-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IjC2LnyWhIih9pzr0OflVdMswuiEqTk6hbfJn5Akal2Le7q4rR6Ol2orzxVwxjTy XooEyaTq9mzpwlKFwU8IMg== 0000950005-99-000358.txt : 19990415 0000950005-99-000358.hdr.sgml : 19990415 ACCESSION NUMBER: 0000950005-99-000358 CONFORMED SUBMISSION TYPE: 10KSB40 PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZAP POWER SYSTEMS INC CENTRAL INDEX KEY: 0001024628 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600] IRS NUMBER: 943210624 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB40 SEC ACT: SEC FILE NUMBER: 333-05744-LA FILM NUMBER: 99593854 BUSINESS ADDRESS: STREET 1: 117 MORRIS ST CITY: SEBASTOBOL STATE: CA ZIP: 95472 BUSINESS PHONE: 7078244150 MAIL ADDRESS: STREET 1: 117 MORRIS ST CITY: STBASTOPOL STATE: CA ZIP: 95472 10KSB40 1 FORM 10KSB40 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------- Form 10-KSB ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ----------------------------- For the fiscal year ended December 31, 1998 ZAP POWER SYSTEMS (Name of small business issuer in its charter) CALIFORNIA 94-3210624 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 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: None 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. Yes X No State issuer's revenues for its most recent fiscal year. $3,518,600 The aggregate market value of the Company's voting common stock held by non-affiliates as of March 30, 1999, based on the average Bid and Ask price on that date was $12,123,380. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 3,494,924 shares of common stock as of March 30, 1999. ================================================================================ 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 of Financial Condition and Results of Operations 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 and Certain Beneficial Owners and Management Item 12. Certain Relationships and Related Transactions Item 13. Exhibits and Reports on Form 8-K Part I Item 1. Description of Business The information on Form 10-KSB and the documents incorporated herein by reference contain forward-looking statements based on current expectations, estimates and projections about the Company's industry, management's beliefs and certain assumptions made by management. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Forward Looking Statements." A. Business Development ZAP Power Systems (the "Company" or "ZAP") was incorporated under the laws of the state of California, on September 23, 1994. At its Sebastopol facilities, the Company designs, assembles, manufactures and distributes electric bicycle power kits, electric bicycles and tricycles, electric scooters, and other electric transportation vehicles. The Company 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 in the electric transportation industry. On February 10, 1998, NASD cleared ZAP Power Systems' common stock for quotation on the OTC Bulletin Board under the symbol "ZAPP". 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 from a foreign private entity and from domestic government agencies. These contracts were set up to develop low cost Zero Air Pollution (or ZAP) type electric vehicles. Now the Company is focusing on the manufacturing and distribution of these electric vehicle products. During the first quarter of 1998, the Company introduced a new line of electric scooter known as the ZAPPY(TM). The product accounted for over 38% of net sales for the year. Throughout 1998, ZAP continued to increase its emphasis on the overseas market with approximately 21% of its sales being generated from foreign entities. 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(TM) scooter (Patent #5,848,660). A Trademark for the name "ZAP" was issued to James McGreen on September 28, 1993 and assigned to the Company on September 23, 1994. B. Business of Issuer The Company manufactures an electric motor system that 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 the 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(TM), which is manufactured by the Company, using parts manufactured by various subcontractors. The Company is an U.S. distributor of the Electricycle(TM) scooter that is imported from China and is a distributor of an electric motorcycle. The Company manufactures several electric motor kits that have up to 62 unique parts. The electric motor kit manufacturing and installation of the motor systems to the bicycles is done at its Sebastopol location. The electric motors are purchased from an original equipment manufacturer (OEM) in the auto and air-conditioning industry. The Company is using one company for its motors, although there are other companies that could be used with slight modifications to the motor support brackets. The batteries are standard batteries used in the computer industry for power interrupt systems. The electronic system uses standard electronic components. The Company has a contractual relationship with Smith & Wesson who provides the Company with Law Enforcement Bicycles. The Company has agreed to purchase at least 250 bikes from Smith & Wesson in exchange for specific exclusive distribution and pricing rights. The Company has no other contractual agreements with any of its other vendors. 3 The electric bicycle industry has four (4) major manufacturers and a large group of small manufacturers. The major manufacturers are Honda, Suzuki, Sanyo and Yamaha. They mainly sell products into Japan and China. 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. The Company does not consider electric bicycle industry sales numbers very accurate at this point in time. As such the Company's position in terms of global sales volumes is not readily determinable, however the Company believes it currently holds leading electric bicycle market position in the United States. Item 2. Description of Property The Company leases its manufacturing and office facilities, consisting of 9,500 square feet, at 111 & 117 Morris Street, Sebastopol, CA. The Company's property consists primarily of manufacturing equipment, and office computer systems. The aggregate monthly lease payments total $6,614.40 per month. The landlords are Daniel O. Davis and Robbin H. Davis. It is management's opinion that the Company's insurance policies cover all insurance requirements of the landlord. The Leases on both properties expire on June 1, 2001. Each has a renewal option for one additional three-year period. The Company owns the basic tools, machinery, and equipment necessary for the conduct of its production, research and development, and vehicle prototyping activities. As of December 31, 1998, the Company has 45 full-time and 11 part-time