly
Zapworld.com) and Subsidiaries as of December 31, 2001, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the two years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ZAP and
Subsidiaries as of December 31, 2001, and the consolidated results of their
operations and their consolidated cash flows for the two years then ended in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note B, on March 1,
2002 the Company filed a voluntary petition for reorganization under Chapter 11
of the U. S. Bankruptcy Code with the U.S. Bankruptcy Court. The Company
experienced a dramatic reduction in sales volume and incurred a significant net
loss during the year ended December 31, 2001. These factors, among others, as
discussed in Note B to the financial statements, raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans
regarding these matters are also described in Note B. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ GRANT THORNTON, LLP
San Francisco, California
March 15, 2002
F-1
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 2001
(in thousands)
ASSETS
CURRENT ASSETS
Cash $ 842
Accounts receivable, net of allowance for doubtful accounts of $533 586
Inventories 1,403
Prepaid expenses and other assets 190
----------
Total current assets 3,021
PROPERTY AND EQUIPMENT - NET 360
OTHER ASSETS
Patents and trademarks, less accumulated amortization 292
Goodwill, less accumulated amortization 100
Deposits and other 145
----------
Total other assets 537
----------
Total assets $ 3,918
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,282
Accrued liabilities and customer deposits 704
Current maturities of long-term debt 1,153
Current maturities of obligations under capital leases 16
----------
Total current liabilities 3,155
OTHER LIABILITIES
Long-term debt, less current maturities 530
STOCKHOLDERS' EQUITY
Preferred stock, authorized 10,000 shares of no par value;
issued and outstanding 2 shares 1,133
Common stock, authorized 20,000 shares of no par value;
issued and outstanding 6,621 shares 18,101
Accumulated deficit (19,001)
----------
Total stockholders' equity 233
----------
Total liabilities and stockholders' equity $ 3,918
==========
The accompanying notes are an integral part of these financial statements.
F-2
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31,
(in thousands, except per share amounts)
2001 2000
---------- ----------
Net sales $ 4,998 $ 12,443
Cost of goods sold 5,850 7,860
---------- ----------
Gross profit (loss) (852) 4,583
Operating expenses
Selling 1,098 2,204
General and administrative 4,083 3,824
Research and development 500 699
Impairment of intangibles 2,610 --
---------- ----------
8,291 6,727
---------- ----------
Loss from operations (9,143) (2,144)
Other income (expense)
Interest expense (11) (21)
Other income (expense) (44) 269
---------- ----------
(55) 248
---------- ----------
Loss before income taxes (9,198) (1,896)
Provision for income taxes 1 1
---------- ----------
NET LOSS $ (9,199) $ (1,897)
========== ==========
Net loss attributable to common shares
Net loss $ (9,199) $ (1,897)
Preferred dividend (138) (2,649)
---------- ----------
$ (9,337) $ (4,546)
========== ==========
Net loss per common share
Basic and diluted $ (1.44) $ (0.85)
========== ==========
Weighted average common shares outstanding 6,471 5,362
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 2001 and 2000
(in thousands)
CONVERTIBLE PREFERRED STOCK COMMON STOCK
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-------- -------- -------- --------
Balance, January 1, 2000 -- $ -- 5,109 $ 12,053
Issuance of preferred stock
Series A-1 preferred stock, net of issuance cost of $295,000 3 2,705 --
Series A-2 preferred stock, net of issuance cost of $192,000 2 1,808 --
Common stock warrants issued with preferred stock -- (2,292) -- 2,292
Beneficial conversion feature of preferred stock -- -- -- 2,539
Deemed dividend from preferred stock -- -- -- --
Issuance of common stock
Cash -- -- 3 14
Acquisitions -- -- 260 1,522
Advance to retail stores & technology co.'s -- -- 10 50
Employee stock purchase plan -- -- 1 10
Services -- -- 11 42
Employee compensation -- -- 5 27
Preferred stock conversion (1) (409) 250 409
Cashless conversion of warrants -- -- 71 --
Exercise of employee stock options -- -- 84 96
Exercise of non-employee stock options -- -- 12 63
Amortization of unearned compensation -- -- -- --
Payments on notes receivable -- -- -- --
Dividend declared on preferred stock -- -- -- --
Net loss -- -- -- --
-------- -------- -------- --------
Balance, December 31, 2000 4 1,812 5,816 19,117
Issuance of preferred stock
Deemed dividend conversions -- (559) -- --
Issuance of common stock
Employee stock purchase plan -- -- 4 4
Repurchase of employee options -- -- 50 10
Cancellation of employee notes -- -- (213) (218)
EMB Acquisition -- -- 5 9
Repurchase of Ridgewood stock -- -- (625) (1,500)
Preferred stock conversion (2) (120) 1,584 679
Amortization of unearned compensation -- -- -- --
Dividend declared on preferred stock -- -- -- --
Net loss -- -- -- --
-------- -------- -------- --------
Balance, December 31, 2001 2 $ 1,133 6,621 $ 18,101
======== ======== ======== ========
NOTE
UNEARNED RECEIVABLE
ACCUMULATED COMPENSATION FROM
DEFICIT & SERVICES SHAREHOLDER TOTAL
-------- -------- -------- --------
Balance, January 1, 2000 $ (5,118) $ (96) $ (285) $ 6,554
Issuance of preferred stock
Series A-1 preferred stock, net of issuance cost of $295,000 -- -- -- 2,705
Series A-2 preferred stock, net of issuance cost of $192,000 -- -- -- 1,808
Common stock warrants issued with preferred stock -- -- -- --
Beneficial conversion feature of preferred stock -- -- -- 2,539
