-----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, Tw2aDcwiBNHvPvfHreiWnecIR4dlLsJsIDBFvb2wNU6Has/OHVdDTPco79lrrH/5 DeB/F2TZdz//ZeGNYRj3TA== 0001072613-02-001269.txt : 20020813 0001072613-02-001269.hdr.sgml : 20020813 20020813161459 ACCESSION NUMBER: 0001072613-02-001269 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZAP CENTRAL INDEX KEY: 0001024628 STANDARD INDUSTRIAL CLASSIFICATION: MOTORCYCLES, BICYCLES & PARTS [3751] IRS NUMBER: 943210624 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-30300 FILM NUMBER: 02729902 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 FORMER COMPANY: FORMER CONFORMED NAME: ZAP POWER SYSTEMS INC DATE OF NAME CHANGE: 19970319 FORMER COMPANY: FORMER CONFORMED NAME: ZAPWORLD COM DATE OF NAME CHANGE: 19990715 10QSB 1 form10-qsb_11422.txt FORM 10-QSB FOR QUARTER ENDED JUNE 30, 2002 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------------- FORM 10-QSB QUARTERLY REPORT PURSUANT SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ----------------------------- For the quarterly period ended June 30, 2002 Commission File Number 0-303000 ZAP ---------------------------------------------- (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 Check 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 [_] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 5,725,815 shares of common stock as of August 9, 2002. Transitional Small Business Disclosure Format Yes [_] No [X] ================================================================================ PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ZAP CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (IN THOUSANDS) June 30, 2002 - ----------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash $ 348 Accounts receivable, net of allowance for doubtful accounts of $654 216 Inventories 1,269 Prepaid expenses and other assets 88 ---------- Total current assets 1,921 ---------- PROPERTY AND EQUIPMENT, net of accumulated depreciation of $752 342 ---------- OTHER ASSETS Patents & Trademarks 274 Goodwill 100 Deposits and other 89 ---------- Total other assets 463 ---------- Total assets $ 2,726 ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 50 Accrued liabilities and other expenses 177 Current maturities of long-term debt 119 Current maturities of obligations under capital leases 10 ---------- Total current liabilities 356 ---------- OTHER LIABILITIES Long-Term Debt, less current maturities 235 Obligations under capital leases, less current maturities 25 ---------- Total other liabilities 260 ---------- Stockholders' Equity Preferred stock, authorized 50,000 shares of no par -- Common stock, authorized 100,000 shares of no par value; issued and outstanding 3,015 shares 18,296 Accumulated deficit (16,186) ---------- Total stockholders' equity 2,110 ---------- Total liabilities and stockholders' equity $ 2,726 ========== See accompanying notes to consolidated financial statements 2 ZAP CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (THOUSANDS, EXCEPT SHARE AMOUNTS)
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, -------------------------- -------------------------- 2002 2001 2002 2001 - -------------------------------------------------------------------------------------------------------------- NET SALES $ 360 $ 940 $ 780 $ 2,953 COST OF GOODS SOLD 226 1,376 540 2,918 ---------- ---------- ---------- ---------- GROSS PROFIT (LOSS) 134 (436) 240 35 OPERATING EXPENSES Selling 66 306 133 732 General and administrative 574 1,078 1,116 2,210 Research and development 13 141 30 360 ---------- ---------- ---------- ---------- 653 1,525 1,279 3,302 ---------- ---------- ---------- ---------- LOSS FROM OPERATIONS BEFORE REORGANIZATION ITEMS AND EXTRAORDINARY GAIN (519) (1,961) (1,039) (3,267) ---------- ---------- ---------- ---------- OTHER INCOME (EXPENSE) Interest income (expense) 5 23 (10) 34 Other income (expense) 13 (15) 27 (4) ---------- ---------- ---------- ---------- 18 8 17 30 ---------- ---------- ---------- ---------- LOSS BEFORE REORGANIZATION ITEMS AND EXTRAORDINARY GAIN (501) (1,953) (1,022) (3,237) REORGANIZATION ITEMS: Professional fees 126 -- 165 -- Provision to rejected executory contracts 31 -- 31 -- ---------- ---------- ---------- ---------- 157 -- 196 -- ---------- ---------- ---------- ---------- NET LOSS BEFORE PREFERRED DIVIDEND AND EXTRAORDINARY GAIN (658) (1,953) (1,218) (3,237) Preferred dividend (48) (105) ---------- ---------- ---------- ---------- LOSS BEFORE EXTRAORDINARY GAIN (658) (2,001) (1,218) (3,342) EXTRAORDINARY GAIN ON FORGIVENESS OF DEBT (NOTE 2) 4,058 -- 4,058 -- ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ 3,400 $ (2,001) $ 2,840 $ (3,342) ========== ========== ========== ========== NET LOSS PER COMMON SHARE BASIC AND DILUTED RESTATED FOR REVERSE STOCK SPLIT(NOTE 4) Loss per share before extraordinary gain $ (0.54) $ (1.88) $ (1.24) $ (3.25) Extraordinary gain (Note 2) 3.36 -- 4.14 -- ---------- ---------- ---------- ---------- Net gain (loss) per share-basic and diluted $ 2.82 $ (1.88) $ 2.90 $ (3.25) ========== ========== ========== ========== WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING BASIC AND DILUTED 1,206 1,062 980 1,028 ---------- ---------- ---------- ----------
