-----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, RlQ6FPBor8bHYEaTxyBkfPcDrJWC8Y1Gc+QaRUTNV/82CetBjwKAVDiI+23vrsfw 3Qdb5T3VLB24uqWBnDvg8A== 0001072613-03-000782.txt : 20030513 0001072613-03-000782.hdr.sgml : 20030513 20030513124530 ACCESSION NUMBER: 0001072613-03-000782 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030513 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: 03694684 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: ZAPWORLD COM DATE OF NAME CHANGE: 19990715 FORMER COMPANY: FORMER CONFORMED NAME: ZAP POWER SYSTEMS INC DATE OF NAME CHANGE: 19970319 10QSB 1 form10-q_11967.txt ZAP FORM 10-QSB DATED MARCH 31, 2003 ================================================================================ 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 March 31, 2003 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 IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 501 FOURTH STREET SANTA ROSA, CA 95401 (707) 525-8658 (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. 14,111,813 shares of common stock as of May 12, 2003. Transitional Small Business Disclosure Format Yes[_] No [X] ================================================================================ Part I. FINANCIAL INFORMATION Item 1. Financial Statements ZAP CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (IN THOUSANDS)
ASSETS CURRENT ASSETS Cash and cash equivalents $ 303 Accounts receivable, net of allowance for doubtful accounts of $1,248 634 Inventories 1,466 Prepaid expenses and other current assets 576 -------- Total current assets 2,979 PROPERTY AND EQUIPMENT, net of accumulated depreciation of $946 3,712 OTHER ASSETS Patents and trademarks, net 245 Goodwill 851 Deposits and other 26 -------- Total assets $ 7,813 ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 78 Accounts payable 542 Accrued liabilities 164 Advances from related party 49 -------- Total current liabilities 833 LONG-TERM LIABILITIES Long -term debt, less current portion 2,220 -------- Total liabilities 3,053 -------- SHAREHOLDERS' EQUITY Preferred stock, authorized 50,000 shares; no par value, no shares outstanding Common stock, authorized 100,000 shares of no par value; issued and outstanding 13,525 shares 23,077 Accumulated deficit (18,317) -------- Total shareholders' equity 4,760 -------- Total liabilities and shareholders' equity $ 7,813 ========
See accompanying notes to consolidated financial statements 2 ZAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (THOUSANDS, EXCEPT SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, 2003 2002 -------- -------- NET SALES $ 1,528 $ 420 COST OF GOODS SOLD 1,205 314 -------- -------- GROSS PROFIT 323 106 -------- -------- OPERATING EXPENSES Sales and marketing 191 67 General and administrative 564 542 Research and development -- 17 -------- -------- 755 626 -------- -------- LOSS FROM OPERATIONS BEFORE REORGANIZATION ITEMS (432) (520) -------- -------- OTHER INCOME (EXPENSE) Interest income (expense) -- (15) Other income -- 14 -------- -------- -- (1) NET LOSS BEFORE REORGANIZATION ITEMS (432) (521) REORGANIZATION ITEMS: Professional fees (8) (39) -------- -------- NET LOSS BEFORE PREFERRED DIVIDEND (440) (560) -------- -------- Preferred Dividend -- (24) -------- -------- NET LOSS APPLICABLE TO COMMON STOCK $ (440) $ (584) ======== ======== NET LOSS PER COMMON SHARE BASIC AND DILUTED $ (0.04) $ (0.55) ======== ======== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING BASIC AND DILUTED 12,145 1,071 ======== ========
See accompany notes to consolidated financial statements 3 ZAP) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, 2003 2002 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss before reorganization items $ (432) $ (521) Issuance of stock for services 151 -- Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 68 56 Reorganization items, net (8) (39) Allowance for doubtful accounts -- 190 Changes in other items affecting operations Receivables (230) 14 Inventories 133 149 Deposits (5) (11) Prepaid expenses and other assets (97) (53) Accounts payable 44 24 Advances from related party (26) -- Accrued liabilities (82) (108) ------- ------- Net cash used in operating activities (484) (299) ------- ------- CASH FLOWS FROM INVESTING ACTIVITES Purchase of equipment (5) (5) Investment in joint venture -- (50) ------- ------- Net cash used for investing activities (5) (55) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Sale of common stock, net of stock offering costs 364 15 Proceeds from issuance of long-term debt 78 -- Payments on obligations under capital leases -- (4) ------- ------- Net cash provided by financing activities 442 11 ------- ------- NET DECREASE IN CASH AND CASH EQUIVALENTS (47) (343) CASH AND CASH EQUIVALENTS, beginning of period 350 842 ------- ------- CASH AND CASH EQUIVALENTS, end of period $ 303 $ 499 ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the quarter for interest -- $ 15 Non-cash investing and financing activities Debt issued to repurchase common stock -- $ 1,500 Note and stock issued to purchase land and building $ 3,292 -- Stock issued to purchase inventory $ 325 -- Stock issued to repay long term debt $ 56 --
