-----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, MW8cW1eqgTNf+XbEkIp95M7IpLj/hzd+VMbL468TBtTiEb72JgUTblRhyfmSh5w8 ERzjImo+nGsXdiIQ6msA/A== 0000950005-97-000513.txt : 19970514 0000950005-97-000513.hdr.sgml : 19970514 ACCESSION NUMBER: 0000950005-97-000513 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: NONE 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 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 333-05744-LA FILM NUMBER: 97601923 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 10QSB 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 -------------- [ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number 333-05744-LA ------------ ZAP POWER SYSTEMS - -------------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) CALIFORNIA 94-3210624 - ------------------------------- --------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 117 Morris Street, Sebastopol, California 95472 - -------------------------------------------------------------------------------- (Address of principal executive offices) (707) 824-4150 - --------------------------- (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 --- (APPLICABLE ONLY TO CORPORATE ISSUERS) State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 2,200,196 shares of common stock as of March 31, 1997 ----------------------------------------------------- Transitional Small Business Disclosure Format Yes [ ] No [x] Part I. FINANCIAL INFORMATION Item 1. Financial Statements ZAP POWER SYSTEMS CONDENSED BALANCE SHEETS (Unaudited)
March 31, 1997 1996 - --------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash $ 169,300 $ 72,300 Receivables 112,900 38,500 Inventories 253,100 76,800 Prepaid expenses and other assets 114,300 ----------- ----------- Total current assets 649,600 187,600 ----------- ----------- PROPERTY AND EQUIPMENT 114,400 71,600 ----------- ----------- OTHER ASSETS Investment in joint venture 57,500 Cash restricted to payment of long-term debt 50,000 Intangibles, net of accumulated amortization of $1,860 and $967, respectively 7,000 8,000 Deposits 22,700 6,000 ----------- ----------- 137,200 14,000 ----------- ----------- Total assets $ 901,200 $ 273,200 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 275,000 $ 108,300 Accrued liabilities and other expenses 17,400 7,800 Notes payable 179,363 55,400 Current maturities of long-term debt 14,337 Current maturities of obligations under capital leases 9,600 ----------- ----------- Total current liabilities 495,700 171,500 ----------- ----------- OTHER LIABILITIES Obligations under capital leases, less current maturities 23,700 ----------- ----------- STOCKHOLDERS' EQUITY Common stock, no par value; 10,000,000 and 3,000,000 shares authorized, 2,200,196 and 1,644,384 shares issued and outstanding, respectively 1,582,000 250,200 Accumulated deficit (1,200,200) (148,500) ----------- ----------- 381,800 101,700 ----------- ----------- Total liabilities and stockholders' equity $ 901,200 $ 273,200 =========== =========== The accompanying notes are an integral part of these financial statements
2 ZAP POWER SYSTEMS CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three months ended March 31, 1997 1996 - -------------------------------------------------------------------------------- NET SALES $ 257,900 $ 203,800 COST OF GOODS SOLD 221,800 112,800 ----------- ----------- GROSS PROFIT 36,100 91,000 ----------- ----------- OPERATING EXPENSES Selling 92,800 86,700 General and administrative 176,200 90,400 Research and development 49,000 12,400 ----------- ----------- 318,000 189,500 ----------- ----------- LOSS FROM OPERATIONS (281,900) (98,500) ----------- ----------- OTHER INCOME (EXPENSE) Interest expense (8,900) Other (2,600) 2,900 ----------- ----------- (11,500) 2,900 ----------- ----------- LOSS BEFORE INCOME TAXES (293,400) (95,600) PROVISION FOR INCOME TAXES -- -- ----------- ----------- NET LOSS $ (293,400) $ (95,600) NET LOSS PER COMMON SHARE $ (0.14) $ (0.06) =========== =========== WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING 2,146,500 1,600,000 =========== =========== The accompanying notes are an integral part of these financial statements 3 ZAP POWER SYSTEMS CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Three months ended March 31, 1997 1996 - --------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(293,400) $ (95,600) Adjustments to reconcile net loss to net cash used by operating activities Depreciation and amortization 12,700 7,400 Allowance for doubtful accounts 5,300 1,300 Issuance of common stock for services rendered 15,700 25,000 Changes in: Receivables (57,300) (9,100) Inventories (2,800) (18,400) Prepaid expenses 1,200 Deposits (7,600) Accounts payable (32,600) 14,100 Accrued liabilities and other expenses (42,200) (4,800) --------- --------- Net cash used by operating activities (401,000) (80,100) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of equipment (30,400) (4,800) Investment in subsidiaries (5,000) --------- --------- Net cash used by investing activities (35,400) (4,800) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes payable 30,000 58,400 Increase in restricted cash (40,000) Sale of common stock, net of stock offering costs 547,100 51,900 Principal repayments on long-term debt (3,000) Payments on obligations under capital leases (3,000) Principal repayments on note payable (87,000) 25,000 --------- --------- Net cash provided by financing activities 444,100 135,300 --------- --------- NET INCREASE IN CASH 7,700 50,500 CASH, beginning of period 161,600 21,800 --------- --------- CASH, end of period $ 169,300 $ 72,300 ========= ========= The accompanying notes are an integral part of these financial statements