employees. Most of the employees work at the Company's Sebastopol, California locations except for one employee who travels throughout California seeking sales opportunities. Item 3. Legal Proceedings The company has become aware that a company named Omni under the leadership of an individual named Joseph Stevenson has been advertising and selling an electric system for bicycles called EROS (electric regenerative operating system). The Company's management, in consultation with patent counsel, has determined after analysis that the EROS system infringes the Company's patents and has filed suit against EROS. Although the Company believes its claims are meritorious and the patents for the ZAP system are valid, it is possible, as in any suit, that the Company may be unable to prove infringement or that Mr. Stevenson may establish, either in litigation or in a re-examination proceeding before the Patent Office that the Company's patents are not valid. If the Company's patents are held to be invalid, the Company's ability to prevent competitors from manufacturing or selling bicycles with the patented system will be significantly reduced. The loss of the patents or a significant damage award against the Company could have a material adverse effect upon the business and financial condition and prospects of the Company. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of stockholders of the Company during the fourth quarter of the Company's 1998 year. Part II Item 5. Market for Common Equity and Related Stockholder Matters In January of 1998, the Company commenced its second direct public offering of its Common Stock, offering for sale 500,000 shares at $6.00 per share. On March 11, 1998, the Company's Common Stock commenced trading on the OTC Bulletin Board under the stock symbol "ZAPP". During 1998, the Company sold 78,847 shares and received $381,986 in proceeds. The offering was closed in January, 1999. Additionally in 1998, the Company 1) realized $15,000 in proceeds from the exercise of stock options and issued 15,000 shares, 2) converted $14,317 in notes payable and accrued interest into 2,727 shares ($5.25 per share) and, 3) issued 25,136 shares in payment for current and future services at an average price per share of $5.98. 4 Prior to the completion of the second direct public offering in January of 1999, the Company sold 400 shares and realized gross proceeds of $2,400. Additionally in 1999, the Company 1) issued 268 shares in payment for current and future services at a price of $6.00 per share, and 2) realized $18,000 in proceeds from the exercise of stock options and issued 45,000 shares. On March 30, 1999, ZAP completed a private placement of 678,808 shares of its common stock at a price of $3.02 per share and realized net proceeds of $1,852,500, (See Note J to the Accompanying Financial Statements). In addition, the Company converted $212,000 of its remaining debt into equity and issued 70,199 common shares. As of December 31, 1998 the Company had 1,930 holders of the common stock. Item 6. Management's Discussion and Analysis of Plan of Financial Condition and Results of Operations. Overview The Company designs, assembles, manufactures and distributes electric bicycle power kits, electric bicycles and tricycles, electric scooters, and other electric transportation vehicles. Historically, unit sales have been approximately 50% kits, 30% electric bicycles, and 20% electric scooters. Dollar sales have been 30% kits, 35% electric bicycles, and 35% electric scooters. The Company sells its electric bicycles, kits and scooters to internet and retail customers, international distributors, law enforcement agencies, electric utility companies, bicycle dealerships, motorcycle dealers, and mail order catalogs. The Company sells to the mail order catalogs and selected customers on credit with net 30-day, 45-day, or 60-day terms. Some of these accounts are factored with a local bank. Many of the smaller dealerships are sold cash on delivery. The internet and retail sales are primarily paid for with a credit card or personal check before shipment of the product. The Company's growth strategy is to increase net sales by increasing distribution channels through its website at zapbikes.com, retail organizations and wholesale distributors both domestically and overseas as well as setting up Company outlet and Franchise stores to assist in the retail sales arena. In March, 1999, ZAP received payment for a franchise store in Hollywood, FL and a deposit for a franchise store in Key West, FL. The Company intends to continue to increase its production capability to meet the increasing demand for its product. The Company also plans to continue to develop the products with the goal of being the low cost leader in the industry. Product improvements, new product introductions, and the expansion of the ZAP electric outlet franchise network are continuing to enlarge ZAP's presence in the electric vehicle industry. Results of Operations Year Ended December 31, 1997 Compared to Year Ended December 31, 1998 Net sales for the year ended December 31, 1998 were $3,518,600 compared to $1,640,200 in the prior year, an increase of $1,878,400 or 115%. The increase in sales was primarily due to the Company's introduction of the ZAPPY(TM) scooter that accounted for $1,369,600 or 39% of total sales. Additionally, international sales of bicycles and kits, including the new single speed low cost motor system for 1998 increased $520,500 over 1997 levels as new dealers acquired interest in selling ZAP products overseas. During the year ended December 31, 1998, $617,000 in sales, representing 18% of total sales, was with one customer. In 1997, a different single customer accounted for 26% of the Company's net sales. Gross profit. Gross profit increased as a percentage of net sales, to 32% from 22%. The total gross profit increased $761,800 or 208%. The increase in gross profit dollars can principally be attributed to the gross margins realized on the sales of the new ZAPPY(TM)scooter. Total gross profit for the ZAPPY(TM) scooter was $421,300. The increase in gross margin percentage was the result of greater cost controls and improved efficiencies in the manufacturing process of all products for the year ended December 31, 1998 as compared to the year ended December 31, 1997. Direct materials were 58% of net sales for the year ended December 31, 1998 as compared to 70% of net sales for the year ended December 31, 1997. Selling. Selling expenses in 1998 were $967,700. This was an increase of $334,700 or 53% from 1997 to 1998. As a percentage of sales, selling expenses decreased from 39% of sales to 28% of sales. Costs increased as a result of additional personnel being added to the sales force, increased promotion through the internet, a print media campaign, and added marketing efforts overseas. 