See accompanying notes to condensed consolidated financial statements 3 ZAP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, -------------------------- 2002 2001 - ----------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 2,840 $ (3,237) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 123 341 Reorganization items, net 196 -- Extraordinary gain on forgiveness of debt (4,058) Allowance for doubtful accounts 121 77 Amortization of the fair market value of warrants -- 27 Changes in: Receivables 248 720 Inventories 134 (405) Deposits (19) -- Prepaid expenses and other assets 102 410 Accounts payable 100 422 Accrued liabilities and customer deposits (245) (565) ---------- ---------- Net cash used in operating activities (458) (2,210) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITES Purchase of equipment (5) (105) Purchase of Patents and intangibles -- (17) Investment in joint venture (47) -- ---------- ---------- Net cash used for investing activities (52) (122) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Sale of common stock, net of stock offering costs 28 5 Draw on convertible promissory note 4 Principal repayments on long-term debt -- (3) Payments on obligations under capital leases (17) (4) ---------- ---------- Net cash provided by(used for) financing activities 15 (2) ---------- ---------- NET DECREASE IN CASH (494) (2,334) CASH, beginning of period 842 3,543 ---------- ---------- CASH, end of period $ 348 $ 1,209 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the six months for interest $ 15 $ 27 Non-cash investing and financing activities Debt issued to repurchase common stock $ 1,500 $ --
See accompanying notes to consolidated financial statements. 4 ZAP NOTES TO THE INTERIM UNAUDITED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The financial statements included in this Form 10-QSB have been prepared by us, without audit. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, 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, 2001. The financial statements presented herein, for the three and six months ended June 30, 2002 and 2001 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 Company did not meet the requirements to utilize fresh start reporting. Therefore, in accordance with Statement of Position 90-7:"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code," our liabilities compromised by the confirmed plan of reorganization have been stated at the present value of the amounts to be paid, reorganization expenses have been separately disclosed and the forgiveness of debt has been reported as an extraordinary item in the condensed consolidated financial statements. (2) PLAN OF REORGANIZATION 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 believed that the Chapter 11 filing would allow the Company to reorganize and rethink its direction, and to seek debtor-in-possession financing. On June 20, 2002,the Bankruptcy Court entered an order (the " Confirmation Order") confirming the Debtors' Second Amended Plan of Reorganization (the "Plan"). The primary objectives of the Plan are to: (a) alter the Debtor's equity and debt structures to permit the Debtor to emerge from the reorganization proceedings with a viable capital structures; (b) maximize the value of the ultimate recoveries to all creditor groups on a fair and equitable basis; and (c) settle, compromise, or otherwise dispose of certain claims and interests on terms that the Debtors believe to be fair and reasonable and in the best interests of their respective estates, creditors, and stakeholders. The Plan provides for, among other things: o the cancellation of certain indebtedness in exchange for cash, common stock, no par value, in Reorganized ZAP (as defined below) (the "new Common Stock"), which will then be reversed split on a 2:1 basis, and/or warrants to purchase shares of New Common Stock (the "New Warrants"). The warrants will be issued to each claimant by August 20, 2002. o the claimant of secured pre-petition debt will be paid $50,000, the estimated value of the collateral, plus 5% interest on a declining balance, payable monthly over three years, commencing 60 days following June 20, 2002; o ZAP's Preferred Stock of 2,250 shares, originally valued at $1,000 per share will be converted to 