Deemed dividend from preferred stock (2,539) -- -- (2,539)
Issuance of common stock
Cash -- -- -- 14
Acquisitions -- -- -- 1,522
Advance to retail stores & technology co.'s -- -- -- 50
Employee stock purchase plan -- -- -- 10
Services -- -- -- 42
Employee compensation -- -- -- 27
Preferred stock conversion -- -- -- --
Cashless conversion of warrants -- -- -- --
Exercise of employee stock options -- -- -- 96
Exercise of non-employee stock options -- -- -- 63
Amortization of unearned compensation -- 54 -- 54
Payments on notes receivable -- -- 67 67
Dividend declared on preferred stock (110) -- -- (110)
Net loss (1,897) -- -- (1,897)
-------- -------- -------- --------
Balance, December 31, 2000 (9,664) (42) (218) 11,005
Issuance of preferred stock
Deemed dividend conversions -- -- -- (559)
Issuance of common stock
Employee stock purchase plan -- -- -- 4
Repurchase of employee options -- -- -- 10
Cancellation of employee notes -- -- 218 0
EMB Acquisition -- -- -- 9
Repurchase of Ridgewood stock -- -- -- (1,500)
Preferred stock conversion -- -- -- 559
Amortization of unearned compensation -- 42 -- 42
Dividend declared on preferred stock (138) -- -- (138)
Net loss (9,199) -- -- (9,199)
-------- -------- -------- --------
Balance, December 31, 2001 $(19,001) $ -- $ -- $ 233
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
F-4
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
(in thousands)
2001 2000
---------- ----------
Cash flows from operating activities:
Net loss $ (9,199) $ (1,897)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation, amortization 685 629
Impairment of intangibles 2,610 --
Loss on disposal of property and equipment 42 --
Issuance of common stock for services rendered -- 42
Amortization of fair value of warrants 42 54
Changes in:
Receivables 1,027 (1,260)
Inventories 1,495 (1,073)
Prepaid expenses and other 506 (393)
Deposits (33) (18)
Accounts payable 884 (545)
Accrued liabilities and customer deposits (463) 799
---------- ----------
Net cash used in operating activities (2,404) (3,662)
Cash flows from investing activities:
Purchase of property and equipment (242) (239)
Purchase of Electric Motorbike, Inc. -- (100)
Purchase of intangibles -- (209)
Payments on note receivable -- 20
---------- ----------
Net cash used in financing activities (242) (528)
---------- ----------
Cash flows from financing activities:
Sale of preferred stock, net of preferred stock offering costs -- 4,513
Sale of common stock, net of stock offering costs -- 14
Issuance of common stock under employee purchase plan 4 10
Proceeds from exercise of stock options -- 159
Proceeds from payment of notes receivable from shareholders -- 67
Payments on obligations under capital leases (47) (13)
Principal repayments on long-term debt (12) (201)
---------- ----------
Net cash provided by (used in) financing activities (55) 4,549
---------- ----------
NET INCREASE (DECREASE) IN CASH (2,701) 359
Cash, beginning of year 3,543 3,184
---------- ----------
Cash, end of year $ 842 $ 3,543
========== ==========
The accompanying notes are an integral part of these financial statements.
F-5
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Years ended December 31,
(in thousands)
2001 2000
---------- ----------
Supplemental cash flow information:
Cash paid during the year for:
Income taxes $ -- $ 1
Non-cash investing and financing activities:
Debt issued to repurchase common stock 1,500 --
Equipment acquired through capital lease obligations -- 27
Cancellation of note receivable from shareholder 139 --
Issuance of common stock to repurchase employee options 10
Issuance of common stock upon acquisition of Electric
Motorbike, Inc., and Aquatic Propulsion Technology 9 1,522
Assets and liabilities recognized upon acquisition of
Electric Motorbike, Inc. and Aquatic Propulsion Technology
Inventories -- 100
Property and equipment -- 78
Other assets -- 19
Patent -- 196
Goodwill -- 1,991
Accounts payable -- 201
Advances from Zapworld -- 206
The accompanying notes are an integral part of these financial statements.
F-6
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ZAP ("the Company"), formerly Zapworld.com, was incorporated in California
in September, 1994. The Company designs, manufactures, and distributes
electric bicycle power kits, electric bicycles and tricycles, and other low
power electric transportation vehicles. Company products are sold directly
to end-users and to distributors throughout the United States.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company, Zapworld Stores, Inc., and emPower Corporation. Zapworld
Stores, Inc. and emPower Corporation are 100% owned by Zapworld.com and
ceased independent operations during 2001. All significant inter-company
transactions and balances have been eliminated.
Revenue Recognition
The Company recognizes revenue when products are shipped. For consignment
sales, revenue is recognized as and when sales are reported by the
consignee.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents. The Company
maintains the majority of its cash balances with three major financial
institutions, which at times, may exceed federally insured limits. The
Company has not experienced any losses in such account and believes it is
not exposed to any significant credit risk on cash and cash equivalents. As
of December 31, 2001 $103, 993 was held in a restricted bank account and
set aside for a letter of credit for the purchase of inventory.
Inventories
Inventories consist primarily of raw materials, work-in-process, and
finished goods and are carried at the lower of cost (first-in, first-out
method) or market.