5 General and administrative expenses for 1998 were $979,200. This is an increase of $158,800 or 19% over 1997. As a percentage of sales, general and administrative expense decreased from 50% to 28% of net sales. Expense increases during 1998 as compared to 1997 occurred due to added personnel in the administrative and accounting areas. Additionally, a consultant was enlisted to assist with obtaining additional equity funding. Research and development decreased $43,500 or 18% from 1997 to 1998. As a percentage of net sales it decreased from 15% to 6% respectively. Extensive efforts in developing the ZAPPY(TM) scooter and single speed low-cost motor system resulted in higher research and development costs in 1997 that were not duplicated in 1998. Other income (expense). Interest expense increased to $100,300 in 1998, an increase of $15,500 over 1997. This increase can primarily be attributed to the amortization of the fair value of warrants issued to an investment banker for securing equity financing for the company. Year Ended December 31, 1996 Compared to Year Ended December 31, 1997 Net sales for the year ended December 31, 1997 were $1,640,200 compared to $1,170,900 in the prior year, an increase of $469,300 or 40%. The increase in sales is attributed to an increased demand for complete electric bicycles, electric motor kits, and scooters. Much of the increase was in dealer and international sales. During the year ended December 31, 1997, $430,000 in sales representing 26% of total net sales were with one customer. The company ceased selling products to this customer in late 1997 and is not expected to have any material sales to this customer in 1998. The loss of this one customer is not expected to have a material adverse affect on the company's results of operations in future periods. In 1996, no one customer accounted for 10% of more of the company's net sales. Gross profit. Gross profit decreased as a percentage of net sales, from 26% to 22%. Early year liquidation of 1996 models and up-front costs incurred in developing the new ZAPPY(TM) scooter resulted in a lower gross-margin percentage. The total gross profit increased $57,300 or 19% due to the increase in net sales from 1996 to 1997. Selling. Selling expenses in 1997 were $633,000. This was an increase of $156,200 or 33% from 1996 to 1997. As a percentage of sales, selling expenses decreased from 41% of sales to 39% of sales. This was due to an increase in sales dollars as well as a reduction in marketing efforts towards auto dealerships and other dealer outlets. There was minimal change in sales and marketing personnel. General and administrative expense. General and administrative expenses in 1997 were $820,400. This was an increase of $265,600 or 48% from 1996 to 1997. As a percentage of net sales, General and Administrative expenses increased from 47% in 1996 to 50% in 1997. This result was due to added employees in General and Administrative areas and administrative supplies. Research and development expense. Research and development expenses in 1997 were $246,100, an increase of 145,700 or 145% from 1996 to 1997. As a percentage of sales, research and development expenses increased from 9% to 15% respectively. These increases were due to the heightened efforts in developing the new ZAPPY(TM) Scooter, the single speed lower cost motor-system for bicycles, and a low cost "Z-Bike" for overseas markets. Also, additional patents were filed. In 1997, the increase in funds available for research resulting from the Company's Direct Public Offering also contributed to the increase in research and development expenses in 1997 over 1996 levels. Other income (expense). Interest expense increased to $84,800 in 1997, an increase of $73,400 over 1996. The increase can be attributed to 1) the amortization of the fair value of warrants issued in connection with previous debt financings of $56,300 and, 2) the increase in interest expense on outstanding loans in 1997 of approximately $17,000. Such increase results from the loans being outstanding for a longer time period in 1997 as compared to 1996. 6 Liquidity and Capital Resources The Company used cash from operations of $1,307,400 and $1,263,000 during the years ended December 31, 1998 and 1997 respectively. Cash used in operations in 1998 was the result of the net loss incurred for the year of $1,109,400, offset by net non-cash expenses of $255,300, and the net change in operating assets and liabilities resulting in a further use of cash of $453,300. Cash used in operations in 1997 was the result of the net loss incurred for the year of $1,409,300, offset by non-cash expenses of $231,200, and the net change in operating assets and liabilities resulting in a further use of cash of $84,900. Investing activities used cash of $161,900 and $143,500 during the years ended December 31, 1998 and 1997 respectively. The uses of cash were for the purchase of fixed assets and additional capitalized patent costs. Financing activities provided cash of $1,254,100 and $1,935,400 during the years ended December 31, 1998 and 1997 respectively. In both years, the cash provided by financing activities resulted from the sales of common stock and issuance of notes payable, $1,280,800 and $2,037,300 for the years ended December 31, 1998 and 1997 respectively, offset by principal payments on outstanding debt. At December 31, 1998 the Company had cash and cash equivalents of $475,300 as compared to $690,500 at December 31, 1997. At December 31, 1998, the Company had working capital of $128,600, as compared to working capital of $726,800 at December 31, 1997. The decrease in cash and cash equivalents is primarily due to losses from operations. The decrease in working capital is due to the short-term liability on the outstanding notes payable. The Company, at present, does not have a credit facility in place with a bank or other financial institution. The Company has established an accounts receivable facility that is guaranteed by the U.S. Exim Bank. The Company believes that the cash and cash equivalents on hand at December 31, 1998, along with the equity financing received in March 1999 of $1,852,500 from the sale of 678,808 shares of common stock will be sufficient to allow the Company to continue its expected level of operations for at least 12 months. The Company's primary capital needs are to fund its growth strategy, which includes increasing its internet shopping mall presence, increasing distribution channels, establish company owned and franchised ZAP stores, introducing