-----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, FxMcIyXyTGUPxFsEE6hZHgE+9EBFwlOGGYRpxbBMOt1QHtyyOf1uHXflTEjICBGW HS5JPVWPI7kqQirZeaIExQ== 0001072613-04-001057.txt : 20040517 0001072613-04-001057.hdr.sgml : 20040517 20040517131831 ACCESSION NUMBER: 0001072613-04-001057 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040517 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: 04811103 BUSINESS ADDRESS: STREET 1: 501 FOURTH STREET CITY: SANTA ROSA STATE: CA ZIP: 95401 BUSINESS PHONE: 7075258658 MAIL ADDRESS: STREET 1: 501 FOURTH STREET CITY: SANTA ROSA STATE: CA ZIP: 95401 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 form10qsb_12700.txt FORM 10-QSB (MARCH 31, 2004) ================================================================================ 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, 2004 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.) 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. 16,619,293 shares of common stock as of May 14, 2004. Transitional Small Business Disclosure Format Yes [_] No [X] ================================================================================ ZAP FORM 10-QSB INDEX PAGE NO. PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (unaudited): Condensed Consolidated Balance Sheet as of March 31, 2004 .......................................... 2 Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2004 and 2003........... 3 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003 .................... 4 Notes to Condensed Consolidated Financial Statements..... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ..................... 10 Item 3. Controls and Procedures.................................. 14 PART II. OTHER INFORMATION Item 1. Legal Proceedings........................................ 14 Item 2. Changes in Securities and Use of Proceeds................ 15 Item 3. Defaults Upon Senior Securities.......................... 15 Item 4. Submission of Matters to a Vote of Security Holders...... 15 Item 5. Other Information........................................ 15 Item 6. Exhibits and Reports on Form 8-K......................... 15 SIGNATURES ................................................................. 16 1 Part I. FINANCIAL INFORMATION Item 1. Financial Statements ZAP CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (IN THOUSANDS)
MARCH 31, 2004 ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $ 510 Accounts receivable, net of allowance for doubtful accounts of $508 341 Inventories 1,485 Prepaid expenses and other current assets 572 ------------ Total current assets 2,908 PROPERTY AND EQUIPMENT, net of accumulated depreciation of $1,072 3,597 OTHER ASSETS Patents and trademarks, net 178 Goodwill 476 Deposits and other 104 ------------ Total assets $ 7,263 ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 76 Accounts payable 410 Accrued liabilities 1,240 Deferred Revenue 330 ------------ Total current liabilities 2,056 LONG-TERM LIABILITIES Long -term debt, less current portion 2,080 ------------ Total liabilities 4,136 ------------ SHAREHOLDERS' EQUITY Preferred stock, authorized 50 million shares; no par value, 1,347 shares issued and outstanding 1,156 Common stock, authorized 100 million shares; no par value; 13,230,706 shares issued and outstanding 27,010 Notes receivable from shareholders, net (167) Accumulated deficit (24,872) ------------ Total shareholders' equity 3,127 ------------ Total liabilities and shareholders' equity $ 7,263 ============
See accompanying notes to condensed consolidated financial statements (Unaudited) 2 ZAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (THOUSANDS, EXCEPT SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, ------------------------------ 2004 2003 ------------ ------------ NET SALES $ 1,320 $ 1,528 COST OF GOODS SOLD 984 1,205 ------------ ------------ GROSS PROFIT 336 323 ------------ ------------ OPERATING EXPENSES Sales and marketing 199 191 General and administrative (non-cash of $731 in 2004 and $151 in 2003) 1,556 562 ------------ ------------ 1,755 753 ------------ ------------ LOSS FROM OPERATIONS BEFORE REORGANIZATION ITEMS, OTHER INCOME (EXPENSE) AND INCOME TAXES (1,419) (430) ------------ ------------ OTHER INCOME (EXPENSE) Interest expense (non-cash of $30 in 2004 And $0 in 2003) (30) -- Other income 8 -- ------------ ------------ (22) -- ------------ ------------ LOSS BEFORE REORGANIZATION ITEMS AND INCOME TAXES (1,441) (430) REORGANIZATION ITEMS: Professional fees (8) (8) ------------ ------------ LOSS BEFORE INCOME TAXES (1,449) (438) ------------ ------------ PROVISION FOR INCOME TAXES 2 2 ------------ ------------ NET LOSS $ (1,451) $ (440) ============ ============ NET LOSS PER COMMON SHARE BASIC AND DILUTED $ (0.11) $ (0.04) ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING BASIC AND DILUTED 13,218 12,145 ============ ============
See accompanying notes to condensed consolidated financial statements (Unaudited) 3 ZAP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, ------------------------------ 2004 2003 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (1,451) $ (440) Items not requiring the use of cash: Amortization of note discount 30 -- Issuance of stock and warrants for services 630 151 Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 81 68 Allowance for doubtful accounts 46 -- Changes in other items affecting operations Receivables (72) (230) Inventories 173 133 Prepaid expenses and other assets 88 (102) Accounts payable (128) 44 Advances from related party -- (26) Accrued liabilities 77 (82) Deferred revenue 40 -- ------------ ------------ Net cash used in operating activities (486) (484) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITES Purchase of equipment (10) (5) ------------ ------------ Net cash used for investing activities (10) (5) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Sale of preferred stock and warrants 460 -- Sale of common stock, net of stock offering costs -- 364 Proceeds from issuance of long-term debt -- 78 Payments on long-term debt (5) -- ------------ ------------ Net cash provided by financing activities 455 442 ------------ ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (41) (47) CASH AND CASH EQUIVALENTS, beginning of period 551 350 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period $ 510 $ 303 ============ ============
See accompanying notes to condensed consolidated financial statements (Unaudited) 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, 2003. The financial statements presented herein, for the three months ended March 31, 2004 and 2003 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 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 has raised approximately $1.1 million in new capital thus far in 2004 but will require substantial additional capital in the short term to realize its business objectives in particular the creation of a distribution network for and sales of SMART(R) Cars. There can be no assurance that additional capital would be available, or if it is available, that it would be on acceptable terms. 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 electrical or fuel-efficient vehicles could cause our products to become obsolete or lose popularity. We cannot assure you that growth in the electric vehicle industry or fuel-efficient cars will continue and our business may suffer if growth in the electric vehicle industry or fuel-efficient market decreases or if we are unable to maintain the pace of industry demands. We may be unable to keep up with changes in electric vehicle or fuel-efficient 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. Basic and diluted earnings (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 debt have been excluded from the diluted per share amounts, since the effect of these securities would be anti-dilutive. At March 31, 2004, these potentially dilutive securities include options for 1,650,000 common shares, warrants for 36,977,033 shares of common stock, debt convertible into 930,000 shares of common stock and preferred shares that can be converted into 1,339,000 common shares. 2) SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING FOR STOCK-BASED COMPENSATION Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation- Transition and Disclosure, establishes a 5 fair-value method of accounting for stock options and similar equity instruments. The fair-value method requires that compensation cost be measured on the value of the award at the grant date, and recognized over the service period. SFAS No.123 as amended allows companies to either account for stock-based compensation to employees under the provisions of SFAS No. 123 as amended or under the provisions of Accounting Principles Board (APB) Opinion No. 25 or its related interpretations. The company accounts for its stock-based compensation to employees in accordance with the provisions of APB opinion No. 25. The Company has recorded deferred compensation for the difference, if any, between the exercise price and the deemed fair market value of the common stock for financial reporting purposes of stock options granted to employees. The compensation expense related to such grants is amortized over the vesting period of the related stock options on a straight-line basis. The Company accounts for equity instruments issued to non-employees in accordance with the provisions of SFAS No. 123, as amended, and Emerging Issues Task Force (EITF) Issues No.96-18 Accounting for Equity Instruments that Are Issued to other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. Had the Company determined compensation cost based on the fair value at the grant date for its employee stock options and purchase rights under SFAS No. 123, the Company's net loss would have been increased to the pro forma amounts indicated below for the three-month periods ended March 31: THREE MONTHS ENDED MARCH 31, ---------------------- IN THOUSANDS EXCEPT PER SHARE AMOUNTS 2004 2003 --------- --------- Net loss: As reported $ (1,451) $ (440) Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects 15 50 --------- --------- Pro forma $ (1,466) $ (490) Basic and diluted (loss) per share: As reported $ (0.11) $ (0.04) Pro forma $ (0.11) $ (0.04) PRINCIPLES OF CONSOLIDATION - The accounts of the Company and its consolidated subsidiaries are included in the condensed consolidated financial statements after elimination of significant inter-company accounts and transactions. USE OF ESTIMATES - The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the Company's financial statements and accompanying notes. Actual results could differ materially from those estimates. Significant estimates include; ACCOUNTS RECEIVABLE - The Company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral from its customers. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company's customers should deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. 6 INVENTORY - The Company maintains reserves for estimated excess, obsolete and damaged inventory based on projected future shipments using historical selling rates, and taking into account market conditions, inventory on-hand, purchase commitments, product development plans and life expectancy, and competitive factors. If markets for the Company's products and corresponding demand were to decline, then additional reserves may be deemed necessary. LEGAL ACCOUNTS - The Company estimates the amount of potential exposure it may have with respect to litigation claims and assessments. RECOVERY OF LONG-LIVED ASSETS - The Company evaluates the recovery of its long-lived assets periodically by analyzing its operating results and considering significant events or changes in the business environment. WARRANTY - The Company provides 30 to 90 day warranties on its personal electric products and records the estimated cost of the product warranties at the date of sale. The estimated cost of warranties has not been significant to date. Should actual failure rates and material usage differ from our estimates, revisions to the warranty obligation may be required. RECENT ACCOUNTING PRONOUNCEMENTS: In December 2003, the Securities and Exchange Commission (SEC) issue Staff Accounting Bulletin No.104, Revenue Recognition (SAB 104), which superceded Staff Bulletin No. 101 Revenue Recognition in Financial Statements (SAB 101). SAB 104 rescinds accounting guidance contained in SAB 101 related to multiple elements revenue arrangement, superceded as a result of the issuance of Emerging issues Task Force Issue No. 00-21 (EITF 00-21), Accounting for Revenue Arrangement with Multiple Deliverables. Additionally, SAB 104 rescinds the SEC's Revenue Recognition in Financial Statements Frequently Asked Questions and Answers (the FAQ) issued with SAB 101 that had been codified in SEC topic 13, Revenue Recognition. While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104. The Company adopted SAB 104 on the first day of 2004. The adoption of SAB 104 did not have an impact on the Company's condensed consolidated financial statements. In April 2003, FASB issued SFAS 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This statement amends and clarifies the financial accounting and reporting requirements, as were originally establishing in SFAS 133, for derivative instruments and hedging activities. SFAS 149 provides greater clarification of the characteristics of a derivative instrument so that contracts with similar characteristics will be accounted for consistently. This statement is effective for contracts entered into or modified after June 30, 2003, as well as for hedging relationships designated after June 30,2003, excluding certain implementation issues that have been effective prior to this date under SFAS 133. The Company's adoption of this statement has not had a material impact on our results of operations or financial condition. In January 2003, the FASB issued FASB Interpretation (FIN) No. 46, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51. FIN 46 provides guidance on how to apply the controlling financial interest criteria in ARB 51 to variable interest entities ("VIE"). Given the complexity of FIN 46 and implementation issues after its original issuance, particularly respect to its scope and application of the consolidation model, FASB staff issued several FASB staff positions throughout 2003 to clarify the Board's intent on certain of the interpretation's provisions. In December 2003, the Board issued FIN 46R to address certain technical corrections and clarify the implementation issues that had arisen. In general, a VIE is subject to consolidation if it has (1) an insufficient amount of equity for the entity to carry on its principle operations without additional subordinated financial support provided by any parties, (2) a group of equity owners that are unable to make decisions about the entity's activities or (3) equity that does not absorb the entity's losses or receive the entity's benefits. Variable interest entities are to be evaluated for consolidation based on all contractual, ownership or other interest that expose their holder to the risk and rewards of the entity. These interests may include equity investments, loans, leases, derivatives, guarantees, service and management contracts and other instruments whose values change with changes in the VIE. Any of these interests may require its holder to consolidate the entity. The holder of a variable interest that receives the majority of the potential variability in gains or losses of the VIE is the VIE's primary beneficiary and is required to consolidate the VIE. FIN 46R became 7 effective immediately for entities created after January 31, 2003. It applies in the first fiscal year or interim period beginning after December 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003.The Company has determined that the adoption of the provisions of FIN 46 will not have an impact upon its financial condition or results of operations. (3) INVENTORIES- The Inventories at March 31, 2004 are summarized as follows (thousands): Vehicles $ 887 Raw Materials 340 Finished Goods 568 ------ 1,795 Less-inventory reserve (310) ------ $1,485 ====== (4) STOCKHOLDERS' EQUITY-On July 1, 2002, ZAP's stock began trading on the National Association of Securities Dealers, Inc. Electronic Bulletin Board (the "OTC Bulletin Board") under the new stock symbol of ZAPZ. The Company issued 1,035 shares of preferred stock in the first quarter ended March 31, 2004, which is convertible into 1.0 million shares of common stock. ZAP received $460,000 