4 ZAP POWER SYSTEMS NOTES TO THE INTERIM UNAUDITED CONDENSED FINANCIAL STATEMENTS (1) Basis of Presentation The financial statements included in this Form 10-QSB have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed, or omitted, pursuant to such rules and regulations, although management believes the disclosures are adequate to make the information presented not misleading. The results of operations for any interim period are not necessarily indicative of results for a full year. These statements should be read in conjunction with the financial statements and related notes included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1996. The financial statements presented herein as of March 31, 1997 and for the three months ended March 31, 1997 and 1996 reflect, in the opinion of management, all material adjustments consisting only of normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flow for the interim periods. The net loss per common share is based on the weighted average number of common shares outstanding in each period. Common stock equivalents associated with stock options have been excluded from the weighted average shares outstanding since the effect of these potentially dilutive securities would be antidilutive. (2) - RECEIVABLES March 31, 1997 1996 ---- ---- Trade accounts receivable $ 134,200 $ 47,500 Less allowance for doubtful accounts (21,300) (9,000) ------------- ------------- $ 112,900 $ 38,500 ============= ============== (3) - INVENTORIES March 31, 1997 1996 ---- ---- Raw materials $ 190,000 $ 47,000 Work-in-process 41,900 11,500 Finished goods 21,200 18,300 ------------- ------------- $ 253,100 $ 76,800 ============= ============== (4) - PROPERTY AND EQUIPMENT March 31, 1997 1996 ---- ---- Demonstration bicycles $ 50,800 $ 17,700 Machinery and equipment 44,800 33,300 Equipment under capital leases 42,100 - Office furniture and fixtures 22,500 15,400 Computers 13,100 13,200 Leasehold improvements 6,900 6,600 Vehicle 4,300 - ----------- ------------ 184,500 86,200 Less accumulated depreciation and amortization (70,100) (14,600) ----------- ------------ $ 114,400 $ 71,600 =========== ============ 5 (5) - NOTES PAYABLE March 31, 1997 1996 ----------- ----------- Notes to stockholders, with interest at 12%; interest and principal due when the notes mature in November and December, 1997; the Company is allocating 50% of the proceeds received from the Company's Direct Public Offering towards repayment of the loans until fully repaid; the note holders have been issued warrants to purchase, in the aggregate, 28,800 shares of common stock at $5.25 per share through October, 1999. $ 144,000 $ - Notes to a stockholder, with interest at 10%; principal and interest is due when the notes mature in December, 1997; unsecured 35,363 45,400 Notes, with interest at 10%; principal and interest is due when the notes mature in January and February, 1997; unsecured 5,000 Note, with interest at 10%; the note was converted to 3,000 shares of common stock in 1996 5,000 ----------- ---------- $ 179,363 $ 55,400 =========== =========== (6) - COMMON STOCK In November 1996, the Company began offering for sale, directly to the public, 500,000 shares of common stock at $5.25 per share. The net proceeds from the sale are to be used to retire certain debt, increase manufacturing capacity, and provide working capital for new product development and general purposes. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Special Note Regarding Forward-Looking Statements Certain statements in this Form 10-QSB, including information set forth under this Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "ACT"). ZAP Power Systems (the "Company") desires to avail itself of certain "safe harbor" provisions of the Act and is therefore including this special note to enable the Company to do so. Forward-looking statements included in this Form 10-QSB or hereafter included in other publicly available documents filed with the Securities and Exchange Commission, reports to the Company's stockholders and other publicly available statements issued or released by the Company involve known and unknown risks, uncertainties, and other factors which could cause the Company's actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward looking statements. Such future results are based upon management's best estimates based upon current conditions and the most recent results of operations. Overview The Company designs, assembles, manufactures and distributes electric bicycle power kits, electric bicycles and tricycles, and other low-power electric transportation vehicles. Historically, unit sales have been approximately 65% kits and 35% electric bicycles. Dollar sales have been 50% kits and 50% electric bicycles. 