new products, improving existing product lines and development of strong corporate infrastructure. Dates following December 31, 1999 and beyond (the "Year 2000 Problem") Many existing computer systems and applications, and other devices, use only two digits to identify a year in the date field, without considering the impact of the upcoming change in the century. Such systems and applications could fail or create erroneous results unless corrected. The Company relies on its internal financial systems and external systems of business enterprises such as customers, suppliers, creditors, and financial organizations both domestically and globally, directly and indirectly for accurate exchange of data. The Company has evaluated such systems and has taken the appropriate steps that it believes address the concerns of the Year 2000 Problem. However, even though the internal systems of the Company are not materially affected by the Year 2000 issue the Company could be affected through disruption in the operation of the enterprises with which the Company interacts. Seasonality and Quarterly Results The Company's business is subject to seasonality influences. Sales volumes in the bicycle industry typically slow down during the winter months, November to March. Inflation The Company's raw materials are sourced from stable cost competitive industries. As such the Company does not foresee any material inflationary trends for its raw material sources. 7 Item 7 FINANCIAL STATEMENTS C O N T E N T S Page ---- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.............................3 FINANCIAL STATEMENTS Balance Sheet.............................................................4 Statements of Operations..................................................5 Statement of Stockholders' Equity.........................................6 Statements of Cash Flows..................................................7 Notes to Financial Statements.............................................9 Report of Independent Certified Public Accountants To the Board of Directors ZAP Power Systems We have audited the accompanying balance sheet of ZAP Power Systems as of December 31, 1998, and the related statements of operations, stockholders' equity and cash flows for each of the years in the two year period ended December 31, 1998. 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 generally accepted auditing standards. Those standards require that we plan and perform the audits 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 our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ZAP Power Systems as of December 31, 1998, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 1998, in conformity with generally accepted accounting principles. GRANT THORNTON LLP San Jose, California February 26, 1999, except for Note J, as to which the date is March 30, 1999 3 ZAP Power Systems BALANCE SHEET December 31, 1998 ASSETS
CURRENT ASSETS Cash $ 475,300 Accounts receivable, net of allowance for doubtful accounts of $35,000 283,800 Inventories 633,900 Prepaid expenses and other assets 97,800 ------------- Total current assets 1,490,800 PROPERTY AND EQUIPMENT - NET 177,000 OTHER ASSETS Intangibles, net of accumulated amortization of $7,800 80,000 Deposits 11,900 ------------- 91,900 ------------- $ 1,759,700 Total assets ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 334,200 Accrued liabilities and customer deposits 150,700 Notes payable, net of unamortized discount of $30,900 867,000 Current maturities of obligations under capital leases 10,300 ------------- Total current liabilities 1,362,200 OTHER LIABILITIES Long-term debt 11,200 Obligations under capital leases, less current maturities 600 ------------- 11,800 STOCKHOLDERS' EQUITY Common stock, no par value; 10,000,000 shares authorized, 2,664,700 shares issued and outstanding 3,731,800 (3,346,100) Accumulated deficit ------------- 385,700 ------------- $ 1,759,700 ============= Total liabilities and stockholders' equity The accompanying notes are an integral part of this statement.
4 ZAP Power Systems STATEMENTS OF OPERATIONS Years ended December 31,
1998 1997 ---- ---- NET SALES $ 3,518,600 $ 1,640,200 COST OF GOODS SOLD 2,391,300 1,274,700 ----------- ----------- GROSS PROFIT 1,127,300 365,500 OPERATING EXPENSES Selling 967,700 633,000 General and administrative 979,200 820,400 Research and development 202,600 246,100 ----------- ----------- 2,149,500 1,699,500 ----------- ----------- LOSS FROM OPERATIONS (1,022,200) (1,334,000) OTHER INCOME (EXPENSE) Interest expense (100,300) (84,800) Miscellaneous 13,900 11,100 ----------- ----------- (86,400) (73,700) ----------- ----------- LOSS BEFORE INCOME TAXES (1,108,600) (1,407,700) PROVISION FOR INCOME TAXES 800 1,600 ----------- ----------- NET LOSS $(1,109,400) $(1,409,300) =========== =========== NET LOSS PER COMMON SHARE Basic and diluted $ (0.42) $ (0.62) =========== =========== WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING 2,614,563 2,289,165 =========== =========== The accompanying notes are an integral part of these statements.
5 ZAP Power Systems STATEMENT OF STOCKHOLDERS' EQUITY Years ended December 31, 1998 and 1997
Common Stock Accumulated Shares Amount Deficit Total ------ ------ ------- ----- Balance, January 1, 1997 2,076,500 $ 1,019,200 $ (906,800) $ 112,400 Issuance of common stock in connection with direct public offering at $5.25 per share, net of expenses of $188,400 415,100 1,990,900 -- 1,990,900 Exercise of stock options 21,600 12,600 -- 12,600 Conversion of notes payable and accrued interest into common stock at $5.25 per share 14,800 77,800 -- 77,800 Recission of shares issued to joint venture (5,000) (26,300) -- (26,300) Stock issued for current and future services 19,700 94,700 -- 94,700 Net loss -- -- (1,409,300) (1,409,300) ----------- ----------- ----------- ----------- Balance, December 31, 1997 2,542,700 3,168,900 (2,316,100) 852,800 Issuance of common stock in connection with direct public offering at $6 per share, net of expenses of $91,000 78,800 383,300 -- 383,300 Fair value of stock options granted to non-employees -- -- 17,600 17,600 Exercise of stock options 15,000 15,000 -- 15,000 Conversion of notes payable and accrued interest into common stock at $5.25 2,700 14,300 -- 14,300 Issuance of warrants in connection with debt placement -- -- 61,800 61,800 Stock issued for current and future services 25,500 150,300 -- 150,300 Net loss -- -- (1,109,400) (1,109,400) ----------- ----------- ----------- ----------- Balance, December 31, 1998 2,664,700 3,731,800 $(3,346,100) $ 385,700 =========== =========== =========== =========== The accompanying notes are an integral part of this statement.