from investors in exchange for 460 shares of preferred stock. Approximately 316 shares of preferred stock were issued in payment for legal, consulting and professional services. In addition, 259 preferred shares were issued to purchase inventory and selected assets. The Company also issued approximately 3.8 million Series B restricted Warrants priced at $1.07. The warrants were issued for the following: 2.0 million for preferred investors mentioned above, 1.6 million for consulting services and 200,000 for purchase of inventory and electric automobiles. The warrants issued to consultants were valued between $0.30 and $0.39 based on the stock price on the date of grant as valued under the Black-Scholes pricing model. General and Administration expenses of $530,000 have been recorded during the first quarter of 2004 related to these warrant issuances. The Company has also approximately 2.9 million shares of common stock outstanding that were pledged as collateral for a long-term loan that has not funded. The prospective lender notified the Company in December 2003 that the shares have been lost, however they have not been cancelled to date. The Company is still holding notes receivable from shareholders of $864,170, less a reserve of $697,200 resulting in a net balance due of $166,970 at March 31, 2004. The notes were given to the Company last year by three shareholders in exchange for restricted and unrestricted common stock. Reserves were established for two of the shareholder notes, since one of the shareholders has not met the agreed upon payment terms and the other shareholder has not assigned collateral as required by the notes. The Company has hired an attorney to pursue collection from the shareholders. (5) RELATED PARTIES-On January 26, 2004, when the Company's stock was trading at $0.75 per share, the Company entered into an agreement with a relative of our CEO to provide fund raising and stock promotion activities. A shareholder of the Company transferred 100,000 shares of unrestricted common stock as compensation for his services. The Company recorded $75,000 of consulting expense related to this agreement. (6) LITIGATION- From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business, including employment-related and trade related claims. On May 20, 2003, the RAP Group, Inc., a wholly owned subsidiary of ZAP was named as a defendant in a lawsuit filed in the Superior Court of California by Fireside Thrift Co. The suit alleges breach of contract and misrepresentation with respect to the Dealer Agreement. The plaintiff is seeking damages in the amount of $546,108 plus interest. The pending action is in the preliminary stage. The Company intends to mount a vigorous defense in this action. Management believes that the ultimate resolution of these claims will not have a material adverse effect on our financial position or on results of operations. 8 The RAP Group is currently on probation with 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 pink slips for sales of 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, and the dealership into a wholesale distributor for its electric cars. There is an action pending against ZAP in the United States Bankruptcy Court for the Northern District of California, Santa Rosa Division, entitled Esquire Trade and Finance, Ltd., and Celeste Trust Reg. v. ZAP, Adversary Proceeding Number 03-1187. This is an action brought by the Plaintiffs against ZAP for declaratory relief in which they ask the court to issue a declaratory judgment that ZAP's purported redemption of the Plaintiff's Class A Warrants in February of 2003 is ineffective. The Plaintiffs also ask that the court order ZAP to issue written certificates for each share of stock and each warrant to be given to the Plaintiffs pursuant to ZAP's confirmed Chapter 11 Plan of Reorganization. Management believes that the ultimate resolution of this claim will not have a material adverse effect on our financial position or on results of operations. (7) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: THREE MONTHS ENDED MARCH 31, ---------------------- 2004 2003 -------- -------- Cash paid during the period for interest $ -- -- Cash paid during the period for income taxes $ -- -- Non-cash investing and financing activities: Note and stock issued to purchase land and building -- $ 3,292 Stock issued for: Purchase of fixed assets $ 28 -- Inventory purchases $ 230 $ 325 Prepaid expenses $ 198 -- Repayment of long-term debt -- $ 56 (8) SUBSEQUENT EVENTS- On April 19, 2004, ZAP entered into an Exclusive Purchase, License and Supply Agreement with Smart-Automobile LLC, a California limited liability company (Smart Auto), to distribute and manufacture "smart" cars. Smart cars is the brand name of 3-cyclinder gas turbo engine cars manufactured by Daimler Chrysler AG, which can achieve an estimated fuel economy up to 60 miles per gallon. Under the agreement ZAP will be the exclusive distributor and licensee of the right to manufacture Smart(R) cars in the United States and the non-exclusive distributor and licensee outside of the United States for a period of ten years. Subject to the terms of the agreement, ZAP will pay Smart-Auto a license and distribution fee of $10,000,000: a $1 million payment in cash was made upon execution of the agreement, $1 million payable in cash ratably with the delivery of the first 1,000 smart cars, and $8 million payable in ZAP preferred stock. On April 12, 2004, the Company received $1 million in cash in exchange for a convertible promissory note from a private investor and shareholder. The note accrues interest at the rate of 1.47% per annum with a due date of June 1, 2005 for the entire principal and interest. After November 1, 2004, the note and accrued interest may be converted at the holder's election into Series A-2 Preferred Stock. The Company also entered into an Asset Purchase Agreement on April 12, 2004 with the private investor and shareholder to purchase three automobiles in exchange for 250 Class A II preferred shares (equivalent to 500,000 common shares) and 500,000 B-2 Warrants, exercisable at $1.07. The purchase price of the automobiles was valued at $250,000. The following consulting agreements were arranged after March 31, 2004 with the Company to provide stock promotion and investor relation services: 1) Marlin Financial Group for $50,000 of Preferred Stock that converts to 89,286 shares of Common Stock. 2) Sunshine 511 Holdings for 2 million B-2 Restricted warrants and 1 million K-2 Restricted Warrants. 9 3) Elexis International for 150,000 B-2 Restricted Warrants. 4) The Banks Group, LLC for a total of $244,000 of which $12,000 is payable monthly over one year and a payment of $100,000, which is due June 1, 2005. On April 14, 2004, the Company signed an agreement to issue 133 Shares of Class D preferred shares(equivalent to 133,333 common shares) to Phi-Nest Fund LLP. in exchange for a $100,000 cash investment. 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 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 reflect 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 and advanced transportation 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, electric vehicle power systems, low emission vehicles and fuel efficient cars, such as the SMART(R) Car, 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 2004, the Company continued to enhance and broaden its electric vehicle and fuel-efficient 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 advanced transportation 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 (fuel efficient) and electric vehicles. In 2004, 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. According to various sources, the Company has developed perhaps the strongest brand names in the electric vehicle industry. PRODUCT SUMMARY - ZAP markets many forms of advanced transportation, including electric automobiles, motorcycles, bicycles, scooters, personal watercraft, neighborhood electric vehicles, commercial vehicles and gas 10 fuel economy vehicles. Additionally, the Company produces the electric scooter, known as the ZAPPY(R), which is manufactured by the Company, using parts supplied by various subcontractors. ELECTRIC VEHICLE RENTAL PROGRAM - ZAP established ZAP Rental Outlet in 2002 to rent neighborhood electric vehicles in tourist locations. 