1,260,000 shares of common stock in Reorganized ZAP, which will then be reversed split on a 2:1 basis. Thus, the former Preferred Shareholders' will receive approximately 630,000 of common stock in the reorganized ZAP, after the split. The Preferred Shareholders' will also receive 2.5 million Series A Warrants vested in accordance with the schedule as outlined in the Plan and one Warrant in Series B, C and D to purchase common stock in the Reorganized ZAP for each common share issued to the claimant; 5 o ZAP's common stock of 6,693,643 shares will be converted to 2,231,214 shares of common stock in the Reorganized ZAP, which will then be reversed split on a 2:1 basis. The final result of the conversion and the reverse split equates to 6:1 or in other words for every six shares a common stockholder held on June 20, 2002 (ZAP's Plan of Reorganization Date) the individual will receive one share of common stock in the Reorganized ZAP. The Common Shareholders' will also receive one Warrant in Series B, C and D to purchase common stock in the Reorganized ZAP for each common share issued to the claimant, o the effective date of the reverse split shall be July 15, 2002 or as soon as the Board of Directors can set a date; The Board of Directors of ZAP set the effective date of July 1, 2002 for the reverse split. o the assumption and assignment, or rejection of executory contract or unexpired leases to which the debtor is a party; o authorization to issue 100 million shares of common stock and 50 million shares of preferred stock. o the authority to issue 10 million each for the following Warrants: A, B, C, D and K for a total of 50 million warrants, the expiration date for the warrants range from 12 to 36 months; o the creation of an Incentive Stock Option Plan for employees within the meaning of Section 423 of the Internal Revenue of 1986, as amended, the Plan will have options to purchase 10 million shares of New ZAP common stock at an exercise price equal to the closing price on date options are granted; o temporary appointment of certain new members to the Board of Directors, pending election at the first annual stockholders' meeting; o the authority to execute a $500,000 of convertible debenture to purchase inventory from a new supplier with interest payable at 6% per annum or may be converted to common stock at $.50 per share, or 15 % of the issued shares of the Reorganized ZAP. An option will also be given to the supplier to purchase one Warrant in Series B, C and D for each common share owned; o to authorize the completion of the proposed acquisition of Voltage Vehicles and RAP Group, Inc effective July 1, 2002. These Companies will become wholly owned subsidiaries of ZAP through the purchase from the equity Shareholders of Voltage Vehicles and RAP Group, Inc. all of the shares of these businesses in exchange for the lesser of 49% of the issued shares to any new equity shareholders or 4,500,000 (post-split) 500,000 to Voltage Vehicles and 4,000,000 to Rap group, Inc. The equity shareholders' will also receive one Warrant in Series B, C, D and K to purchase common stock in the Reorganized ZAP for each common share issued to Voltage Vehicles and RAP Group, Inc. EXTRAORDINARY GAIN ON FORGIVENESS OF DEBT Under ZAP's approved Plan of reorganization, Ridgewood ZAP, LLC agreed to convert approximately $3 million in long-term debt due to Ridgewood ZAP, LLC to common stock. This transaction resulted in the Company recognizing an extraordinary gain of approximately $2.9 million. The remainder of the extraordinary gain or $1.1 million was due to the cancellation of the unsecured creditor's indebtedness as outlined previous. Also, in accordance with ZAP's plan of reorganization, some unsecured creditors have elected to receive stock rather than cash for their claims. The plan also provides for a twelve-month period following June 20, 2002 for the unsecured creditors to still elect to receive equity. The Company will issue any stock and warrants for the equity elections by August 20,2002. Those unsecured creditors that elected to receive cash, will share in a fund of $300,000 which is payable over three years, with each creditor receiving their pro-rata share. 