6 ZAP Power Systems STATEMENTS OF CASH FLOWS Years ended December 31,
1998 1997 ---- ---- Cash flows from operating activities: Net loss $(1,109,400) $(1,409,300) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 86,500 67,700 Allowance for doubtful accounts (30,000) (11,400) Issuance of common stock for services rendered 150,300 92,400 Issuance of stock options for services rendered 17,600 -- Loss on abandonment of subsidiary -- 26,200 Amortization of fair value of warrants 30,900 56,300 Changes in: Receivables (192,100) (49,400) Inventories (366,600) (20,700) Prepaid expenses and other (32,200) (4,100) Deposits 1,600 2,000 Accounts payable 172,600 (139,600) Accrued liabilities and customer deposits (36,600) 126,900 ----------- ----------- Net cash used in operating activities (1,307,400) (1,263,000) Cash flows from investing activities: Purchases of equipment (97,800) (128,600) Patent costs capitalized (64,100) (14,900) ----------- ----------- Net cash used in investing activities (161,900) (143,500) Cash flows from financing activities: Proceeds from issuance of notes payable 882,500 33,800 Sale of common stock, net of stock offering costs 398,300 2,003,500 Principal repayments on notes payable (10,700) (98,800) Payments on obligations under capital leases (16,000) (13,100) Cash restricted to payment of certain notes payable -- 10,000 ----------- ----------- Net cash provided by financing activities 1,254,100 1,935,400 ----------- ----------- NET INCREASE/(DECREASE) IN CASH (215,200) 528,900 Cash, beginning of year 690,500 161,600 ----------- ----------- Cash, end of year $ 475,300 $ 690,500 =========== =========== The accompanying notes are an integral part of these statements.
7 ZAP Power Systems STATEMENTS OF CASH FLOWS Years ended December 31,
1998 1997 ----- ---- Supplemental cash flow information: Cash paid during the year for: Interest $ 69,400 $ 84,763 Income taxes 800 1,600 Non-cash investing and financing activities: Conversion of notes payable and accrued interest into common stock 14,300 77,800 Stock issued for current and future services 150,300 94,700 Stock issued (cancelled) to joint venture -- (26,300) The accompanying notes are an integral part of these statements.
8 ZAP Power Systems NOTES TO FINANCIAL STATEMENTS December 31, 1998 and 1997 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ZAP Power Systems, ("ZAP"), was incorporated in California in September, 1994. ZAP 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. 1. 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. 2. 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 7 years Equipment under capital leases 5 years Demonstration bicycles 2 years Office furniture and equipment 7 years Vehicle 5 years Leasehold improvements 15 years or life of lease, whichever is shorter 3. Intangibles Intangibles consist of costs expended to perfect certain patents and are amortized over an estimated useful life of ten years. 4. Income Taxes The Company accounts for income taxes using an asset and liability approach for financial accounting and reporting purposes. 5. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles 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. 9 ZAP Power Systems NOTES TO FINANCIAL STATEMENTS December 31, 1998 and 1997 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 6. Fair Value of Financial Instruments The Company measures its financial assets and liabilities in accordance with generally accepted accounting principles. 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 carrying amount of the bank note payable and current notes payable approximate fair value as current interest rates available to the Company for similar debt are approximately the same. The fair value of related party notes payable is impracticable to determine. 7. Net Loss Per Common Share Net loss per common share, basic and dilutive, has been computed using weighted average common shares outstanding. The effect of outstanding stock options and warrants has been excluded from the dilutive computation as their inclusion would be anti-dilutive. NOTE B - INVENTORIES Inventories consist of the following at December 31, 1998: Raw materials $ 442,100 Work-in-process 104,100 Finished goods 87,700 ----------- $ 633,900 =========== NOTE C - PROPERTY AND EQUIPMENT Property and equipment consist of the following at December 31, 1998: Machinery and equipment $ 81,600 Equipment under capital leases 45,900 Demonstration bicycles 89,600 Office furniture and equipment 76,000 Leasehold improvements 25,400 Vehicle 56,200 374,700 Less accumulated depreciation and amortization 197,700 ----------- $ 177,000 =========== 10 ZAP Power Systems NOTES TO FINANCIAL STATEMENTS December 31, 1998 and 1997 NOTE D - NOTES PAYABLE Unsecured notes to stockholders, with interest at 12%; due on demand. The noteholders have been issued warrants to purchase, in the aggregate, 2,500 shares of common stock at $5.25 per share through October, 1999. $ 32,800 Unsecured note to a stockholder, with interest at 10%; principal and interest is due when the notes mature in December 1999. The noteholder has been issued warrants to purchase 11,400 shares of common stock at $5.25 per share through December 1999. 60,000 Notes secured by inventory, with interest at 12%, due March, 1999. Notes are convertible into common stock at $3.02 per share through March, 1999. 800,000 Less fair value of unamortized cost of warrants issued in connection with the debt (30,900) --------- 769,100 Note to bank, with interest at 3.9%, principal and interest due in monthly installments through January 2002. 16,300 --------- 878,200 Less current portion 867,000 --------- Long-term debt $ 11,200 ========= NOTE E - CAPITAL LEASES Minimum future lease payments under capital lease obligations for computer and other equipment are as follows: Year ending December 31, 1999 $ 10,900 2000 900 ----------- Total minimum lease payments 11,800 Less amounts representing interest 900 ----------- Present value of minimum lease payments 10,900 Less current maturities 10,300 ----------- $ 600 =========== 11 ZAP Power Systems NOTES TO FINANCIAL STATEMENTS December 31, 1998 and 1997 NOTE F - PROVISION FOR INCOME TAXES 1998 1997 ----------- ----------- Current tax expense Federal $ -- $ -- State 800 1,600 ----------- ----------- $ 800 $ 1,600 =========== =========== Deferred tax assets (liabilities) Federal tax loss carryforward $ 1,037,100 $ 695,000 State tax loss carryforward 177,200 132,600 ----------- ----------- 1,214,300 827,600 Less valuation allowance (1,214,300) (827,600) ----------- ----------- Net deferred tax asset $ -- $ -- =========== =========== The Company has available for carryforward approximately $3,050,300 and $1,998,000 of federal and state net operating losses, respectively, expiring through 2012. 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. 12 ZAP Power Systems NOTES TO FINANCIAL STATEMENTS December 31, 1998 and 1997 NOTE G - STOCK OPTIONS AND WARRANTS Options to purchase common stock are granted by the Board of Directors under two Stock Option Plans, referred to as the 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 1996 and 1995 Plans are 600,000 and 750,000, respectively. Options are granted at no less than fair market value on the date of grant, become exercisable as they vest over a two year period, and expire ten years after the date of grant. Options totaling 832,117 shares were vested under both plans at December 31, 1998. Option activity under the two plans is as follows:
1996 Plan 1995 Plan ---------------------- ---------------------- Weighted Weighted Average Average Number of Exercise Number of Exercise Shares Price Shares Price ------ ----- ------ ----- Outstanding at December 31, 1996 501,000 $1.00 678,000 $ 0.55 Granted 110,500 $4.39 -- $ 0.40 Exercised (7,300) $1.00 (15,000) $ 0.40 Canceled (174,700) $1.13 (216,700) $ 0.55 -------- -------- Outstanding at December 31, 1997 429,500 $1.70 446,300 $ 0.56 Granted 102,800 $4.65 -- -- Exercised (15,000) $1.00 -- -- Canceled (26,500) $1.48 (27,400) $ 0.40 -------- -------- Outstanding at December 31, 1998 490,800 $2.35 418,900 $ 0.56 ======== ========
The weighted average fair value of options granted during the years ending December 31, 1998 and 1997 was $3.66 and $3.23, respectively. The following information applies to options outstanding at December 31, 1998:
Range of exercise prices $.40 - 1.00 $3.68 - 5.25 ----------- ------------ Options outstanding 722,900 186,800 Weighted average exercise price $.75 $4.55 Weighted average remaining contractual life (years) 7 8 Options exercisable 722,900 109,175 Weighted average exercise price $.75 $4.64
13 ZAP Power Systems NOTES TO FINANCIAL STATEMENTS December 31, 1998 and 1997 NOTE G - STOCK OPTIONS AND WARRANTS (continued) 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 1998 and 1997. 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: 1998 1997 ------------- ------------- Net loss - as reported $ (1,109,400) $ (1,409,300) Net loss - pro forma (1,254,600) (1,696,300) Loss per share - as reported (.42) (.62) Loss per share - pro forma (.48) (.73) 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: 1998 1997 ---------- ----------- Dividends None None Expected volatility 100% 30% Risk free interest rate 6.00% 6.38% Expected life 10 years 10 years In connection with the issuance of $800,000 of notes payable in 1998, the Company issued 20,000 warrants at $4.00 per share, to purchase the Company's common stock, to an entity that assisted the Company in arranging the financing. The warrants are immediately exercisable and expire September, 2001. The fair value of warrants at the time of issuance was $61,800 and is being amortized as additional interest expense over the term of the debt. During 1998, $30,900 was amortized to operations. NOTE H - CONCENTRATIONS During 1998, one customer accounted for $617,000 or 17.5% of the Company's net sales. The loss of this customer is not expected to have a material impact on the Company's financial position and results of operations for the coming year. During 1997, one customer accounted for $430,000 or 26% of the Company's net sales. The Company ceased selling to this customer in late 1997 and did not have any material sales to this customer in 1998. 14 ZAP Power Systems NOTES TO FINANCIAL STATEMENTS December 31, 1998 and 1997 NOTE I - COMMITMENT The Company leases warehouse and office space under two operating leases that expire in June, 2001. The aggregate monthly rent is $6,600 and is adjusted annually to reflect the average percentage increase in the Consumer Price Index. An option exists to extend each lease for an additional three year period. Rent expense under these leases were $79,400 and $52,800 in 1998 and 1997, respectively. Future minimum lease payments on the lease are as follows: Year ending December 31, ------------------------ 1999 $ 79,000 2000 79,000 2001 65,400 -------- Total $224,200 NOTE J - SUBSEQUENT EVENTS On March 30, 1999, the Company completed a private placement of its common stock with Ridgewood ZAP, LLC ("Ridgewood"), a Deleware limited liability company managed by Ridgewood Power Corporation. The Company sold to Ridgewood 678,808 shares of common stock at a price of $3.02 per share. Net cash proceeds to the Company were $1,852,500, net of underwriting fees and expenses paid of $197,500. In addition to the underwriting fees paid, the Company issued, in aggregate, 35,596 shares of common stock to two entities who assisted in the private placement. In addition, the Company has granted Ridgewood an option to acquire an additional $2,000,000 of common stock at any time up through December 31, 1999. The price per share upon exercise would be 85% of the average closing price of the stock for the 20-day period prior to the exercise date, subject to minimum and maximum per share prices of $3.50 and $4.50, respectively. If, during the option period, the Company meets certain financial milestones, as defined in the agreement, the Company can require Ridgewood to exercise the option to purchase the full $2,000,000 of common stock using the per share formula described above. As of March 30, 1999, the Company has converted $212,000 of its remaining debt into 70,199 shares of common stock. 