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. In September 2003 the Company acquired a fleet of approximately 100 electric cars, which are being rented to the public at two locations on the main Casino strip in Las Vegas. The purchase was completed in exchange for stock and warrants. VEHICLE DEALERSHIP PROGRAM - The Company began establishing Electric Vehicle Dealerships in various locations in the United States in the fourth quarter of 2003. The new car dealer pays the Company a fee and in return may apply with the respective state to become a licensed new car electric vehicle dealership. The Company also receives a commitment from the new car dealer to purchase a minimum number of electric automobiles annually. The Company intends to expand this network to include the gasoline fuel efficient SMART(R) Car. RESEARCH AND PRODUCT DEVELOPMENT The Company has primarily become a marketer and distributor of products and is only involved in the manufacturing of the ZAPPY Scooters. Thus, we do not require large expenditures for internal research and development costs. In order to maintain our competitive advantage the Company searches globally for the latest technological advances in electric transportation and then determines the feasibility of including the new item into our product. CURRENT PRODUCT LINE The Company's existing product line, which includes new and planned introductions, is as follows: SMART - This vehicle has a gas turbo engine with estimated fuel economy of 60 miles per gallon. This car is a two-passenger coupe that is eight feet in length that provides ample room for two adult passengers. Other "smart" features and options of the Smart(R) car include a 61-hp, 3-cyclinder turbocharged engine, equipped with an advanced electronic stabilization program, or ESP, an anti-skid design that throttles the engine torque along with an anti-lock braking system. The unique 6-speed automatic gear transmission with kick down function allows the user to switch between "automatic" and "manual" gear shifting via a control program that changes gears in response to varying driving characteristics. ZAPCAR (TM) - This electric vehicle is made in China and is the first of its kind to utilize an advanced drive train powered by an asynchronous AC motor system delivering up to four times the horsepower of other models in its class. The Company signed an exclusive agreement to import this nearly completed vehicle into the United States. ZAP LIGHT UTILITY VEHICLE (LUV) - This vehicle is a new kind of automobile called a Neighborhood Electric Vehicle (NEV). A 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. ZAPPY(R) - This electric scooter is a stand-up, portable, lightweight scooter featuring a 12-volt battery with a built-in charger and a collapsible frame. Its patented design includes a unique folding mechanism and proprietary circuitry, which increases the efficiency and range of the vehicle. In the fourth quarter last year, we introduced a new 2002 ZAPPY(R) Scooter, which offered significant upgrades over the previous design, from performance and construction to look. ZAPPY TURBO(TM) - The new ZAPPY TURBO is an improved version of the Company's ZAPPY folding electric scooter. The ZAPPY TURBO's new electric propulsion system offers improved acceleration and hill climbing, and has a "hi-performance" mode that allows the scooter to reach speeds of 19.5 MPH. We started shipping this item in March of 2002. 11 ZAPLIGHT - This product is a perpetual flashlight that has no need for batteries or bulbs. With just 30 seconds of shaking the Faraday flashlight can generate enough power for up to five minutes of light. POWERBIKE(R) - The Powerbike is primarily a mountain bike with a new and improved electric motor attached. It was designed to appeal to the low cost mass merchant. OTHER ELECTRIC VEHICLES - Commercial road and highway. Under various distribution agreements, the Company has the rights to a wide spectrum of personal and industrial electric vehicles. MICROPROCESSOR DRIVE CONTROLLERS - The Company is working to develop a series of low cost proprietary motor controller microprocessors for all of its electric vehicles, which is believed to increase efficiency and lower costs of operation. SUBSIDIARY BUSINESSES-The Company completed its acquisition of Voltage Vehicles ("VV") 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 ("RAP") 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, which began business in February 2001, is a relatively new enterprise. The Company has a $68,200 backlog of orders and purchase contracts in hand for various products and electric vehicles as of May 14, 2004. 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 and in April of 2004 were as follows: 1. ZAP signed an exclusive purchase, license and supply agreement with Smart Automobile LLC (SA). The Smart Car has a 3-cylinder turbo gas engine with estimated fuel economy up to 60 miles per gallon. See Note (8) Subsequent Events for further information. 2. ZAP has raised approximately $1.1 million in new funds thus far in 2004, as a result of various fund raising and stock promotions activity. 3. The Company purchased the inventory and fixed assets of The Electric Transportation Company, LLC (ETC) for ZAP Preferred Stock and Warrants. ETC has developed and marketed advanced drive trains for electric powered bicycles. 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: 12 THREE MONTHS ENDED MARCH 31, ---------------- 2004 2003 ---- ---- STATEMENTS OF OPERATIONS DATA: Net sales.......................................... 100.0% 100.0% Cost of sales...................................... (74.5) (78.9) Gross profit....................................... 25.4 21.1 Operating expenses................................. 133.0 49.4 Loss from operations before reorganization items and other expenses......................... (107.5) (28.3) Reorganization items-Professional fees............. (0.6) (0.5) Net loss........................................... (109.9) (28.8) QUARTER ENDED MARCH 31, 2004 COMPARED TO QUARTER ENDED MARCH 31, 2003 NET SALES for the quarter ended March 31, 2004 were $1.3 million compared to $1.5 million in 2003. RAP's net sales for the period accounted were $909,000 versus $1.1 million in 2003. The net sales for ZAP were $411,000 versus $421,000 in 2003. The sales were less than last year due to the slow economy. GROSS PROFIT was $336,000 for the first quarter ended March 31, 2004 compared to $323,000 for the quarter ended March 31, 2003. The RAP Group accounted for $248,000 of the gross profit for the quarter ended March 31, 2004 versus $216,000 in 2003. ZAP's gross profit excluding the RAP Group, decreased from $97,000 to $88,000 in 2004. The change in gross profit decrease was due to product mix. SALES AND MARKETING EXPENSES in the first quarter of 2004 were $199,000 as compared to $191,000 in 2003. RAP's expenses were $27,000 versus $79,000 in 2003. ZAP was $172,000 versus $112,000 in 2003. As a percentage of sales, total selling expenses increased from 12% of sales to 15% of sales. RAP's decrease of $52,000 was due to less salaries and advertising expenses. While ZAP's increase in expenses was due to higher salaries and marketing expenses. GENERAL AND ADMINISTRATIVE expenses for 2004 were $1,556,000 as compared to $562,000 in 2003. RAP's portion of the expenses was $231,000 versus $95,000 in 2003. For ZAP the expenses increased from $460,000 to $1,325,000. As a percentage of sales, general and administration expenses increased from 37% of sales to 118% of sales. RAP's increase of $136,000 was primarily due to higher bad debt estimates for problem customer accounts. ZAP's increase of $865,000 was due to higher consulting, professional fees and bad debt estimates. Of this increase $731,000 represents non-cash legal and consulting expense related to stock and warrant issuances. INTEREST EXPENSE increased by $30,000 in the first quarter of 2004, and is due to the quarterly interest for the note payable for the building purchase on 03/31/03. OTHER INCOME INCREASED by $8,000 in the first quarter of 2004 due to fees on auto sales. REORGANIZATION ITEMS reflect the quarterly trustee fee. NET LOSS -The Net Loss was $1,451,000 for the period ended March 31, 2004 as compared to a loss of $440,000 for March 31, 2003. The increase was primarily due to higher General and Administration expenses for consulting, stock promotion and estimates for bad debts on problem customer accounts. The issuance of Stock warrants for legal fees and to consultants for services accounted for $731,000 of the General and Administration expenses. LIQUIDITY AND CAPITAL RESOURCES In the first quarter of 2004 net cash used by the Company for operating activities was $ 486,000. In the first quarter of 2003, the Company used cash for operations of $484,000. Cash used in the first quarter of 2004 was comprised of the net loss incurred for the quarter of $1,376,000 plus net non-cash expenses of $712,000 plus the net change in operating assets and liabilities of $178,000. Cash used in operations in the first quarter of 2003 was comprised of the net loss before reorganization items incurred for the quarter of $440,000 plus net non-cash expenses of $219,000, and the net change in operating assets and liabilities resulting in a further use of cash of $263,000. 