6 The Risks Related to Our Business includes, 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 The net loss per common share is based on the weighted average number of common shares outstanding in each period. Potential dilutive securities associated with stock options and warrants have been excluded from the weighted average shares outstanding since the effect of these securities would be anti-dilutive. See note 4 below for reverse stock split and restatement of per share amounts. (3) PRINCIPLES OF CONSOLIDATION The accounts of the Company and its consolidated subsidiaries are included in the consolidated financial statements after elimination of significant inter-company accounts and transactions. (4) COMMON STOCK 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. Under the rules, the Company had until August 13, 2002, to comply. If the Company met 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 Small Cap Market due to our Chapter 11 Bankruptcy filing. On March 20, 2002, we resumed trading under the symbol "ZAPPQ". On April 29, 2002, the NASDAQ Stock Market notified ZAP that its shares of common stock would be delisted from the NASDAQ Small Cap Market effective with the open of business on April 30, 2002. As primary grounds for its decision was cited uncertainty over the Company's future in light of its current chapter 11 proceedings. In particular, the panel noted that the timing and the completion of the Company's plan are uncertain. On July 1, 2002, ZAP's stock began trading on the Over-the-Counter (OTC) Bulletin Board under the new stock symbol of ZAPZ. According to the OTC Bulletin Board, the symbol change is to indicate that ZAP is no longer in Chapter 11 Reorganization, and that the stock has undergone a reverse split effective July 1, 2002. ZAP's common stock of 6,693,643 shares will be converted to 2,231,214 shares of common stock in the Reorganized ZAP, which will then be reversed split on a 2:1 basis. The final result of the conversion and the reverse split equates to 6:1 or in other words for every six shares a common stockholder held on June 20, 2002 (ZAP's Plan of Reorganization Date) the individual will receive one share of common stock in the Reorganized ZAP. The resulting shares of common stock after the split was 1,115,607. All shares and per share data have been restated to reflect the stock split. The Common Shareholders' will also receive one Warrant in Series B, C and D to purchase common stock in the Reorganized ZAP for each common share issued to the claimant. The approved plan, as outlined previous in Note 2, permitted the Company to complete the following: increase the authorized common stock to 100 million shares, issue 50 million warrants for common stock, create an Incentive Stock Option Plan, and execute a reverse stock split. As of June 30, 2002, no warrants are outstanding, according to the approved Plan of Reorganization they will be issued by August 20, 2002. The reverse split was effected on July 1, 2002. The Company also issued 660,000, pre-split shares of common stock for consulting services during the quarter. 7 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"). We desire to avail ourselves of certain "safe harbor" provisions of the Act and are therefore including this special note to enable us 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 our stockholders and other publicly available statements issued or released by us involve known and unknown risks, uncertainties, and other factors which could cause our 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 our best estimates based upon current conditions and the most recent results of operations. OVERVIEW 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 2002, the Company continued to enhance and broaden its electric vehicle product line. PRODUCT SUMMARY- ZAP markets many forms of advanced transportation, including electric automobiles, motorcycles, bicycles, scooters, personal watercraft, hovercraft, neighborhood electric vehicles, commercial vehicles and more. Additionally, the Company produces the electric scooter, known as the ZAPPY(R), which is manufactured by the Company, using parts manufactured by various subcontractors. ELECTRIC VEHICLE RENTAL PROGRAM- Working in conjunction with Global Electric Motorcars, LLC, a Daimler Chrysler Company, a program was announced in which ZAP will be renting neighborhood electric vehicles throughout California. ZAP plans to solicit rental agencies and other locations for the program. Neighborhood electric cars are a new category of 25 MPH automobiles designed for short trips in urban areas, planned communities, commercial zones or tourist districts. The smaller, low-speed electric cars are a new alternative in places concerned with air and noise pollution, high fuel prices, traffic congestion or parking shortages. ACQUISITION OF NEW BUSINESSES-The Company completed its acquisition of Voltage Vehicles and RAP Group on July 1, 2002. Voltage Vehicles is a Sonoma County-based Nevada Corporation with the exclusive distribution contracts for advanced transportation in the independent auto dealer network, including rights to one of the only full-performance electric cars certified under federal safety standards. The RAP Group owns an auto dealership focused on the independent