15 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not Applicable Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act. MANAGEMENT Name Age Position ---- --- -------- Gary Starr 43 Managing Director James McGreen 45 President and Director Andrew Hutchins 38 General Manager Sanford Theodore 35 Controller Jessalyn Nash 39 Director Lee S. Sannella, M.D. 83 Director Nancy K. Cadigan 40 Director and Secretary Richard Balzhiser 66 Member, Advisory Board Hal Larson 74 Member, Advisory Board Jack Guy 66 Member, Advisory Board Gary Starr is Managing Director of the Company. He has been building and driving electric cars for more than 20 years. In addition to overseeing the marketing of more than 20,000 electric bicycles and vehicles, Mr. Starr has invented several solar electric products and conservation devices. Mr. Starr founded U.S. Electricar's electric vehicle operation in 1983. That Company recently signed a licensing agreement with Hyundai. In 1993, Mr. Starr earned a Private Industry Council Recognition Award for creating job opportunities in the EV industry and was named as one of the ten most influential electric car authorities by Automotive News. More recently, he was honored by the American Lung Association of San Francisco with a Clean Air Award in Technology and was recognized by U.S. Senator Barbara Boxer for his contribution towards clean air. Mr. Starr has several publications: Electric Cars: Your Guide to Clean Motoring, The Shocking Truth of Electric Cars, and The True Cost of Oil. In addition, he has appeared on more than 300 radio and television talk and news shows (including Larry King Live, The Today Show, Inside Edition, CNN Headline News, Prime Time Live, and the CBS Evening News and the McNeil Lehrer News Hour) as a recognized authority in the field of electric vehicles. James McGreen, President, has over 25 years experience in design, development, engineering, manufacturing and marketing. He has brought over 100 successful consumer products from conception to the mass market. He has been a pioneer in the ultralight aircraft, personal watercraft, and motorcycle racing fields. He is the founder and/or former president of Protopipe Exhaust Systems, Inc., McGreen Metalworking, Kanemoto Racing and McGreen Development. His commitment to electric transportation began in 1991 with successful competition in Electrathon racing. He holds several records and winning times for this lightweight electric vehicle class. He has been a racer of motorcycles and has built motor parts, frames, chassis and other specialty parts for both manufacturers and other racers. Mr. McGreen has also designed and built composite racing sailboats. A skilled machinist, welder, and tool and die maker, he has designed and built nearly every kind of lightweight motorized vehicle. A prolific inventor, McGreen has been awarded three patents, in the resource conservation and transportation fields. He also managed the World Championship team that won the World Solar Bicycle Races, in Akita, Japan in 1995. In 1996, McGreen was selected as an honored member of the Who's Who of American Inventors for his positive impact on society. 8 Andrew Hutchins, General Manager has been involved in the retail bicycle industry since he was 11 years old, when he worked for his family's retail bicycle shop. He successfully started, managed, and operated a retail bicycle store for 11 years prior to selling it for several times his initial investment. He has also worked in the insurance industry for three years and served on the Transportation advisory board for the city of Rohnert Park. Mr. Hutchins received a degree in Business Economics and Communication Studies from the University of California at Santa Barbara in 1982. Sanford Theodore, Controller has been involved in various financial and accounting positions for over 11 years. Well versed with computerized accounting and auditing processes, he has worked with Optical Coating Laboratory, Western Dairy Products, and Blue Cross. Mr. Theodore received a bachelor's degree in Business Administration from San Diego State University in 1985 and a certificate for Human Resource Management from Sonoma State University in 1996. Jessalyn Nash, Masters in Business, is an environmental and business consultant to rapid growth entrepreneurial companies. She has specialized in marketing, distributor relations and sales programs. Ms. Nash previously held positions with NeXT, Inc. and in National Sales and Marketing with Apple Computer, Inc. Ms. Nash has been an environmental advocate for over 20 years. She has operated her consulting business since 1989. Lee Sannella, M.D. has been an active researcher in the fields of alternative transportation, energy and medicine for more than 25 years. Dr. Sannella has been a founding shareholder in many start up high tech companies. He was a Director of U.S. Electricar from 1983 to 1992. A graduate of Yale University, he maintained an active medical practice for many years in ophthalmology and psychiatry. He worked with the Sonoma Medical Society on improving radiation standards and is a best-selling author. He has served on advisory boards of the City of Petaluma, California, on the Board of Directors of the San Andreas Health Council of Palo Alto, the Veritas Foundation of San Francisco, and the AESOP Institute. Nancy K. Cadigan assisted Jim McGreen in managing McGreen Development, the research organization that developed the original ZAP Power System. She has broad experience in sales, trade show events, and office management. With an educational background in Recreation and Leisure, Ms. Cadigan has worked in public and commercial recreation for more than twenty years. She has also worked on women's health issues and has counseled women in crisis situations. She has conducted public education classes on recycling, reuse and composting practices. Currently, Ms. Cadigan is involved in organic farming. In all of her work, she looks for environmentally sound solutions to ordinary problems and has been a strong advocate of the ZAP mission since its inception. In the past five years she has worked for the Oakland Parks and Recreation Department (1990-92), Alameda Waste Management Authority (1992-93), Urban Ore (1993-94), McGreen Development (1994), ZAP Power Systems (1994-present), and Women's Health Specialists (1995-present). Advisory Board Dr. Richard E. Balzhiser, President Emeritus of the Electric Power Research Institute (EPRI) served as President and CEO of EPRI from 1988-1996. He joined EPRI in 1973 at the time of its founding after serving as Deputy Director for Energy and Environment in the White House Office of Science and Technology. Dr. Balzhiser currently serves on the Houston Industries and Electrosource Boards as well as Advisory boards to Mobil, MIT, University of Michigan and the University of Wisconsin. He is chairing committees for the World Bank and World Energy Council. Dr. Balzhiser earned his Ph.D. from the University of Wisconsin. Hal Larson was the Executive Creative Director for the advertising agency Tatham, Laird & Kudner. He has been responsible for the advertising for Kraft Cheese, Sears, Quaker, 7-UP, and Oscar Meyer. He also served as Creative Director of J. Walter Thompson and West Coast Creative Director of Cunningham & Walsh. Mr. Larson has directed advertising for the Republican National Committee and has written several books and lectured at several Universities. Mr. Larson earned his B.S. degree from the University of Oregon and his M.S. degree from Boston University. Jack Guy has been employed by the Electric Power Research Institute (EPRI) since 1974. He is responsible for commercializing EPRI's new products and technologies in Electric Transportation. From 1956 to 1974, Mr. Guy was a manager for General Electric Co. Mr. Guy has also served as a special agent for the U.S. Army Counterintelligence Corps. 