13 Investing activities used cash of $10,000 in the first quarter of 2004 and used $5,000 during the first quarter ended March 31, 2003. In 2004 and 2003 the cash was used to purchase equipment. Financing activities provided cash of $455,000 and $442,000 during the first quarters ended March 31, 2004 and 2003, respectively. At March 31, 2004 the Company had cash of $510,000 compared to $303,000 at March 31, 2003. At March 31, 2004, the Company had working capital of $852,000, as compared to working capital of $2.2 million at March 31, 2003. The Company, at present, does not have a credit facility in place with a bank or other financial institution. Even though we have raised approximately $1.1 million thus far in 2004, we will need additional 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. 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 creating an auto distribution network for the distribution of the SMART (R) Car and electrical vehicles, 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 a 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 intends to develop a wide auto distribution network to counter any seasonality effects. INFLATION Our raw materials and finished products and automobiles are sourced from stable, cost-competitive industries. As such, we do not foresee any material inflationary trends for our product sources. ITEM 3. CONTROLS AND PROCEDURES Within 90 days prior to the date of this Form 10-QSB, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's President and Chief Executive Officer along with the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Company's President and Chief Executive Officer along with the Company's Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in this Form 10-QSB. There have been no significant changes in the Company's internal controls or in other factors, which could significantly affect the internal controls subsequent to the date the Company carried out its evaluation. 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. On May 20, 2003, the RAP Group, Inc., a wholly owned subsidiary of ZAP was named as a defendant in a lawsuit filed in the Superior Court of California by Fireside Thrift Co. The suit alleges breach of contract and 14 misrepresentation with respect to the Dealer Agreement. The plaintiff is seeking damages in the amount of $546,108 plus interest. The pending action is in the preliminary stage. The Company intends to mount a vigorous defense in this action. Management believes that the ultimate resolution of these claims will not have a material adverse effect on our financial position or on results of operations. The RAP Group is currently on probation with 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 pink slips for sales of 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. There is an action pending against ZAP in the United States Bankruptcy Court for the Northern District of California, Santa Rosa Division, entitled Esquire Trade and Finance, Ltd., and Celeste Trust Reg. v. ZAP, Adversary Proceeding Number 03-1187. This is an action brought by the Plaintiffs against ZAP for declaratory relief in which they ask the court to issue a declaratory judgment that ZAP's purported redemption of the Plaintiff's Class A Warrants in February of 2003 is ineffective. The Plaintiffs also ask that the court order ZAP to issue written certificates for each share of stock and each warrant to be given to the plaintiffs pursuant to ZAP's confirmed Chapter 11 Plan of Reorganization. Management believes that the ultimate resolution of this claim will not have a material adverse effect on our financial position or on results of operations. 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 On March 5, 2004,the Company's Board of Directors appointed Kevin Schneider, a relative of our CEO to be a member of the Advisory Board. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 2.1 Agreement for Stock Promotion and Investor Services dated January 8, 2004 between the Company and Evan Rapoport. 2.2 Asset Purchase Agreement dated March 1, 2004 with Electric Transportation Company LLC for the purchase of inventory, various fixed assets and intellectual property. 2.3 Convertible Promissory Note dated April 12, 2004 in the amount of $1,000,000 to Jeffrey G. Banks and Karen A. Banks, as Trustees of the Banks Living Trust. 2.4 Asset Purchase Agreement dated April 12, 2004 with Jeffrey G. Banks for purchase of various automobiles. 2.5 Agreement for Private Placement Investment Received dated April 14, 2004 with Phi-Nest Fund LLP. 2.6 Exclusive Purchase, License and Supply Agreement dated April 19, 2004 with Smart Automobile LLC to manufacture and distribute the Smart(R)Car. 15 2.7 Consulting Fee Agreement dated April 21, 2004 with Elexis International. 2.8 Agreement for Stock Promotion and Investor Relation Services dated April 21, 2004 with Sunshine 511 Holdings. 31.1 Certificate of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certificate of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certificate of the Chief Financial pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K On May 11, 2004, the Company filed a Current Report on Form 8-K to report the Exclusive Purchase, License and Supply Agreement with Smart Automobile LLC. 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 14, 2004 - --------------------------- /s/ William Hartman CFO May 14, 2004 - --------------------------- 16 EX-2.1 2 exhibit2-1_12700.txt EVAN RAPOPORT AGREEMENT EXHIBIT 2.1 ----------- AGREEMENT THIS AGREEMENT made this 8th day of January 2004 by and between Evan Rapoport located at 101 North Clematis St., Ste. 511, West Palm Beach, Florida, and ZAP located at 501 4th Street, Santa Rosa, California. In consideration of the mutual covenants contained herein, it is agreed by and between the parties as follows: 1a. ZAP shall pay Evan Rapoport a total sum of 100 preferred shares (60 plus 40) (equivalent to 100,000 common shares of ZAPZ stock) and 935,500 B-2 Restricted Warrants for any services provided, including, but not limited to, stock promotion and investor relation services. The value of service received was a total of $1,040,000. 1b. It is understood that the underlying stock is restricted under Rule 144 guidelines. The actions to be taken by the parties hereto to close the transaction as provided shall take place on or before January 8, 2004 at the office of ZAP at 501 Fourth Street, Santa Rosa, CA 95401 hereinafter referred to as the ("Closing Date"). This Agreement shall be governed in all respects by the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have set their hands and seals, the date and place first above written. Dated: January 8, 2004 /s/ Evan Rapoport /s/ Renay Cude - ------------------------ ---------------------- Evan Rapoport Renay Cude for ZAP EX-2.2 3 exhibit2-2_12700.txt ELECTRIC TRANSPORTATION COMPANY AGREEMENT EXHIBIT 2.2 ----------- ASSET PURCHASE AGREEMENT THIS AGREEMENT made this 1st day of March 2004 by and between Electric Transportation Company, LLC, a California limited liability company, P.O. Box 50244, Santa Barbara, CA 93150, Tax ID #77-0441063 (seller), and ZAP, a California corporation, located at 501 Fourth Street, Santa Rosa, California (Purchaser). In consideration of the mutual covenants contained herein, it is agreed by and between the parties as follows: 1. Seller shall sell/and or assign and Purchaser shall purchase, free and clear of all liens, encumbrances and liability: I. Inventory: Electric scooters, electric bikes, and electric bike kits, II. Various fixed assets, III.Intellectual Property, including patents, trademarks, website domains, dealer lists, suppliers, etc. (hereinafter collectively "Assets"). 