automotive and advanced technology vehicle markets. A Voltage Vehicle authorized dealer, RAP showcases an array of advanced transportation at its dealership in Fulton, California. The Rap Group began business in 1996 and has been a profitable entity for the past few years with annual sales in excess of $ 6 million. While Voltage Vehicles, which began, business in February, 2001, is a relatively new enterprise. As noted in the ZAP's approved Plan of Reorganization, the mergers are expected to enhance ZAP's financial base by providing access to the two companies' services and relationships. The move is expected to advance ZAP's goal of becoming a leading full-service brand in the electric and alternate fuel transportation industry. Upon completion of the mergers, ZAP plans to step-up its role in building a national distribution network to support its contract manufacturing for its growing line of products. The merger will also enable ZAP to immediately cut overhead and other costs, and increase revenues. The Company has a $331,800 backlog of orders and purchase contracts in hand for electric vehicles as of August 9, 2002. The Company expects to fill these orders within the current fiscal year. 8 Some of the significant events for the Company that occurred during the second quarter of 2002 or prior to the filing of this Form 10-Q document were as follows: (1) On June 20, 2002, The United States Bankruptcy Court confirmed ZAP's Plan of Reorganization which cleared the way for the Company to emerge immediately from bankruptcy. (2) On July 1, 2002, ZAP completed its acquisition of Voltage Vehicles and RAP Group, Inc. pursuant to ZAP's Second Amended Plan of Reorganization; see Note 2 above for details. (3) ZAP began trading on July 1, 2002 on the Over-the-Counter (OTC) Bulletin Board under the stock symbol of ZAPZ. Also on this date ZAP's Reorganization Plan provided for a reverse stock split. (4) ZAP signed a distribution agreement with Daka Development Ltd, for the design, manufacturing and marketing of a full line of advanced transportation and alternative energy products. The Plan of Reorganization also approved the execution of a $500,000 Secured Convertible Promissory Note to Daka for financing of the inventory purchases. (5) ZAP announced an electric car rental program in conjunction with Global Electric Motorcars, LLC, (GEM) a Daimler Chrysler Company. GEM will sell the electric vehicles to ZAP who will in turn operate a rental management company, handling all insurance and processing. ZAP's first rental location opened recently on Balboa Island in Newport Beach, California, with more locations expected during the course of the summer. 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:
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ----------------------- ------------------------- 2002 2001 2002 2001 - ---------------------------------------------------------------------------------------------------------------------------------- STATEMENTS OF INCOME DATA: - -------------------------- Net sales........................................................ 100% 100.0% 100% 100.0% Cost of sales ................................................... (62.7) (146.3) (69.2) (98.8) Gross profit (loss).............................................. 37.2 (46.4) 30.7 1.2 Operating expenses............................................... 181.3 162.2 163.4 111.8 Loss from operations before reorganization items and extraordinary gain............................................... (144.1) (208.6) (133.7) (110.6) Other Income..................................................... 5.0 - 2.1 1.0 Net loss before reorganization items and extraordinary gain...... (139.1) (208.6) (131.6) (109.6) Reorganization items-Professional fees,etc....................... 43.6 - 25.1 - Net loss before extraordinary gain............................... (182.7) (212.8) (156.7) (113.2)
QUARTER ENDED JUNE 30, 2002 COMPARED TO QUARTER ENDED JUNE 30, 2001 NET SALES for the quarter ended June 30, 2002, were $360,000 compared to $940,000 in the prior year. Sales were less in all areas due to the overall poor world-wide economy. The Company's filing of Chapter 11 Bankruptcy also adversely affected our sales during the current quarter. GROSS PROFIT increased from a loss of $436,000 in 2001 to a profit of $134,000 in 2002 due to product mix and less sales to liquidators, which were done last year at little or no margin to move product. 