6 The Company sells its electric bicycles and kits to retail customers, police departments, electric utility companies, bicycle dealerships and mail order catalogs. Net revenue is net of returns. The Company sells to the mail order catalogs and selected customers on credit with net 30 day terms. Many of the bicycle dealerships are sold cash on delivery. The retail sales are primarily paid for with a credit card or personal check before shipment of the product. The Company manufactures an electric motor system that is sold as a kit to be installed by the customer on their own bicycle. The Company also installs the motor system on bicycles which the Company buys. The Company then sells the complete electric bicycle to the customer. The Company purchases complete bicycles from various bicycle manufacturers for use with the Company's electric motor system. The Company manufactures the electric motor kit, which has approximately 62 unique parts. The manufacturing of the electric motor kit and the 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 vendor 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 electric motor kits and electric bicycles sold by ZAP are usually shipped by U.P.S. and Federal Express. Larger quantity orders to wholesale distributors are shipped common carrier. The Company has developed long term purchase arrangements with its key vendors. The Company has no contractual relationships with any of its vendors. The Company recently began selling an electric scooter manufactured by an Italian company through a joint marketing agreement where they have rights to sell the Company's products in Italy and Austria, and the Company has the right to sell their product in Northern America. Subsequent to this agreement the company has sold approximately 40 units. The Company as of March 31,1997 had a $322,000 sales backlog. The company expects to fill these orders within the next 60 days. The Company's growth strategy is to increase net sales by augmenting its marketing and sales force, and by increasing distribution channels through retail organizations and wholesale distributors both domestically and overseas. The Company will continue to increase its production capability to meet the increasing demand for its product. The Company will continue to develop the product so that it is the low cost leader in the industry. Product improvements and new product introductions will continue to enlarge ZAP's presence in the electric vehicle industry. Results of Operations The following table sets forth, as a percentage of net sales, certain items included in the Company's Income Statements (see Financial Statements and Notes) for the periods indicated: Three months ended March 31, 1997 1996 ---- ---- Statements of Income Data: Net sales............................. 100.00% 100.00% Cost of sales......................... 86.00 55.35 Gross profit (Loss)................... 14.00 44.65 Operating expenses................... 123.00 92.98 Loss from operations.................. (109.00) (48.33) Other income (expense)............... (4.50) 1.42 Loss before income taxes.............. (113.50) (46.91) Provision for income taxes............ 0.00 0.00 Net loss.............................. (113.50) (46.91) 7 Quarter Ended March 31, 1996 Compared to Quarter Ended March 31, 1997 Net sales for the quarter ended March 31, 1997, were $257,900 compared to $203,800 in the prior year, an increase of $54,100 or 27%. The increase in sales is attributed to the Company's development of distributor sales and the increased retail sales from year end clearance programs the company executed to sell off the 1996 models in January 1997. Gross profit (loss). Gross profit decreased as a percentage of net sales, from 45% to 14%. The total gross profit decreased $54,900 or 60%. The year end clearance in the 1st quarter 1997 and the subsequent price reduction of the 1997 models is the primary reason for the decrease. The transition to the new 1997 model resulted in lower production volumes and associated higher initial production costs in the 1st quarter of 1997. Selling expenses in the quarter ended March 1997 were $92,800. This was an increase of $6,100 or 7% from 1996 to 1997. As a percentage of sales, selling expenses decreased from 43% of sales to 36% of sales. This was due to a decrease in marketing to auto dealerships and an increase in direct retail sales and other dealer outlets as compared to the 1996 period. General and administrative expenses for the quarter ended March 31, 1997 were $176,200. This is an increase of $85,800 or 95% from 1996. As a percentage of sales, general and administrative expense increased from 44% to 68% of net sales. Expense increases during the 1st quarter of 1997 as compared to the 1st quarter of 1996 resulted from the expenses of the implementation of computer systems, and increased accounting, auditing and administration expense to support the Company's public offering and the increase in sales activity. Research and development increased $36,600 or 295% from the 1st quarter of 1996 as compared to the 1st quarter of 1997. As a percentage of net sales it increased to 19% of sales in the 1st quarter of 1997 as compared to 6% of sales in the 1st quarter of 1996. The expense increase in the 1st quarter of 1997 was related to the electric scooter products that will be introduced in the second half of 1997. Other income (expense) decreased $14,400 or 497% from the 1st quarter of 1996 to 1997. This decrease was due to interest expense increasing $8,900 in the first quarter of 