2a. Purchaser shall pay the Seller as the purchase price for the foregoing the sum of $250,000 ($230,000 for inventory items and $20,000 for the fixed assets). The total purchase price shall be payable in preferred stock and warrants at closing. 2b. It is understood that the preferred converts to common ZAPZ stock in 12 months at the option of the Seller. It is agreed that 100,000 B priced warrants (priced at $1.07/share) will be granted to the Seller in addition to the preferred stock. 3. Seller shall sell, assign, transfer, and convey to Purchaser the Assets, free of all liabilities. In order to assure such transfer free of liabilities, Seller has disclosed to Buyer and Buyer acknowledges Seller's intentions to file with the U.S. Bankruptcy Court located in Santa Barbara County, California under Chapter 11 of the Bankruptcy Code. Seller's Chapter 11 plan of reorganization will provide for the consummation of this Asset Purchase Agreement on the noted closing date pursuant to an order of the Bankruptcy Court. 4. All Assets included in the sale shall be in good working condition at the time of sale. Purchaser shall accept the Assets "as is" without warranty as to their condition and operation. Seller shall provide Buyer with documentation relating to intellectual Property ("IP") assets without further warranty as to what further actions, if any, shall be required to prosecute or protect such IP assets. 5. The actions to be taken by the parties hereto to close the transaction as provided shall take place or before March 31, 2004 at the office of ZAP at 501 Fourth Street, Santa Rosa, CA 95041 hereinafter referred to as the ("Closing Date). At the closing, Seller shall deliver to Purchaser possession of the Assets, and good and sufficient instruments of transfer, conveying and transferring the Assets to Purchaser. Such delivery shall be made against payment and delivery to the Seller of as the price as set forth herein above. The instruments of transfer shall contain covenants and warranties that Seller has good and marketable title in and to the Assets. 6. Seller covenants, warrants and represents: (a) Seller is not presently involved in any activity or any outstanding dispute with any taxing authority as to the amount of any property taxes due, nor has Seller received any notice of any deficiency, credit or other indication of deficiency from any taxing authority. (b) Seller is the owner of and has good and marketable title to all of the Assets enumerated. (c) Seller shall indemnify and hold harmless Purchaser from any and all claims of its creditors and such Assets shall transfer to Purchaser, free and clear of all liens and encumbrances. (d) Seller is an accredited investor. (e) Seller is the owner and will assign all patents and trademarks to Purchaser. (f) Seller will assign all patents, trademarks and domain to Purchaser. (g) Seller will provide Purchaser with list of dealers, and suppliers. 7. Seller hereby assumes all risk of loss, damage or destruction resulting from fire or other casualty to the time of transfer of Assets and Closing. 8. This Agreement shall be binding upon the personal representatives, successors and assignees of the parties, subject to final approval by the Board of Directors of the Purchaser and the approval of the U.S. Bankruptcy Court per Section 3 above. This Agreement and any accompanying instruments and documents include the entire transaction between the parties and there are no representations, warranties, covenants or conditions, except those specified herein or in accompanying instruments and documents. 9. All covenants, warranties and representations herein shall survive this Agreement and the Closing Date. 10. This Agreement shall be governed in all respects by the laws of the State of California. SCHEDULE A--ASSETS Item 1. V.I.N. or Serial Number Whiz Bang Scooters ETC Bicycles ETC Bicycle Kits II. Fixed assets: forklift, desk, and computers III. Intellectual Property, Patents, Trademarks, Web domains, Dealer Lists, Suppliers IN WITNESS WHEREOF, the parties hereto have set their set hands and seals, the date and place first above written. Seller: Electric Transportation Company, A California limited Liability Company /s/ Warren E. Dennis Date 03/16/2004 - ------------------------------------------- Warren E. Dennis,Manager Purchaser: ZAP, a California corporation /s/ Steve Schneider Date 03/16/2004 - ------------------------------------------- Steve Schneider, CEO EX-2.3 4 exhibit2-3_12700.txt CONVERTIBLE PROMISSORY NOTE EXHIBIT 2.3 ----------- THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT THERETO UNDER SUCH ACT AND APPLICABLE LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. ZAP CONVERTIBLE PROMISSORY NOTE ONE MILLION DOLLARS Santa Rosa, California $1,000,000 April 12, 2004 ZAP, a California corporation (the "Company"), the principal office of which is located at 501 Fourth Street, Santa Rosa, California 95401, for value received hereby promises to pay to Jeffrey G. Banks and Karen A. Banks, as Trustees of the Banks Living Trust, or its registered assigns, the sum of One Million Dollars ($1,000,000), or such other amount as shall then equal the outstanding principal amount hereof and all accrued interest. The following is a statement of the rights of the Holder of this Note and the conditions to which this Note is subject, and to which the Holder hereof, by the acceptance of this Note, agrees: 1. DEFINITIONS. As used in this Note, the following terms, unless the context otherwise requires, have the following meanings: (i) "Company" includes any person or entity that shall succeed to or assume the obligations of the Company under this Note. (ii) "Holder," shall mean any person who is an accredited investor (as defined in Regulation D under the Securities Act of 1933, as amended (the "1933 Act")), and who shall at the time be the registered holder of this Note. (iii) "Underlying Shares" means any shares of the Company's common stock which are issuable upon conversion of the Series A-2 Preferred Stock issued in connection with this Note. 2. INTEREST. Until all outstanding principal and interest on this Note shall have been converted into shares of Series A-2 Preferred Stock in full, simple interest on the unpaid principal balance of this Note shall accrue from the date hereof at the rate of 1.47% per annum, compounded annually. 3. CONVERSION. 3.1 CONVERSION. The entire outstanding principal amount and all outstanding accrued interest of this Note shall be converted into shares of Series A-2 Preferred Stock on or after November 1, 2004 at the Holder's election. The number of shares of Series A-2 Preferred Stock into which this Note will be converted ("Conversion Shares") pursuant to this SECTION 3.1 shall be determined by dividing the outstanding aggregate principal amount together with all outstanding accrued interest as of the date of conversion by $500 (the "Conversion Price"), as may be adjusted for any stock split, combination, reorganization, reclassification, consolidation or merger. The Series A-2 Preferred Stock shall have the rights and preferences as set forth in the Certificate of Determination of Rights, Preferences, Privileges, and Restrictions of Series A-2 Preferred Stock substantially in the form attached hereto as EXHIBIT A. 3.2 AUTOMATIC CONVERSION. In the event that Holder has not converted this Note, the Company may, in its sole discretion, elect to convert this Note in accordance with SECTION 3.1 at any time between November 1, 2004 and June 2, 2005, provided that: (i) all of the Underlying Shares have been registered (and are fully marketable and saleable without restriction) under the 1933 Act; and (ii) the average closing price of the Company's common stock for the five (5) trading days immediately preceding the date on which the Company delivers to Holder written notice of conversion is at least $.60 per share. 