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, 2002. The financial statements presented herein, for the three months ended March 31, 2003 and 2002 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. Potential dilutive securities associated with stock options, warrants and conversion of preferred stock have been excluded from the weighted average shares outstanding since the effect of these securities would be anti-dilutive. ACCOUNTING FOR STOCK-BASED COMPENSATION The Company measures stock-based compensation for option grants to employees and members of the board of directors using the intrinsic value method. Had compensation expense for the Company's stock options been recognized based upon the fair value for awards granted, the Company's net loss for the quarters ended March 31, 2003 and 2002 would have been increased to the following pro forma amounts (in thousands, except per share data):
THREE MONTHS ENDED MARCH 31, ------------------------------- IN THOUSANDS EXCEPT PER SHARE AMOUNTS 2003 2002 ---------- ---------- Net (loss) income: As reported $ (440) $ (584) Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects 50 10 ---------- ---------- Pro forma $ (490) $ (594) Basic and diluted (loss) per share: As reported $ (0.04) $ (0.55) Pro forma $ (0.04) $ (0.55)
5 The Risks Related to Our Business The Company has a history of losses, and the Company might not achieve or maintain profitability. The Company's continuation as a going concern is directly dependent upon our ability to increase sales and receive additional financing. The Company will require substantial additional capital in the short term to remain a going concern. A substantial portion of the Company's growth in the past three years has come through acquisitions and the Company may not be able to identify, complete and integrate future acquisitions. Other risks include, but are not limited to, the following: We face intense competition, which could cause us to lose market share. Changes in the market for electric vehicles could cause our products to become obsolete or lose popularity. We cannot assure you that growth in the electric vehicle industry will continue and our business may suffer if growth in the electric vehicle industry ceases or if we are unable to maintain the pace of industry demands. We may be unable to keep up with changes in electric vehicle technology and, as a result, may suffer a decline in our competitive position. The failure of certain key suppliers to provide us with components could have a severe and negative impact upon our business. Product liability or other claims could have a material adverse effect on our business. We may not be able to protect our Internet address. Our success is heavily dependent on protecting our intellectual property rights (2) 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. (3) COMMON STOCK-On July 1, 2002, ZAP's stock began trading on the Over-the-Counter (OTC) Bulletin Board under the new stock symbol of ZAPZ. The Company issued approximately 4.4 million shares of common stock in the first quarter ended March 31, 2003. Of this total 2.9 million was issued for a note receivable and was for a loan that did not fund; these shares are anticipated to be returned to the Company in May 2003. The note receivable ($1 million) for 2.9 million shares as collateral has been netted against common stock. Another approximate 600,000 shares were issued for the part of the purchase price of the new corporate headquarters. In addition, 265,000 shares of stock were issued to Daka as part of the purchase price of future inventory items. The Company also issued 410,000 shares of common stock for cash and notes receivable. The remainder of 225,000 shares issued were for the pay-off of debt and for advertising expenditures and for professional services rendered. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 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 6 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 ZAP (the "Company" or "ZAP") was incorporated under the laws of the State of California, on September 23, 1994, as "ZAP Power Systems". The name of the Company was changed to "ZAPWORLD.COM" on May 16, 1999 in order to increase our visibility in the world of electronic commerce. We subsequently changed our name to ZAP on June 18, 2001 in order to reflect our growth and entry into larger, more traditional markets. The Company has grown from a single product line to a full line of electric vehicle products. Most of the Company's domestic manufacturing has been transferred to lower-cost overseas contract manufacturers. The Company's business strategy has been to develop, acquire and commercialize advanced transportation including electric vehicles