Property and Equipment
Property and equipment are stated at cost and depreciated using
straight-line and accelerated methods over the assets' estimated useful
lives. Costs of maintenance and repairs are charged to expense as incurred;
significant renewals and betterments are capitalized. Estimated useful
lives are as follows:
Machinery and equipment 3 -7 years
Equipment under capital leases 3 -5 years
Demonstration bicycles 2 years
Office furniture and equipment 3 -7 years
Vehicle 5 years
Leasehold improvements 15 years or life of lease,
whichever is shorter
Machinery and equipment includes molds and tools that the Company owns but
that are held and used by suppliers at outside locations.
F-7
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Patents and Trademarks
Patents and trademarks consist of costs expended to perfect certain patents
and trademarks acquired and are amortized over ten years.
Goodwill
Goodwill consists of the excess consideration paid over net assets acquired
and are amortized over ten years. Impairment of goodwill is evaluated
whenever a triggering event is encountered. The impaired value is
determined by reference to cash flows anticipated from estimated proceeds
from selling the related technology and/or sales of products directly
linked to the technology and assets that gave rise to the goodwill.
Advertising
The cost of advertising is expensed as incurred. Advertising and marketing
expenses amounted to $266,000 and $546,000 in the years ended December 31,
2001 and 2000, respectively.
Income Taxes
The Company accounts for income taxes using an asset and liability approach
for financial accounting and reporting purposes. Deferred income tax assets
and liabilities are determined based on differences between the financial
reporting and tax bases of assets and liabilities and are measured using
the currently enacted tax rates and laws.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management of the Company to make estimates and assumptions affecting the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, as well as
revenues and expenses during the reporting period. The amounts estimated
could differ from actual results.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance
with accounting principles generally accepted in the United States of
America. The fair value of a financial instrument is the amount at which
the instrument could be exchanged in a current transaction between willing
parties. For certain of the Company's financial instruments, including
cash, accounts receivable and accounts payable, the carrying amount
approximates fair value because of the short maturities. The fair value of
debt is not determinable due to the terms of the debt and no comparable
market for such note.
Net Loss Per Common Share
Net loss per common share, basic and diluted, has been computed using
weighted average common shares outstanding. The effect of potential
dilutive securities of 3,386,589 and 2,859,000 in 2001 and 2000,
respectively, has been excluded from the diluted computations as their
inclusion would be anti-dilutive.
F-8
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board ("APB") No.
25, Accounting for Stock Issued to Employees, and complies with disclosure
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
Accounting for Stock-Based Compensation. Under APB No. 25, compensation
cost is recognized over the vesting period based on the difference, if any,
on the date of grant between the quoted market price of the Company's stock
and the amount an employee must pay to acquire the stock.
Segment Information
The Company operates in one reportable segment. The Company's chief
operating decision maker is the Chief Executive Officer who reviews a
single set of financial data that encompasses the Company's entire
operations for purposes of making operating decisions and assessing
performance.
Recent Accounting Pronouncements
During 2001, the Financial Accounting Standards Board (FASB) approved for
issuance Statement of Financial Accounting Standards (SFAS) 141, Business
Combinations, and SFAS 142, Goodwill and Other Intangible Assets. SFAS 141
provisions relating to the initial measurement and recording of goodwill
and intangible assets, as well as financial statement disclosures, are
effective for purchase business combinations completed after June 30, 2001.
SFAS 142 is effective for fiscal years beginning after December 15, 2001;
however, certain provisions of this Statement apply to goodwill and other
intangible assets acquired between July 1, 2001 and the effective date of
SFAS 142. Major provisions of these Statements and their effective dates
for the Company are as follows:
All business combinations initiated after June 30, 2001 must use the
purchase method of accounting. The pooling of interest method
accounting is prohibited except for transactions initiated before July
1, 2001.
Intangible assets acquired in a business combination must be recorded
separately from goodwill if they arise from contractual or other legal
rights or are separable from the acquired entity and can be sold,
transferred, licensed, rented or exchanged, either individually or as
part of a related contract, asset or liability.
Goodwill as well as intangible assets with indefinite lives, acquired
after June 30, 2001, will not be amortized. Effective January 1, 2001,
all previously recognized goodwill and intangible assets with
indefinite lives will no longer be subject to amortization.
Effective January 1, 2002, goodwill and intangible assets with
indefinite lives will be tested for impairment annually and whenever
there is an impairment indicator.
All acquired goodwill must be assigned to reporting units for purposes
of impairment testing and segment reporting.
F-9
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Financial Accounting Standards Board also issued SFAS 143, Accounting
for Asset Retirement Obligations. SFAS 143 applies to all entities that
have legal obligations associated with the retirement of a tangible
long-lived asset that result from acquisition, construction, or development
and (or) normal operations of the long-lived asset. SFAS 143 requires that
a liability for an asset retirement obligation be recognized if the
obligation meets the definition of a liability in FASB, Concepts Statement
6, Elements of Financial Statements, and if the amount of the liability can
be reasonably estimated. SFAS 143 is effective for financial statements
issued for fiscal years beginning after June 15, 2002.
In addition, the Financial Accounting Standards Board also issued SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS 144
supercedes SFAS 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of, as well as the provisions of
Opinion 30, Reporting the Results of Operations Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, that address the disposal
of a business. SFAS 144 also amended APB 51, Consolidated Financial
Statements, to eliminate the exception to consolidate a subsidiary for
which control is likely to be temporary. SFAS 144 carries over the
recognition and measurement provisions of SFAS 121, but differs from SFAS
121 in that it provides guidance in estimating future cash flows to test
recoverability. SFAS 144 also includes criteria that have to be met for an
entity to classify a long-lived asset or asset group as held for sale, and
extends the presentation of discontinued operations permitted by Opinion 30
to include disposals of a component of an entity. SFAS 144 is effective for
financial statements issued for fiscal years after December 15, 2001,
except for the disposal provisions which are immediately effective.