3.3 MECHANICS AND EFFECT OF CONVERSION. No fractional shares of stock shall be issued upon conversion of this Note. In lieu of the Company issuing any fractional shares to the Holder upon the conversion of this Note, the Company shall pay to the Holder the amount of outstanding principal or accrued interest that is not so converted, such payment to be in the form as provided below. At its expense, the Company shall, as soon as practicable after conversion, issue and deliver to the Holder at such principal office a certificate or certificates for the number of shares of such stock to which the Holder shall be entitled upon such conversion (bearing such legends as are required by the Purchase Agreement and applicable state and Federal securities laws in the opinion of counsel to the Company), together with any other securities and property to which the Holder is entitled upon such conversion under the terms of this Note, including a check payable to the Holder for any cash amounts payable as described above. 4. REGISTRATION RIGHTS. The Company shall, at its expense, use its commercial best efforts to cause all of the Underlying Shares to be registered under the 1933 Act by November 13, 2004. 5. DUE DATE. Provided that this Note has not been converted, Company shall pay Holder the entire principal amount and all accrued interest due hereunder in lawful money of the United States, in immediately available funds by June 1, 2005. 6. ASSIGNMENT. Subject to the restrictions on transfer described in SECTION 8 below, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors and assigns of the parties. 7. WAIVER AND AMENDMENT. Any provision of this Note may be amended, waived or modified upon the written consent of the Company and the Holder. 8. TRANSFER OF THIS NOTE OR SECURITIES ISSUABLE ON CONVERSION HEREOF. With respect to any offer, sale or other disposition of this Note or securities into which such Note may be converted, the Holder will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such Holder's counsel, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any Federal or state law then in effect). Promptly upon receiving such written notice and opinion, if so requested, the Company, as promptly as practicable, shall notify such Holder that such Holder may sell or otherwise dispose of this Note or such securities, all in accordance with the 2 terms of the notice delivered to the Company. Each Note thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such legend is not required. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. 9. NOTICES. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or if faxed with confirmation of receipt by telephone or if mailed by registered or certified mail, postage prepaid, at the respective addresses of the parties as set forth herein. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given when personally delivered, faxed, or when deposited in the mail in the manner set forth above and shall be deemed to have been received when delivered. 10. NO STOCKHOLDER RIGHTS. Nothing contained in this Note shall be construed as conferring upon the Holder or any other person the right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of the Company; and no dividends or interest shall be payable or accrued in respect of this Note or the interest represented hereby or the Conversion Shares obtainable hereunder until, and only to the extent that, this Note shall have been converted. 11. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California, excluding that body of law relating to conflict of laws. 12. HEADING; REFERENCES. All headings used herein are used for convenience only and shall not be used to construe or interpret this Note. Except where otherwise indicated, all references herein to Sections refer to Sections hereof. IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first written above. ZAP Banks Living Trust BY: /s/ Steven Schneider BY: /s/ Jeffrey G. Banks ------------------------- ----------------------------- Steven Schneider, Name: Jeffrey G. Banks, Trustee Chief Executive Officer Address: 3 EXHIBIT A --------- Certificate of Determination of Rights, Preferences, Privileges, and Restrictions of Series A-2 Preferred Stock (see attached) EX-2.4 5 exhibit2-4_12700.txt ASSET PURCHASE AGREEMENT EXHIBIT 2.4 ----------- ASSET PURCHASE AGREEMENT THIS AGREEMENT made this 12th day of April 2004 by and between Jeff Banks located at 1314 Sunny Hills Road, Oakland, CA, and ZAP located at 501 4th Street, Santa Rosa, California. In consideration of the mutual covenants contained herein, it is agreed by and between the parties as follows: 1a. ZAP shall pay Jeff Banks a sum of 250 Class A II preferred shares (equivalent to 500,000 common shares of ZAPZ stock) and 500,000 B-2 Warrants for the 2003 Mercedes Benz, the 1997 Bentley, and the 2004 Porsche Cayenne S. The total purchase price for the three automobiles will be $250,000. 1b. It is understood that the underlying stock is restricted under Rule 144 guidelines. The actions to be taken by the parties hereto to close the transaction as provided shall take place on or before April 12, 2004 at the office of ZAP at 501 Fourth Street, Santa Rosa, CA 95401 hereinafter referred to as the ("Closing Date"). This Agreement shall be governed in all respects by the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have set their hands and seals, the date and place first above written. Dated: April 12, 2004 /s/ Jeff Banks /s/ Steve Schneider - ----------------- --------------------- Jeff Banks Steve Schneider for ZAP EX-2.5 6 exhibit2-5_12700.txt PHI-NEST FUND AGREEMENT EXHIBIT 2.5 ----------- AGREEMENT THIS AGREEMENT made this 14th day of April 2004 by and between Phi-Nest Fund LP located in Florida, and ZAP located at 501 4th Street, Santa Rosa, California. In consideration of the mutual covenants contained herein, it is agreed by and between the parties as follows: 1a. ZAP shall pay Phi-Nest Fund LP a sum of 133 Class D II preferred shares (equal to 133,333 common shares) as a private placement. 1b. It is understood that the underlying stock is restricted under Rule 144 guidelines. The actions to be taken by the parties hereto to close the transaction as provided shall take place on or before April 14, 2004 at the office of ZAP at 501 Fourth Street, Santa Rosa, CA 95401 hereinafter referred to as the ("Closing Date"). This Agreement shall be governed in all respects by the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have set their hands and seals, the date and place first above written. Dated: April 14, 2004 /s/ Howard Deverett /s/ Renay Cude - ------------------------ ----------------------- Howard Deverett for Phi-Nest LP Renay Cude for ZAP EX-2.6 7 exhibit2-6_12700.txt PURCHASE, LICENSE AND SUPPLY AGREEMENT EXHIBIT 2.6 ----------- EXCLUSIVE PURCHASE, LICENSE AND SUPPLY AGREEMENT ------------------------------------------------ APRIL 19, 2004 Recitals Smart Automobile LLC (SA) and ZAP wish to enter into a distribution and strategic relationship. Whereby SA will provide a license to ZAP to manufacture compliant cars and will provide fully USA compliant Smart Cars and ZAP will provide distribution to dealers in the USA. Compliance 1. SA is a manufacturer of cars with brand name "smart" which meet all U.S. Environmental Protection Agency (EPA), Department of Transportation (DOT), / Federal Motor Vehicle Safety Standards (FMVSS), and California Air Resources Board (CARB) standards and will provide Smart Vehicles that fully meet DOT/FMVSS and EPA Federal standards to ZAP. The estimate Time to show this permits will be between 4-6 weeks upon signing. 2. SA will warrant the vehicles for 12 months/12,000 miles. 3. SA will provide dealer diagnosis computers at cost, currently $10,000. 4. SA will procure and provide parts for ZAP Smart Cars dealers, and provide a dealer recommended parts list. 5. SA will provide dealer training and service manuals for Smart Cars. 6. SA will finalize all required modification, testing and submit the application for CARB approval within 8-12 weeks of signing. Purchasing 1. ZAP will agree to purchase 90 Smart Cars from SA after SA receives all permits, and provides proof of such permits and a firm delivery schedule to ZAP, estimated to be by May 15, 2004. SA warrants to sell all the 90 cars (reserved to Zap) not to an other Party. 