and electric vehicle power systems, which have fundamental practical and environmental advantages over available internal combustion modes of transportation that can be produced commercially on an economically competitive basis. In 2003, the Company continued to enhance and broaden its electric vehicle product line. The Company intends to further expand its technological expertise through an aggressive plan of acquisitions of companies with exciting new products in the electrical vehicle industry and strategic alliances with certain manufacturers, distributors and sales organizations. The Company's business goal is to become the largest and most complete distribution portal for advanced transportation and electric vehicles. In 2003, the Company continued to accelerate its market positioning in the electric vehicle industry. The Company is now focused on creating a distribution channel for its vehicles, with special emphasis on entrepreneurs in the power-sport and independent auto industry. 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- ZAP established ZAP Rental Outlet in 2002 to rent neighborhood electric vehicles throughout California. ZAP plans to solicit the participation of 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. OTHER SUBSIDIARY 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 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. Voltage Vehicles began business in February 2001, and is a relatively new enterprise. The mergers are expected to enhance ZAP's financial base by providing access to the two companies' services and relationships. The move is also expected to advance ZAP's goal of becoming a leading full-service brand in the electric and alternate fuel transportation industry. Since the acquisition, ZAP plans to step-up its role in building a national distribution network to support its contract manufacturing for its growing line of products. 7 The Company has $2.2 million backlog of orders and purchase contracts in hand for various products and electric vehicles as of May 12, 2003. The Company expects to fill these orders within the current fiscal year. Some of the significant events for the Company that occurred during the first quarter of 2003 were as follows: 1. ZAP signed an exclusive distribution agreement with a distributor to sell a full line of electric vehicles throughout Spain. 2. ZAP received an initial order from a distributor in Mexico for $250,000 of the new SEASCOOTER(TM). The Company is anticipating additional follow-on orders for other electrical products as well. 3. The Company purchased a three-story office building in downtown Santa Rosa, California at 300 B Street with approximately 20,000 square feet of space. The new facility will be the corporate headquarters of ZAP and has space for a retail Company store. The Company moved from its Morris Street location in April 2003. 4. ZAP signed a $650,000 Financing agreement with Daka Development for inventory purchases; the terms are 50% Common stock and 50% in cash. Daka had previously provided the Company with $500,000 of inventory financing last year, which was also converted to equity. 5. A subsidiary of ZAP, Voltage Vehicles, signed an exclusive agreement with a European-based group of companies involved in the design and manufacturing of electric automobiles. The group started production on several different types of light electric utility vehicles for urban transportation and commercial use, including a 25 MPH neighborhood electric car that is now available. The ZAP LIGHT UTILITY VEHICLE (LUV)(TM) is a new kind of automobile called a Neighborhood Electric Vehicle (NEV). This new category of automobile was created for the many car trips people take for inter-city transportation, planned communities, commercial zones and tourist areas. The LUV sports a European design that comes from Italy. The vehicle has speeds up to 25 mph, has room for two and plugs into any normal household electric outlet. The LUV was selected as a finalist for Tech-TV's best of the Consumer Electronic Show held in Las Vegas in January 2003. ZAP is working to launch a ZAP "L.U.V.-Line" of electric automobiles, which includes freeway-capable vehicles as well as vans, pickups and tractors. 6. The Company introduced a new Lithium-Ion Battery that could greatly increase the range of electric cars. The battery could extend the range of today's electric cars from 60 miles to 240 miles per charge. ZAP sees these batteries as the potential battery solution for the industry. While many experts point to hydrogen cells as a clean way to power automobiles, that technology requires an infrastructure while batteries can be recharged by plugging into any normal electrical outlet. 8 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, 2003 2002 ------ ------ STATEMENTS OF OPERATIONS DATA: Net sales .......................................... 100.0% 100.0% Cost of sales ...................................... (78.9) (74.8) Gross profit ....................................... 21.1 25.2 Operating expenses ................................. 49.4 149.0 Loss from operations before reorganization items ... (28.3) (123.8) Reorganization items-Professional fees ............. (0.5) (9.3) Net loss ........................................... (28.8) (133.1)