The Company has not determined what effect the adoption of these accounting
standards will have on its financial statements.
NOTE B - BANKRUPTCY FILING AND GOING CONCERN CONSIDERATIONS
On March 1, 2002, the Company filed a voluntary petition for reorganization
under Chapter 11 of the U. S. Bankruptcy Code with the U.S. Bankruptcy
Court. The Company experienced a dramatic reduction in sales volume and
incurred a significant net loss during the year ended December 31, 2001.
The Company also experienced a significant loss in 2000. These losses and
other factors resulted in most of the Company's available cash resources
being used to support operating activities. In addition, the Company has
assumed significant commitments and obligations as described in these
financial statements. These factors, among others, raise substantial doubt
about the Company's ability to continue as a going concern.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
Management has taken certain steps to revise the operating and financial
requirements of the Company, which it believes are sufficient to provide
the Company with the ability to continue in existence. These steps and
management's plans regarding these matters include the following:
F-10
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE B - BANKRUPTCY FILING AND GOING CONCERN CONSIDERATIONS (CONTINUED)
On March 1, 2002 the Company filed a voluntary petition for reorganization
under Chapter 11 of the U. S. Bankruptcy Code with the U.S. Bankruptcy
Court. The first impact of the Chapter 11 filing was to stay certain legal
proceedings that had been instituted against the Company. Management also
believes that the Chapter 11 filing will allow the Company to reorganize
and rethink its direction, and to seek debtor-in-possession financing.
On March 28, 2002, the Company announced the signing of an agreement to
merge with two privately owned companies involved in alternate fuels,
automotive sales and distribution businesses. Management believes that the
planned mergers will enhance the Company's financial base and provide
access to the two companies' services and relationships. Both of these
merger agreements are contingent upon the Company's Plan of Reorganization
being approved by its creditors and shareholders and confirmed by the U.S.
Bankruptcy Court. Management is in the process of preparing the Company's
Plan of Reorganization that will reflect the economic strength and
viability by completing the aforementioned mergers.
There can be no assurance that steps taken by management, including any
reorganization plan that is effected, will be successful.
NOTE C - INVENTORIES
Inventories consist of the following at December 31, 2001 (thousands):
Raw materials $ 972
Work-in-process 44
Finished goods 387
---------
$ 1,403
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 2001
(thousands):
Machinery and equipment $ 466
Computer equipment 313
Office furniture and equipment 111
Leasehold improvements 30
Vehicle 118
---------
1,038
Less accumulated depreciation and amortization (678)
---------
$ 360
F-11
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE E - DEBT
As of December 31, 2001, the Company's debt mainly comprised of two notes
payable as described below. The Company also has obligations under capital
leases in the amount of $59,000 and various small short-term loans and
notes payable in connection with insurance premiums that are included under
accrued liabilities.
Amounts classified as long-term debt mainly comprise the last installment
under the Ridgewood Note and the long-term portion of capital lease
obligation, all payable in 2003.
In 2000, the Company acquired a promissory note payable in monthly
installments of $6,000 through June 30, 2001 and $7,000 per month through
July 1, 2004. Interest accrues at 10% per year. The note is convertible
into common stock at $5.00 per share and may be converted on or before
December 31, 2001. At December 31, 2001, none of the note principal was
converted. Since the Company was in default under the note the related
balance was classified as a current liability.
On June 28, 2001, the Company entered into an agreement with Ridgewood ZAP,
LLC, then one of the preferred shareholders. In terms of the agreement, the
Company purchased 625,178 shares of ZAP common stock from Ridgewood for a
note in the amount of $1,500,000. The note bears interest at 6%, payable
semiannually with principal due in $500,000 installments starting with the
first installment 12 months from the date of the Note and then continuing
every 6 months thereafter. Upon default, the Ridgewood Note can be
converted into shares at a price of one-third of the then market price of
Common stock at the option of Ridgewood.
In terms of the Ridgewood settlement agreement, certain holders of the
Company's preferred stock agreed to purchase the remaining 625,179 shares
of common stock held by Ridgewood. The purchase price is set at 91% of the
lowest Bid Price during the 20-day period preceding the purchase or 93% if
the lowest bid closing price should be $12 or more. Every month, starting
February 1, 2002, these shareholders are obligated to purchase shares for
an amount that is determined as the greater of $100,000 or 50% of the
stated value of preferred stock converted by such shareholder in the prior
calendar month. The shareholders' purchase obligation expires in June 2003
at the latest. If the aggregate amount thus paid by the shareholders is
more than $1,500,000 the principal amount of the Company's note payable
shall be reduced by such excess. If the aggregate amount paid by the
shareholders is less, the note is increased by such shortfall. The amount
of such increase shall be amortized at the rate of $100,000 per month plus
applicable interest. Accordingly, the Company is contingently liable for
any shortfall in the purchase price paid by the preferred shareholders, up
to $1,500,000.