2. ZAP agrees to buy 4,000 Smart Cars if available in 2004. 3. ZAP agrees to buy 15,000 Smart Cars if available in 2005. 4. ZAP agrees to continue to buy 15,000 or more cars every year thereafter unless Mercedes Benz distributes a similar car in the USA. USA Distribution 1. It is agreed that ZAP will receive exclusive USA distribution and license rights to manufacture and worldwide non-exclusive rights from SA for 10 years. SA or any affiliated company will not sell any other distributor in the USA these cars or similar micro cars that achieve 40 mpg or more efficiency to any other distributor in the USA. ZAP has the right to sublicense or assign these rights to any party in the USA. 2. It is agreed that ZAP will pay $10,000,000 (ten million dollars) as a distribution right and license fee to SA. $1,000,000 (one million dollars) will be paid in cash via check upon signing. a. SA to deliver five Smart Cars to Santa Rosa, upon signing. (Only for demo and not for sale) b. SA to deliver one Smart Car to Dallas for the auto dealer show in June. (Only for demo and not for sale) c. SA to provide ZAP copies of the following as soon as possible: I. DOT/FMVSS approval letter II. EPA approval letter III. MSO IV. FMVSS sticker V. EPA sticker VI. DISTRIBUTOR INVOICE VII. Window Sticker 3. ZAP agrees to pay as a distribution right and license fee, $1,000 (one thousand dollars) premium over the regular distribution price for the first 1,000 cars delivered. 4. ZAP agrees to pay $8,000,000 (eight million dollars) in preferred stock to SA for the distribution rights upon signing. It is understood that this stock is restricted and non-voting. ZAP agrees that the Preferred stock will have a value of $8,000,000 (eight million dollars) even if the stock price decrease from the current price within 18 months. The floor common share price will be $.91 and equal to $8,000,000 (eight million dollars). The common stock will have a leak out selling provision in accordance with SEC laws and limited by 10% of the volume of ZAPZ stock sold in the previous month. SA will grant a proxy for the stock to Steve Schneider. 5. ZAP agrees to pay for the first 90 cars in advance via wire or L/C, one week prior to delivery. 6. ZAP agrees to pay for future cars with an Irrevocable Letter of Credit. The Irrevocable Letter of Credit is payable at the time of shipping from Germany, and at time VIN numbers are provided. The delivery will be 6 to 8 weeks after L/C. 7. SA guarantees to ZAP that at least 2,500 Smart Cars will be available in 2004, and 10,000 Smart Cars will be available for purchase to ZAP in 2005. ZAP and SA are aware of the fact that Mercedes Benz of North America has no plans to import the city coupe Smart Car in the USA. It is also common knowledge and anticipated that Mercedes Benz plans to import the 4-door Smart Car that is produced in Brazil in 2006. 8. SA guarantees that no other entity can provide fully compliant Smart cars in the USA, during 2004 and 2005. In the event this should occur, SA will returned the unearned stock if unencumbered or a refund of $1 Million Dollars to ZAP's option. 9. It is agreed that applicable law with is the State of California. 10. Thomas Heidemann personally guarantees the performance of this contract. If SA cannot meet the terms of this agreement, then the funds and stock will be returned to ZAP. 11. It is agreed that the parties will sign a more detailed common agreement. by June 15, 2004. Public Relations SA and ZAP will work cooperatively to maximize publicity for the ZAP cars. AGREED, - ------- /s/ Thomas Heidemann /s/ Steven Schneider - ------------------------- ------------------------ Smart-Automobile LLC ZAP President CEO Thomas Heidemann Steven Schneider 04/19/04 04/19/04 - ------------------------- ---------------------- Date Date EX-2.7 8 exhibit2-7_12700.txt ELEXIS INTERNATIONAL AGREEMENT EXHIBIT 2.7 ----------- AGREEMENT THIS AGREEMENT made this 21st day of April 2004 by and between Elexis International, Inc. located in Florida, and ZAP located at 501 4th Street, Santa Rosa, California. In consideration of the mutual covenants contained herein, it is agreed by and between the parties as follows: 1a. ZAP shall pay Elexis International, Inc. 150,000 B-2 Restricted Warrants for a consulting fee for a period of 1 (one) year from the date of this agreement. 1b. It is understood that the underlying stock is restricted under Rule 144 guidelines. The actions to be taken by the parties hereto to close the transaction as provided shall take place on or before April 21, 2004 at the office of ZAP at 501 Fourth Street, Santa Rosa, CA 95401 hereinafter referred to as the ("Closing Date"). This Agreement shall be governed in all respects by the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have set their hands and seals, the date and place first above written. Dated: April 21, 2004 /s/ Howard Deverett /s/ Renay Cude - ------------------------ ----------------------- Howard Deverett for Renay Cude for ZAP Elexis International, Inc. EX-2.8 9 exhibit2-8_12700.txt SUNSHINE 511 HOLDINGS AGREEMENT EXHIBIT 2.8 ----------- AGREEMENT THIS AGREEMENT made this 21st day of February 2004 by and between Sunshine 511 Holdings located at 101 North Clematis St., Ste. 511, West Palm Beach, Florida, Tax id # 05-0601712 and ZAP located at 501 4th Street, Santa Rosa, California. In consideration of the mutual covenants contained herein, it is agreed by and between the parties as follows: 1a. ZAP shall pay Sunshine 511 Holdings a sum of 2,000,000 B-2 Restricted Warrants and 1,000,000 K-2 Restricted Warrants for any services provided, including, but not limited to, stock promotion and investor relation services for a period of 1 (one) year from the date of this agreement. The value of services will total around $2,000,000. 1b. It is understood that the underlying stock is restricted under Rule 144 guidelines. The actions to be taken by the parties hereto to close the transaction as provided shall take place on or before April 21, 2004 at the office of ZAP at 501 Fourth Street, Santa Rosa, CA 95401 hereinafter referred to as the ("Closing Date"). This Agreement shall be governed in all respects by the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have set their hands and seals, the date and place first above written. Dated: April 21, 2004 /s/ Evan Rapoport /s/ Renay Cude - ---------------------- ----------------------- Evan Rapoport for Renay Cude for ZAP Sunshine 511 Holdings EX-31.1 10 exhibit31-1_12700.txt 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER EXHIBIT 31.1 ------------ 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 annual 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 14, 2004 /s/ Steve Schneider ------------------------ Steve Schneider Director and Chief Executive Officer EX-31.2 11 exhibit31-2_12700.txt 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER EXHIBIT 31.2 ------------ 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 annual 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 14, 2004 /s/ William Hartman ----------------------------- William Hartman Chief Financial Officer EX-32.1 12 exhibit32-1_12700.txt 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICER Exhibit 32.1 ------------ 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, 2004 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, 2004 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, 2004 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 14, 2004 EX-32.2 13 exhibit32-2_12700.txt 906 CERTIFICATION OF CHIEF FINANCIAL OFFICER EXHIBIT 32.2 ------------ 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, 2004 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: (1) such Form Type of ZAP for the three months ended March 31, 2004,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, 2004, fairly presents, in all material respects, the financial condition and results of operations of ZAP. /s/ William Hartman - ---------------------- William Hartman Chief Financial Officer May 14, 2004 -----END PRIVACY-ENHANCED MESSAGE-----