9 Indemnification of Directors and Officers The Company's Articles of Incorporation provide that the liability of the directors for monetary damages shall be limited to the fullest extent permissible under California law. Insofar as indemnification for liabilities arising under the federal securities laws may be permitted to directors, officers and controlling persons of the Company pursuant to that provision, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in those laws and is, therefore, unenforceable. Director Term of Office and Compensation All directors' terms of office expire at the next annual meeting of shareholders. The Company's directors do not receive any cash compensation for their service on the Board of Directors, but directors may be reimbursed for certain expenses in connection with their attendance at Board meetings. Item 10. EXECUTIVE COMPENSATION Summary Compensation Table
Long Term Compensation ---------------------- Annual Compensation Awards Payouts --------------------------------------------------------------------------------- (a) (b) (c) (d) (e) (f) (g) (h) (I) Other Rest- Secur- Name Annual ricted ities All other and Compen- Stock Underlying LTIP Compensa- Principal Salary Bonus sation Award(s) Options/ Payouts tion Position Year ($) ($) ($) ($) SARs (#) ($) ($) - ----------------------------------------------------------------------------------------------------------------- Gary Starr 1994 $ 0 Managing 1995 $21,000 72,000 Director 1996 $31,000 $3,750 60,000 1997 $35,000 $2,250 1998 $35,700 James McGreen 1994 $ 0 President 1995 $33,000 72,000 1996 $33,000 $3,750 60,000 1997 $38,000 $2,250 1998 $37,500
Option/SAR Grants in Last Fiscal Year Individual Grants
- ---------------------------------------------------------------------------------------------------------- (a) (b) (c) (d) (e) Number of % of Total securities Options/SARs Underlying Granted to Exercise Options/SARs Employees or Base Name Granted (#) in Fiscal Year Price ($/sh) Expiration Date - ---- ----------- -------------- ------------ --------------- None
10 Item 11. Security Ownership and Certain Beneficial Owners and Management The following table sets forth certain information known to the Company regarding the beneficial ownership of the Company's Common Stock as of March 30, 1999 for each shareholder known by the Company to own beneficially 5% or more of the outstanding shares of its Common Stock, and all directors and executive officers as a group. The Company believes that the beneficial owners of the Common Stock listed below, based on information furnished by them, have sole investment and voting power with respect to their shares, subject to community property laws where applicable. Shares Beneficially Percentage of Common Shares 5% Shareholders: Owned at March 30, 1999 --------------------------------------------------------------------------- James McGreen 584,950(1) 16.6% Gary Starr 432,078(1) 12.4% Ridgewood ZAP, LLC 1,202,368(2) 29.9% All directors and executive officers as a group (3 & 4) 1,177,611 30.3% (1) Includes 132,000 shares of Common Stock issuable upon exercise of currently exercisable incentive stock options. (2) Includes 523,560 shares of issuable upon exercise of a currently exercisable option to purchase $2,000,000 of common stock at $3.82 per share. (3) Includes 264,000 shares of Common Stock issuable upon exercise of currently exercisable incentive stock options. (4) Includes 10,000 shares of Common Stock issuable upon exercise of currently exercisable incentive stock options. 11 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 POWER SYSTEMS _________________________________________ (Registrant) By ________________________________________ Gary Starr - Managing Director & Chief Financial Officer Date ________________________________________ 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. By ________________________________________ James McGreen - President and Director Date ________________________________________ By ________________________________________ Nancy K. Cadigan - Secretary and Director Date ________________________________________ By ________________________________________ Sanford Theodore - Principal Accounting Officer and Controller Date ________________________________________ 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ZAP POWER SYSTEMS FOR THE YEAR ENDED DECEMBER 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 475,300 0 318,800 (35,000) 633,900 1,490,800 374,700 197,700 1,759,700 1,362,200 11,800 0 0 3,731,800 (3,346,100) 1,759,700 3,518,600 3,518,600 2,391,300 2,391,300 2,149,500 100,300 100,300 (1,108,600) 800 (1,109,400) 0 0 0 (1,109,400) (0.42) (0.42)
EX-99 3 SUBSEQUENT EVENTS 99. Additional Exhibits - Subsequent events On March 30, 1999, the Company completed a private placement of its common stock with Ridgewood ZAP, LLC ("Ridgewood"), a Delaware limited liability company managed by Ridgewood Power Corporation. The Company sold to Ridgewood 678,808 shares of common stock at a price of $3.02 per share. Net cash proceeds to the Company were $1,852,500, net of underwriting fees and expenses paid of $197,500. In addition to the underwriting fees paid, the Company issued, in aggregate, 35,596 shares of common stock to two entities who assisted in the private placement. In addition, the Company has granted Ridgewood an option to acquire an additional $2,000,000 of common stock at any time up through December 31, 1999. The price per share upon exercise would be 85% of the average closing price of the stock for the 20-day period prior to the exercise date, subject to minimum and maximum per share prices of $3.50 and $4.50, respectively. If, during the option period, the Company meets certain financial milestones, as defined in the agreement, the Company can require Ridgewood to exercise the option to purchase the full $2,000,000 of common stock using the per share pricing formula described above. As of March 30, 1999, the company has converted $212,000 of its remaining debt into 70,199 shares of common stock. -----END PRIVACY-ENHANCED MESSAGE-----