F-12
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE F - PROVISION FOR INCOME TAXES
2001 2000
-------- --------
Current tax expense (thousands)
Federal $ -- $ --
State 1 1
-------- --------
$ 1 $ 1
======== ========
Deferred tax assets (liabilities)
Tax loss carryforward $ 4,591 $ 2,057
Inventory capitalization (681) (283)
Other (557) (37)
-------- --------
3,353 1,737
Less valuation allowance (3,353) (1,737)
-------- --------
Net deferred tax asset $ -- $ --
======== ========
The Company has available for carryforward approximately $11,796,000 and
$9,942,000 of federal and state net operating losses, respectively,
expiring through 2020 for federal purposes and 2010 for state purposes. The
Tax Reform Act of 1986 and the California Conformity Act of 1987 impose
restrictions on the utilization of net operating losses in the event of an
"ownership change" as defined by Section 382 of the Internal Revenue Code.
There has been no determination whether an ownership change, as defined,
has taken place. Therefore, the extent of any limitation has not been
ascertained.
A valuation allowance is required for those deferred tax assets that are
not likely to be realized. Realization is dependent upon future earnings
during the period that temporary differences and carryforwards are expected
to be available. Because of the uncertain nature of their ultimate
utilization, a full valuation allowance is recorded against these deferred
tax assets. Valuation allowance increased $1,616,000 and $87,000 for the
years ended December 31, 2001 and 2000, respectively.
NOTE G - STOCK OPTIONS AND WARRANTS
On December 19, 2001, the Company cancelled all outstanding stock options
from prior plans against payment of a total stock bonus of $10,000. On the
same date, new stock options were issued to employees, directors, and
non-employees under the 1999 plan.
The grant of these options resulted in an effective re-pricing of the
options. Accordingly, the Company is required to apply variable accounting
to these options and will need to mark the value of these options to market
value as and when the Company's stock price changes. At December 31, 2001,
the impact of the application of variable accounting to these options was
not material to the financial statements.
At December 31, 2001, the Company had granted 670,000 options in excess of
the number of options available for grant and will need either shareholder
approval or plan reorganization in order to vest and become fully
excercisable.
F-13
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
Options to purchase common stock are granted by the Board of Directors
under three Stock Option Plans, referred to as the 1999, 1996, and 1995
plans. Options granted may be incentive stock options (as defined under
Section 422 of the Internal Revenue Code) or nonstatutory stock options.
The number of shares available for grant under the 1999, 1996 and 1995
Plans are 1,500,000, 600,000 and 750,000, respectively. Options are granted
at no less than fair market value on the date of grant. Options granted in
2001 mostly become exercisable immediately, while options granted in prior
years become exercisable as they vest over a two or three year period, and
expire ten years after the date of grant.
Option activity under the three plans is as follows (thousands, except per
share amounts):
1999 Plan 1996 Plan 1995 Plan
--------------------- --------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Shares Price Shares Price Shares Price
------ ------- ------ ------- ------ -------
Outstanding at
January 1, 2000 479 $ 6.34 126 $ 2.85 70 $ 0.93
Granted 630 5.17 -- -- -- --
Exercised (7) 5.00 (52) 1.23 (25) 1.00
Canceled (4) 5.25 -- -- -- --
------ ------ ------
Outstanding at
December 31, 2000 1,098 5.71 74 3.97 45 1.00
Granted 2,380 .32 -- -- -- --
Exercised -- -- -- -- -- --
Canceled (1,318) 5.36 (74) 3.97 (45) 1.00
------ ------ ------
Outstanding at
December 31, 2001 2,170 $ 0.20 -- $ -- -- $ --
NOTE G - STOCK OPTIONS AND WARRANTS (CONTINUED)
The weighted average fair value of options granted during the years ending
December 31, 2001 and 2000 was $0.17 and $5.17, respectively.
The following information applies to options outstanding at December 31,
2001:
Plan: 2001
----------
Range of exercise prices $0.20
Weighted average remaining life (years) 5
Options exercisable 2,170,000
Weighted average exercise price $0.20
F-13
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
The Company has adopted the disclosure only provision of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation (SFAS 123)". Accordingly, no compensation expense has been
recognized for stock options issued during 2001 and 2000. Had compensation
cost for the Company's options been based on the fair value of the awards
at the grant date consistent with the provisions of SFAS No. 123, the
Company's net loss and loss per share would have approximated the following
proforma amounts (thousands, except per share amounts):
2001 2000
-------- --------
Net loss - as reported $ (9,199) $ (1,897)
Net loss - pro forma (9,578) (3,448)
Loss per share - as reported (1.44) (0.85)
Loss per share - pro forma (1.50) (1.14)
The fair value of each option and warrant is estimated on date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
2001 2000
-------- --------
Dividends None None
Expected volatility 128% 72%
Risk free interest rate 4.5% 6%
Expected life 5 years 5 years
At December 31, 2001, the Company has outstanding stock options for
employees to purchase 1,445,000 and for directors to purchase 700,000 and
for non-employees to purchase 25,000 shares of common stock at an exercise
price of $0.20.
In 2000, as part of the issuance of preferred stock, the Company granted
1,184,989 warrants to preferred shareholders and 31,600 to other
non-employees. The warrants have exercise prices ranging from $5.43 to
$5.98.
F-14
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE H - MAJOR CUSTOMERS
During 2001 and 2000, no single customer accounted for more than 10% of the
Company's net sales, nor receivables.
NOTE I - COMMITMENT
The Company consolidated its locations in 2001 resulting in the
cancellation or expiration of four leases in 2001. One additional warehouse
lease was terminated in January 2002. The Company presently rents warehouse
and office space under operating leases that expire through 2005. The
monthly rent is adjusted annually to reflect the average percentage
increase in the Consumer Price Index. An option exists to extend the office
lease, which expires in 2002 for an additional three - year period. Rent
expenses under these leases were $270,000 and $250,000 in 2001 and 2000,
respectively.