QUARTER ENDED MARCH 31, 2003 COMPARED TO QUARTER ENDED MARCH 31, 2002 Note: The results for 2003 include one quarter's activity for the newly acquired companies of RAP Group Inc., and Voltage Vehicles. Since Voltage Vehicles is still in the development stage the majority of the results of the combined ZAP are affected by RAP. NET SALES for the quarter ended March 31, 2003, were $1.5 million compared to $420,000 in the prior year. RAP's net sales for the period accounted for $ 1.1 million. The net sales for ZAP were $421,000 versus $420,000. The increase in sales was primarily due to the acquisition of the RAP Group. GROSS PROFIT was $323,000 for the first quarter ended March 31, 2003 compared to $106,000 for the quarter ended March 31, 2002. The RAP Group accounted for $216,000 of the gross profit for the quarter ended March 31, 2003. ZAP's gross profit excluding the RAP Group, decreased from a $106,000 to $97,000 in 2003. The gross profit decrease was due to product mix. SELLING expenses in the first quarter of 2003 were $191,000 as compared to $67,000 in 2002. RAP's expenses were $79,000. ZAP was $112,000 versus $67,000. This was an increase of $45,000 or 67% from 2002 to 2003. As a percentage of sales, selling expenses increased from 16% of sales to 27% of sales. The higher expenses were due to greater expenses for trade shows and advertising and marketing. ZAP began a new campaign to promote the SeaScooters with magazine ads etc. and the LUV line and its ZAP line of electric vehicles. GENERAL AND ADMINISTRATIVE expenses for 2003 were $564,000 as compared to $542,000 in 2002. RAP's portion of the expenses was $95,000. For ZAP the expenses decreased from $542,000 to $460,000. This is a decrease of $82,000 or 15% from 2002. The decrease in expense was due to lower bad debt expense and less spending in most expense areas. RESEARCH AND DEVELOPMENT decreased $17,000 in the 1st quarter of 2003 as compared to the 1st quarter of 2002. Expense decreases in the first quarter of 2003 as compared to the first quarter of 2002 were the result of the Company's decision to spend less on R&D. Since ZAP has transitioned from manufacturing to a sales and marketing organization, R&D expenses have decreased. INTEREST EXPENSE decreased from $15,000 in the first quarter of 2002 to a minimal amount in 2003. The previous long-term note was converted to equity in mid 2002. OTHER INCOME DECREASED from $14,000 in the first quarter of 2002 to zero in 2003 since no grant monies were received in the quarter. In the previous year ZAP had received funds from selected government grants. 9 REORGANIZATION ITEMS were less since the Company has completed its reorganization. In 2003 the amount reflects the quarterly trustee fee. LIQUIDITY AND CAPITAL RESOURCES In the first quarter of 2003 net cash used by the Company for operating activities was $ 484,000. In the first quarter of 2002, the Company used cash for operations of $299,000. Cash used in the first quarter of 2003 was comprised of the net loss before reorganization items incurred for the quarter of $432,000 plus net non-cash expenses of $211,000 and the net change in operating assets and liabilities resulting in a further use of cash of $263,000. Cash used in operations in the first quarter of 2002 was comprised of the net loss incurred for the quarter of $521,000, offset by net non-cash expenses of $207,000, and the net change in operating assets and liabilities in providing cash of $15,000. Investing activities used cash of $5,000 in the first quarter of 2003 and used $55,000 during the first quarter ended March 31, 2002. In 2003 the cash was used to purchase equipment. In 2002 the funds were used to purchase equipment and to invest in a joint venture. Financing activities provided cash of $442,000 and $11,000 during the first quarters ended March 31, 2003 and 2002, respectively. At March 31, 2003 the Company had cash of $303,000 compared to $499,000 at March 31, 2002. At March 31, 2003, the Company had working capital of $2.2 million, as compared to working capital of $2.1 million at March 31, 2002. The Company, at present, does not have a credit facility in place with a bank or other financial institution. We may not be able to meet our future cash requirements for the rest of the current fiscal year unless new financing is obtained. Toward this end, we have held discussions with various parties, but no formal agreements have been reached to date. We will need short term outside investments on a continuing basis to finance our current operations. Our revenues for the foreseeable future may not be sufficient to attain profitability. We expect to continue to experience losses for the near future. In order to finance our working capital requirements we are currently seeking both debt and equity investments with several investors, but there can be no assurances that we will obtain this capital or that it will be obtained on terms favorable to us. 