9 SELLING AND MARKETING expenses in the quarter ended June 30, 2002 were $66,000 as compared to $306,000 for the quarter ended June 30, 2001. As a percentage of sales, selling and marketing expenses decreased from 32% to 18% of net sales. The primary reason for the decrease was less spending in all areas of sales and marketing together with significantly less personnel. GENERAL AND ADMINISTRATIVE expenses for the quarter ended June 30, 2002 were $574,000 as compared to $1.1 million for the quarter ended June 30, 2001. This is a decrease of $504,000 or 47%. However, as a percentage of sales, general and administrative expense increased from 115% to 159% of net sales in 2002. This increase is due to the lower sales volume where although expenses have been reduced in all areas, certain general and administration costs are fixed. The dollar decrease in amount of expenses was due to less salaries and benefits, fewer professional fees, no amortization of goodwill in accordance with new accounting guidelines, and spending cutbacks. RESEARCH AND DEVELOPMENT decreased $128,000 or 91% in the 2nd quarter of 2002 as compared to the 2nd quarter of 2001. As a percentage of net sales it decreased to 4 % of sales in the 2nd quarter of 2002 as compared to 15% of sales in the 2nd quarter of 2001. Expense decreases in the second quarter of 2002 as compared to the second quarter of 2001 were the result of less spending. INTEREST INCOME (EXPENSE) decreased from income of $23,000 in 2001 to $5,000 in 2002. The decrease was due to less interest income due to lower cash investment balances. OTHER INCOME (EXPENSE) increased to $13,000 as the result of reimbursement of expenses from two government grants. REORGANIZATION ITEMS- The increase in reorganization items was primarily due to legal expenses incurred for the reorganization. SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001 NET SALES for the six months ended June 30, 2002 were $780,000 compared with $2.9 million in the six months ended June 30, 2001, a decrease of $2.1 million or 73 %. The decrease in sales is primarily attributable to less sales and greater sales returns from customers due to the poor worldwide economy. The Company's filing of bankruptcy in March also adversely affected sales volume. GROSS PROFIT dollars increased in the first six months of 2002 to $240,000 from $35,000 in the first half of 2001. As a percentage of sales, gross profit increased to 31% in the first half of 2002 compared with 1% in the first six months of 2001. The primary reasons for the increase were product mix and fewer sales to liquidators at low profit. SELLING expenses for the six months ended June 30, 2002 were $133,000 as compared to $732,000 for the six months ended June 30, 2001. This was a decrease of $599,000 or 82% from 2001 to 2002. As a percentage of sales, selling expenses decreased from 25% of sales to 17% of sales. The decrease was primarily due to fewer salaries and commissions for sales personnel, and less marketing and promotion expenses. GENERAL AND ADMINISTRATIVE expenses for the six months ended June 30, 2002 were $1.1 million. This is a decrease of $1.1 million or 50% from 2001. Expenses were less in all categories of spending due to fewer employees and facilities. The Company's expenses were significantly less in legal and consulting costs. RESEARCH AND DEVELOPMENT expenses decreased $330,000 or 92% from the first six months of 2002 as compared to the first six months of 2001. As a percentage of net sales, research and development decreased to 4% of sales in the first six months of 2002 as compared to 12% of sales in the first six months of 2001. INTEREST INCOME (expense) decreased $44,000 in the first six months of 2002 as compared to the first six months of 2001due to lower available cash balances for investment. OTHER EXPENSE increased $31,000 from the first six months of 2001 to the first six months of 2002, which was primarily due the receipt of government grant money from two projects. 10 LIQUIDITY AND CAPITAL RESOURCES In the first six months of 2002 net cash used by the Company for operating activities was $ 458,000. In the first half of 2001, the Company used cash for operations of $2.2 million. Cash used in the first six months of 2002 was comprised of the net loss before reorganization items and the extraordinary gain incurred for the period of $1,022,000 offset by net non-cash expenses of $244,000 and the net change in operating assets and liabilities resulting in providing cash of $320,000. Cash used in operations in the first six months of 2001 was comprised of the net loss incurred for the first six months of $3.2 million, offset by net non-cash expenses of $445,000, and the net change in operating assets and liabilities resulting in a further use of cash of $582,000. Investing activities used cash of $52,000 and $122,000 in the first six months of 2002 and 2001, respectively for the purchase of equipment and patents. Financing activities used cash of $15,000 and provided cash of $2,000 during the first six months