Future minimum lease payments on the lease are as follows (thousands):
Year ending December 31,
2002 $ 101
2003 71
2004 71
2005 47
---------
Total $ 290
=========
NOTE J - PREFERRED STOCK
During 2000, the Company issued 3 thousand shares of Preferred Stock Series
A-1 and 2 thousand shares of Preferred Stock Series A-2. Both series are
convertible into common stock as follows: (1) on or before the first
anniversary date, the amount of 85% of the average of the 3 lowest closing
price over the 22 trading days prior to conversion, (2) thereafter and or
before the second anniversary, the amount of 80% of the average of the 3
lowest closing prices over the 22 days prior to conversion, and (3)
thereafter and on or before the day prior to the maturity date, the amount
of 70% of the average of the 3 lowest closing prices over the 45 trading
days prior to conversion. Dividends are cumulative and accrue at 6% per
year and payable on June 30th of each year or on conversion date. Dividends
are payable in cash or in common stock at the Company's option. During 2001
and 2000, shares of preferred stock converted into common stock totaled
1,559 and 920, respectively.
During 2000, the Company recorded a deemed dividend on preferred stock of
$2.5 million. This is a result of the conversion price of the convertible
preferred stock issued during 2000 being less than the market price of the
common stock on the date of the transaction. All deemed dividends related
to the transaction have been recognized during 2000, as the preferred stock
is immediately convertible at the discretion of the holder.
F-15
ZAP (FORMERLY ZAPWORLD.COM) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001 AND 2000
NOTE K - ACQUISITIONS
In October 2000, the Company purchased all the assets of Electric Motorbike
Inc. ("EMB") and assumed certain liabilities. The Company issued 140,000
shares of common stock at $5.68 and paid $100,000 in cash. The purchase
price was allocated to assets acquired based on their estimated fair value.
For 2000, results of operations for EMB have been included with those of
the Company for the periods subsequent to the date of acquisition. In
December 2001, the Company resolved that it did not have the intention to
employ its resources in the production and development of electric
motorbikes in the near term and therefore decided to write down the
goodwill associated with EMB by $764,000.
In July 2000, the Company purchased all the assets of Aquatic Propulsion
Technology, Inc. ("APT") and assumed certain liabilities. The Company
issued 120,000 shares of common stock at $6.05 per share. The purchase
price was allocated to the assets acquired and liabilities assumed based on
their estimated fair values. For 2000, results of operations for APT have
been included with those of the Company for the periods subsequent to the
date of acquisition. At December 31, 2001, the Company wrote-off impaired
goodwill of $771,000 associated with the APT acquisition.
In February 2000, the Company purchased patents and trademark from Electric
Vehicles Systems, Inc. The Company issued 25,000 shares of common stock at
$5.89 per share and $10,000 in cash. The total purchase price of $157,000
was allocated to patents and trademark. Since the Company intends to focus
on its core business and the development of electric vehicles is not
currently envisaged, EVS patents and trademark in the amount of $131,000
have been written-off.
The evaluation of intangible assets for impairment resulted in a loss of
$2,610,000 including the effect of the aforementioned write-offs.
NOTE L - SUBSEQUENT EVENTS
On March 1, 2002 the Company filed a voluntary petition for reorganization
under Chapter 11 of the U. S. Bankruptcy Code with the U.S. Bankruptcy
Court.
On March 28, 2002, the Company announced the signing of an agreement to
merge with two privately owned companies involved in alternate fuels,
automotive sales and distribution businesses. Both of these mergers are
contingent upon the Company's Plan of Reorganization being approved by its
creditors and shareholders and confirmed by the U.S. Bankruptcy Court.
F-16
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
During our two most recent fiscal years our principal independent accountant has
neither resigned (or declined to stand for re-election) nor been dismissed.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
MANAGEMENT
Directors and Management
------------------------
Name Age Position
---- --- --------
Gary Starr 46 Director, Chief Executive Officer
Lee S. Sannella, M.D. 86 Director
Harry R. Kraatz 51 Director
William R. Hartman 54 Chief Financial Officer
Andrew Hutchins 41 Vice President Operations
Joni Arellanes 45 Corporate Secretary
Gary Starr has been a director and executive officer since our inception in
1994, and our Chief Executive Officer since September 1999. Mr. Starr has been
building, designing, and driving electric cars for more than 25 years. In
addition to overseeing the marketing of more than 75,000 electric bicycles and
other electric vehicles, Mr. Starr has invented several solar electric products
and conservation devices. Mr. Starr has a Bachelor of Science Degree from the
University of California, Davis in Environmental Consulting and Advocacy.
Lee Sannella, M.D. has been a director of our company since its inception in
1994. Dr. Sannella has been an active researcher in the fields of alternative
transportation, energy, and medicine for more than 25 years and has been a
founding shareholder in many start-up high technology companies. A graduate of
Yale University, he maintained an active medical practice for many years in
ophthalmology and psychiatry.
Harry R. Kraatz became a director on December 7, 2000. Mr. Kraatz has been the
sole officer and director of The Embarcadero Group II, a company that
specializes in franchise management, financial consulting, and workout
consulting since 1984. In addition to serving as a director of the company, Mr.