1997 as compared to the first quarter of 1996. Liquidity and Capital Resources In the first quarter of 1997 the Company had a cash deficit of $401,000 from operations as compared to a cash deficit of $80,000 in the first quarter of 1996. In order to meet all of the Company's operating expenses the Company relied on the sales of common stock and issuing notes payable. In the first quarter of 1997 the Company raised a total of $547,100 from common stock sales and $30,000 from the issuance of notes payable. In the first quarter of 1996 the Company raised $51,900 from stock sales and $83,400 from the issuance of notes payable. The Company was cleared by the SEC to sell public shares on November 29, 1996. The funds received from this direct public offering in the first quarter of 1997 were utilized to pay down accounts payable and accrued expenses and to pay the Company's operating expenses. At March 31, 1996 and 1997, the Company had a working capital of $16,100 and $158,600 respectively. As of March 31, 1997, the Company had total current assets of $649,600, including cash of $169,300 unrestricted, accounts receivable of $112,900, inventories of $253,100, and prepaid expenses of $114,300. The Company's current liabilities as of March 31,1997 were $491,000, including accounts payable and accrued expenses of $292,400, notes payable of $179,363 and $19,237 of current maturity of long-term debt and leases. The balance of notes payable issued in November and December of 1996 in the amount of $144,000 had preferential repayment rights of the public stock offering proceeds. The notes are due in November and December of 1997. These note holders were also granted a total of 37,800 warrants. The proceeds from this placement went to fund increased inventory levels, accounts receivables, capital expenditures and the Company's public stock offering expenses. The balance of notes payable $35,363, were unsecured notes with an interest rate of 10%. This note is due in December of 1997. 8 The Company had net cash provided by financing activities of $135,200 for the Quarter ended March 31, 1996, and $444,100 for the quarter ended March 31, 1997. Net cash provided by financing activities for the quarter ended March 31, 1996 was from notes payable proceeds of $58,400, a bank loan of $25,000, and sale of common stock of $51,900. Net cash provided by financing activities for the quarter ended March 31,1997 was $30,000 from notes payable, $547,100 from the sale of common stock, less $93,000 of repayments of notes payable, bank debt and lease obligations. The bank loan with Wells Fargo Bank, (March 1996), had an initial principal balance of $25,000 amortized over 2 years at an interest rate of 15%. The note, with a balance of $14,337 as of March 31, 1997, will be paid off March of 1998. The equipment lease is with AT&T Credit Corporation, (July 1996), and had an initial balance of $43,076 with monthly payments of $1,186 for three years. The Company's primary capital needs are to fund its growth strategy, which includes increasing its net sales, increasing distribution channels, introducing new products, improving existing product lines and development of strong corporate infrastructure. Recent Accounting Pronouncements During October 1995, the Financial Accounting Standards Board issued Statement No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), which established a fair value-based method of accounting for stock-based compensation plans. The Company is currently following the requirements of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Seasonality and Quarterly Results The Company's business is subject to seasonal influences similar to the bike industry. Sales volumes in the bicycle industry typically slow down during the winter months, November to March, in the U.S. 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. PART II - OTHER INFORMATION Item 1. Legal Proceedings There were no material proceedings pending in which the Registrant was named as a party. Item 2. Changes in Securities There were no changes in rights of securities holders. Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities. Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to the vote of security holders. Item 5. Other Information There were no major contracts signed during the period. Item 6. Exhibits and Reports on Form 8-K No reports on Form 8-K were filed during the quarter. 9 SIGNATURES In accordance with the requirements 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) Date ______________________ ______________________________________________ Gary Starr - Managing Director Date ______________________ ______________________________________________ James McGreen - President and Director Date ______________________ ______________________________________________ David Workman - Vice President of Operations, Chief Financial Officer, and Principal Accounting Officer 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ZAP POWER SYSTEMS FOR THE THREE MONTHS ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1997 MAR-31-1997 169,300 0 134,200 (21,300) 253,100 649,600 184,500 (70,100) 901,200 495,700 23,700 1,582,000 0 0 (1,200,200) 381,800 257,900 257,900 221,800 221,800 293,900 5,300 8,900 (293,400) 0 (293,400) 0 0 0 (293,400) (0.14) 0.00
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