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. 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 substantially impacted by U.S. seasonality. INFLATION Our raw materials and finished products are sourced from stable, cost-competitive industries. As such, we do not foresee any material inflationary trends for our product sources. 10 PART II - OTHER INFORMATION Item 1. Legal Proceedings From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business, including employment-related and trade related claims. The Company has become aware that the California Department of Motor Vehicles (DMV)-Investigations Division is conducting an inquiry into the activities of certain employees of the RAP Group. If any adverse findings did result, the Auto Dealer's License for the RAP Group could be jeopardized since RAP is currently on probation by the California Department of Motor Vehicles for a period of two years ending June 12, 2004. The probationary action was primarily due to the RAP Group's untimely transfers of sale vehicles and lack of compliance with Motor Vehicle Pollution Control guidelines on certain automobile sales. As part of ZAP's original business plan, management is considering converting, depending upon the sales volume, the dealership into a wholesale distributor for its electric cars. On September 9, 2002, ZAP and certain of its Directors were named as a co-defendant in a lawsuit filed in the Superior Court of the State of California by shareholders of Advanced Wireless Systems, Inc. The suit alleges that ZAP improperly acquired both the RAP Group, Inc and Voltage Vehicles. Plaintiffs seek to rescind both acquisitions and have alleged monetary damages in an amount not specified in their complaint. The plaintiff has requested that the lawsuit be dismissed. A motion was filed in April 2003 to dismiss the action. 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. 11 CERTIFICATION FOR QUARTERLY REPORT ON FORM 10-QSB I, Steve Schneider, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of ZAP; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 12, 2003 /s/ Steve Schneider -------------------------- Steve Schneider Director and Chief Executive Officer 12 CERTIFICATION FOR QUARTERLY REPORT ON FORM 10-QSB I, William Hartman, certify that: 1. I have reviewed this Quarterly report on Form 10-QSB of ZAP; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarter report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarter report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarter report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarter report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 12, 2003 /s/ William Hartman -------------------------- William Hartman Chief Financial Officer 13 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/ Steve Schneider Director / CEO May 12, 2003 ---------------------------- /s/ William Hartman CFO May 12, 2003 ---------------------------- 14 EX-99.1 3 exh99-1_11967.txt CERTIFICATION OF CHIEF EXECUTIVE OFFICER EXHIBIT 99.1 ------------ CHIEF EXECUTIVE OFFICER'S CERTIFICATION TO U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the accompanying Form 10-QSB of ZAP for the three months ended March 31, 2003, Steven M. Schneider, Director and Chief Executive Officer of ZAP, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that: (1) such Form Type of ZAP for the three months ended March 31, 2003,fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange of 1934; and (2) the information contained in such Form 10-QSB of ZAP for the three months ended March 31, 2003,fairly presents, in all material respects, the financial condition and results of operations of ZAP. /s/ Steve Schneider - ------------------------------------ Steve Schneider Director and Chief Executive Officer May 12, 2003 EX-99.2 4 exh99-2_11967.txt CERTIFICATION OF CHIEF FINANCIAL OFFICER EXHIBIT 99.2 ------------ CHIEF FINANCIAL OFFICER'S CERTIFICATION TO U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the accompanying Form 10-QSB of ZAP for the three months ended March 31, 2003, William Hartman, Chief Financial Officer of ZAP, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that: (3) such Form Type of ZAP for the three months ended March 31, 2003,fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange of 1934; and (4) the information contained in such Form 10-QSB of ZAP for the three months ended March 31, 2003,fairly presents, in all material respects, the financial condition and results of operations of ZAP. /s/ William Hartman - ------------------------------------ William Hartman Chief Financial Officer May 12, 2003 -----END PRIVACY-ENHANCED MESSAGE-----