Kraatz assumed the positions of Chief Restructuring Officer on March 1, 2002. He
has also been appointed by the United States Bankruptcy Court Southern District
of New York as Liquidating Trustee for Redsky Interactive, Inc. Mr. Kraatz has
also served as chief executive officer for Finet Holdings Corporation (NASD:
FNET). He was retained by Montgomery Medical Ventures to restructure William &
Clarissa, Inc. (NASD: WMCL), where he was responsible for the liquidation of $8
million in inventory and management of the out-of-court reorganization. In 1998
he served as vice-chairman of the board, chief executive officer, and president
of ACA JOE International (NASD: ACAJ), where he was appointed by that company's
secured lenders to reorganize the company pursuant to Chapter 11. Mr. Kraatz has
also served as vice-chairman of the board of Commercial Bank of San Francisco
(NASD: CBSF) and as a director and president of Swensen's Ice Cream Company
(NASD: SWEN). He has also been previously employed by AMOCO Oil Company, he
served as a police officer for the Palos Hills, Illinois Police Department and
as a member of the Marin County Grand Jury. Mr. Kraatz received his degree from
SMSU in 1971.
William R. Hartman was appointed Chief Financial Officer in March 2001. He has
been engaged as a financial consultant at our Company since January 2001. He has
over 15 years of CFO or Controller experience in various industries. While in a
previous position as Division Controller for Sega of America he obtained
extensive experience in the consumer products manufacturing and distribution
business. Prior to his engagement at ZAP, Mr. Hartman had been providing
financial and accounting consulting services to various Internet start-ups in
the SF Bay area. Mr. Hartman is a Certified Public Accountant in the State of
California with a Masters in Accounting Degree from the State University of New
York. He also had previous public accounting experience as an audit manager with
Price Waterhouse Coopers in San Francisco.
Andrew Hutchins was appointed Vice President for Operations of our company in
October 1999. He joined our company in December 1996 and since June 1997 has
been our General Manager. Successful as an entrepreneur, Mr. Hutchins started,
developed and managed a retail bicycle business for 11 years prior to selling it
for several times his initial investment. In 1982, Mr. Hutchins received a
Bachelor of Arts degree with a double major in Business Economics and
Communication Studies from the University of California at Santa Barbara.
Joni Arellenes has been with us since 1998. Currently the Executive
Administrator to the President, Vice President and CEO, Ms. Arellenes was
appointed our Corporate Secretary in December 2000. Prior to joining our
company, Ms. Arellanes was a program administrator for a certified Autodesk
training center program with over 200 locations in the United States and Canada.
Ms. Arellenes holds a Bachelor of Arts degree in Environmental Studies and
Planning from Sonoma State University.
ITEM 10. EXECUTIVE COMPENSATION.
The following tables set forth information concerning the compensation we paid
for services rendered during our fiscal years ended December 31, 2001, 2000 and
1999, by the Named Executive Officers. The Named Executive Officers are our
company's Chief Executive Officer, regardless of compensation level, and the
other executive officers of our company who each received in excess of $100,000
in total annual salary and bonus for the fiscal years ended December 31, 2001,
2000 and 1999. Gary Starr entered into an employment agreement in December,1999
which has been recently extended until December, 2005.
SUMMARY COMPENSATION TABLE
Annual Compensation Long -Term Compensation
Awards Payouts
----------------------- ----------------------
Stock
Other Restricted Underlying All Other
Annual Stock Options LTIP Compen-
Salary Bonus Compensation Award /SARs Payouts sation
Name and Principal Position Year ($) ($) ($) ($) (#) ($) ($)
--------------------------- ---- ------ ----- ------------ ---------- ---------- ------- ------------
Gary Starr 1999 39,500 200 135,000
Chief Executive officer 2000 59,600 700
2001 66,700 700,000
John Dabels 2000 69,000 700
Former President
James McGreen 1999 34,000 200 35,000
Former President
The following table shows all individual grants of stock options to the Named
Executive Officers (as defined above) for the fiscal year ended December 31,
2001.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (INDIVIDUAL GRANTS)
Year Number of % of Total Exercise
Options Securities Underlying Options/SARs Granted to or Base Expiration
Name Granted Options/SARs Granted Employees in Fiscal Year Price ($/Sh) Date
------------------------------------------------------------------------------------------------------------------
Gary Starr 2001 700,000 48 $0.20 12/19/12
COMPENSATION OF DIRECTORS
Our directors do not receive any cash compensation for their service on our
Board of Directors, but they may be reimbursed for certain expenses in
connection with their attendance at board meetings.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table presents information with respect to beneficial ownership of
our Common Stock as of March 28, 2002 by:
o Each person or entity who beneficially owns more than 5% of the Common Stock;
o Each of our directors;
o Each of our Named Executive Officers; and
o All Executive Officers and directors as a group.
Unless otherwise indicated, the address for each person or entity named below is
c/o ZAP, 117 Morris Street, Sebastopol, California 95472. The table includes all
shares of Common Stock issuable upon the exercise of options and other rights
beneficially owned by the indicated stockholders on that date. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Except as indicated by footnote, and except for community
property laws where applicable, the persons named in the table below have sole
voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
The applicable percentage of ownership is based on 41,497,597 shares of Common
Stock outstanding on a fully diluted basis as of March 29, 2002. However, as of
March 29, 2002, the Company only has 20,000,000 shares authorized. The number of
shares of Common Stock outstanding on a fully diluted basis includes 1,941,589
shares of Common Stock issuable upon the exercise of certain warrants and
options to non-employees, 1,445,000 shares of Common Stock issuable upon the
exercise of certain options, and 31,417,365 shares of Common Stock issuable upon
the conversion of shares of our outstanding Series A-1 and A-2 Preferred Stock
into shares of Common Stock. ZAP believes that these conversion rights fall
under an executory contract that will be rejected under ZAP's Plan of
Reorganization, and will be converted to common shares at a different rate.