ended June30, 2002 and 2001, respectively. The Company received a significant increase to liquidity through the Plan of Reorganization where approximately $3 million in long-term debt due to Ridgewood ZAP, LLC was converted to common stock. Thus in accordance with the conversion formula specified in the plan, Ridgewood will receive approximately 975,000 of common stock in the Reorganized ZAP. This transaction also resulted in the Company recognizing an extraordinary gain of approximately $2.9 million. At June 30, 2002 the Company had cash of $348,000 compared to $1.2 million at June 30, 2001. At June 30, 2002, the Company had working capital of $1.6 million, as compared to working capital of $3.9 million at June 30, 2001. The Company, at present, does not have a credit facility in place with a bank or other financial institution. In conjunction with the distribution agreement signed with Daka Development on June 17, 2002 to market, sell and distribute their products in North America, ZAP signed a secured convertible promissory note for up to $500,000 to finance the inventory purchases. The terms of the note require interest at the rate of 6% per annum. The note is scheduled to mature on September 17, 2002, for all items that were received. As of June 30, 2002 there was $4,000 drawn on the note. On the maturity date, Daka may at their option, convert the principle to common stock of ZAP at $.50 per share or 15 % of the issued shares of ZAP. Daka also has the right to purchase one warrant in series B,C, and D for each common share that Daka receives. The Company was granted authority to issue the $500,000 convertible debenture through the Approved Plan of Reorganization. On July 1, 2002, ZAP completed its acquisition of Voltage Vehicles ("VV") and RAP Group, Inc. ("RAP") pursuant to ZAP's Second Amended Plan of Reorganization that was approved by the United States Bankruptcy Court (the "Court"), Northern District of California (Santa Rosa Division) on June 20, 2002. In exchange for all of the outstanding shares of the businesses, ZAP will issue the lesser of 49% of the issued shares to any new equity shareholders or 4,500,000 (post split) 500,000 to VV and 4,000,000 to RAP. The equity shareholders of VV and RAP will also receive one Warrant in Series B,C,D and K to purchase common stock in ZAP for each share issued to Voltage Vehicles and RAP Group, Inc. 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. 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. 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. 11 SEASONALITY AND QUARTERLY RESULTS The Company's business is subject to seasonal influences. Sales volumes in this industry typically slow down during the winter months, November to March in the U.S. The Company is marketing worldwide and is not impacted 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. PART II - OTHER INFORMATION Item 1. Legal Proceedings There are no legal proceedings outstanding against the Company 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 In May, 2002 the security holders voted to accept ZAP's Plan of Reorganization Item 5. Other Information The Company signed distribution agreements with DAKA Development and began a rental program with Global Electric Motorcars, LLC a Daimler Chrysler Company. See previous discussion in Item 2. Item 6. Exhibits and Reports on Form 8-K The Company filed the following Form 8-K's during the period: o On April 15, 2002, the Company filed its Disclosure Statement and Proposed Plan of Reorganization, which was subject to approval of the U.S. Bankruptcy court prior to submission to the creditors and shareholders for vote. o April 29, 2002, the Company also filed a Form 8-K to report that it changed their independent auditors for the year ended December 31, 2002 from Grant Thornton LLP to Odenberg, Ullakko, Muranishi & Co. LLP. o Ju1y 12, 2002, the Company filed a Form 8-K to report that on June 20, 2002, the United States Bankruptcy Court, Northern District of California confirmed ZAP's Plan of Reorganization, which cleared the way for the Company to emerge immediately from bankruptcy. It was also announced, that ZAP completed it's acquisition of Voltage Vehicles and RAP Group, Inc. on July 1, 2002 which was pursuant to ZAP's Second Amended Plan of Reorganization that was approved by the bankruptcy court on June 20, 2002. Note, the Approved Plan of Reorganization was attached as an exhibit to the Form 8-K. 12 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 - ----------------------------- (Registrant) SIGNATURE TITLE DATE /s/ Gary Starr Director / CEO August 9, 2002 - ----------------------------- /s/ William R. Hartman CFO August 9,2002 - ----------------------------- 13 -----END PRIVACY-ENHANCED MESSAGE-----