SHARES BENEFICIALLY OWNED
NAME OF BENEFICIAL OWNER NUMBER PERCENT
The Endeavour Capital Fund, S.A.(1) 23,262,500 56.1
P.O.B. 57116
Jerusalem 91570 Israel
Celeste Trust Reg (2) 4,100,000 7.9
Landstrasse 8
Furstentums 9496
Balzer, Liechtenstein
Esquire Trade & Finance (3) 4,039,662 7.8
P.O.B. 146
Road Town, Tortola
British Virgin Islands
Lee Sannella(4) 217,252 *
Gary Starr(5) 1,005,249 2.4
Harry R. Kraatz (6) 408,571 *
All Executive Officers and directors as a 1,631,072 3.9
group (3 persons)
* Represents beneficial ownership of less than 1%.
(1) Includes 23,262,500 shares of Common Stock issuable upon the conversion of
1,861 shares of Series A-1 and Series A-2 Preferred Stock as of March 29, 2002.
ZAP believes that these conversion rights fall under an executory contract that
will be rejected under ZAP's Plan of Reorganization, and will be converted to
common shares at a different rate.
(2) Includes 4,100,000 shares of Common Stock issuable upon the conversion of
328 shares of Series A-2 Preferred Stock as of March 29,2002. ZAP believes that
these conversion rights fall under an executory contract that will be rejected
under ZAP's Plan of Reorganization, and will be converted to common shares at a
different rate.
(3) Includes 4,039,662 shares of Common Stock issuable upon the conversion of
323 shares of Series A-2 Preferred Stock as of March 29,2002 ZAP believes that
these conversion rights fall under an executory contract that will be rejected
under ZAP's Plan of Reorganization, and will be converted to common shares at a
different rate.
(4) Mr. Sanella is one of our directors, also includes 150,000 shares of common
stock upon the exercise of stock options.
(5) Includes 700,000 shares of Common Stock issuable upon the exercise of stock
options exercisable Mr. Starr is our CEO and a director.
(6) Includes 400,000 shares of Common Stock issuable upon the exercise of stock
options. Mr. Kraatz is one of our directors.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Since our inception in 1994, we have not been a party to any transaction or
series of similar transactions in which the amount involved exceeded or will
exceed $60,000 and in which any director, executive officer or holder of more
than 5% of our Common Stock had or will have an interest, other than as
described under "Management" and the transactions described below.
Harry R. Kraatz, is a member of our Board of Directors. During our year ended
December 31, 2001, A company affiliated with Mr. Kraatz' received $115,000 in
compensation for financial consulting and reorganization services provided to
us. Also, William D. Evers who resigned as a member of our Board of Directors in
March, 2002 and was our principal outside counsel. During the year ended
December 31, 2001, Mr. Evers' law firm received $ 163,000 in compensation for
legal services provided to us.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation of ZAP Power Systems, endorsed and
filed on September 23, 1994. (1)
3.2 Certificate of Amendment to Articles of Incorporation of ZAP
Power Systems, endorsed and filed on November 8, 1996. (2)
3.3 Certificate of Amendment of Articles of Incorporation of ZAP
Power Systems, endorsed and filed on June 2, 1999. (3)
3.4 Certificate of Amendment of Articles of Incorporation of
ZAPWORLD.COM, endorsed and filed June 28, 2000. (4)
3.5 Certificate of Amendment of Articles of Incorporation of
ZAPWORLD.COM, endorsed and filed February 26,2001. (5)
3.6 Amended Bylaws of ZAPWORLD.COM ,dated June 24, 2000. (4)
3.7 Certificate of Determination of Rights and Preferences of the
Series B Convertible Preferred Stock, Endorsed and filed June 26,
2001(5)
3.8 Amended and Restated Certificate of Determination of the rights,
Preferences, Privileges of the Series B Convertible Preferred
Stock, filed on October 2, 2001. (5)
10.1 Settlement Agreement Between ZAPWORLD.COM, Ridgewood ZAP,LLC, and
the Shareholders dated June 27, 2001 (5)
23.1 Consent of Grant Thornton LLP*
--------------------
* Filed herewith.
(1) Filed and endorsed on September 23, 1994. Included as an exhibit to the
Registrant's Annual Report on Form 10-KSB for the year ended December
31,2000
(2) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-KSB for the year ended December 31, 1996.
(1) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-KSB for the year ended December 31, 1999.
(2) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-KSB for the year ended December 31, 2000.
(3) Previously filed with Pre-effective Amendment Number 3 to Form SB-2
registration statement filed with the Securities and Exchange Commission on
October 3, 2001.
REPORTS ON FORM 8-K.
We did not file any reports on Form 8-K during the last quarter of the period
covered by this report. However, on March 01, 2002 we filed a Form 8-K wherein
we reported our filing of a voluntary petition for reorganization under Chapter
11 of the U.S. Bankruptcy Code.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ZAP
(REGISTRANT)
BY /S/ GARY STARR
-------------------------------------
(GARY STARR, CHIEF EXECUTIVE OFFICER)
DATE April 5, 2002
-------------------------------------
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Gary Starr Director / CEO April 5, 2002
------------------------
/s/ William R. Hartman CFO April 5, 2002
------------------------
/s/ Harry R. Kraatz Director April 5, 2002
------------------------
/s/ Lee Sannella Director April 5, 2002
------------------------