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California
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0-303000
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94-3210624
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(State or other jurisdiction of
incorporation or organization)
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Commission File Number
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IRS Employer
Identification Number
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501 Fourth Street
Santa Rosa, CA
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95401
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(Address of principal executive offices)
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(Zip Code)
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o
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Written communications pursuant to Rule 425 under Securities Act (17 CFR 230.425)
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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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o
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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o
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Pre-commencement communications pursuant to Rule 13e-14(c) under the Exchange Act (17 CFR 240.13e-4(c))
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(a)
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Financial Statements of Business Acquired.
|
·
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Report of Independent Registered Public Accounting Firm
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·
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Balance Sheets as of December 31, 2010 and 2009
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·
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Statements of Operations and Comprehensive Income for the years ended December 31, 2010 and 2009
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·
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Statements of Changes in Shareholder’s Equity for the years ended December 31, 2010 and 2009
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·
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Statements of Cash Flows for the years ended December 31, 2010 and 2009
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·
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Notes to Financial Statements
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|
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·
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Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2010
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·
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Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2010
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·
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Notes to Pro Forma Condensed Combined Financial Statements
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(d)Exhibits
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||
23.1 | Consent of Independent Auditors, Grant Thornton | |
99.1
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Audited Financial Statements and Report Thereon listed in Item 9.01(a)
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99.2
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Unaudited Pro Forma Financial Information listed in Item 9.01(b)
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ZAP
|
|||
Dated: April 8, 2011
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By:
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/s/ Steven M. Schneider | |
Steven M. Schneider | |||
Chief Executive Officer | |||
Report of Independent Registered Public Accounting Firm
|
5
|
Balance Sheets as of December 31, 2010 and 2009
|
6
|
Statements of Operations and Comprehensive Income for the years ended December 31, 2010 and 2009
|
7
|
Statements of Changes in Shareholder’s Equity for the years ended December 31, 2010 and 2009
|
8
|
Statements of Cash Flows for the years ended December 31, 2010 and 2009
|
9
|
Notes to Financial Statements
|
10
|
ASSETS
|
||||||||
Current assets:
|
12/31/10 | 12/31/09 | ||||||
Cash and cash equivalents
|
$ | 5,509 | $ | 1,391 | ||||
Accounts receivable
|
2,380 | 19 | ||||||
Due from related parties
|
1,730 | 2,536 | ||||||
Notes receivable
|
2,618 | 3,659 | ||||||
Inventories- net of reserve of $258 in 2010 and $363 in 2009
|
12,828 | 9,049 | ||||||
Prepayment to suppliers
|
1,197 | 2,071 | ||||||
Other Receivables
|
867 | 700 | ||||||
Deferred tax assets
|
339 | 225 | ||||||
Total current assets
|
$ | 27,468 | $ | 19,650 | ||||
Non-current assets
|
||||||||
Property and equipment, net
|
45,561 | 41,182 | ||||||
Total assets
|
$ | 73,029 | $ | 60,832 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 13,729 | $ | 11,448 | ||||
Notes payable
|
4,239 | — | ||||||
Due to related parties
|
2,698 | 50,853 | ||||||
Other payables
|
1,025 | 3,090 | ||||||
Accrued liabilities
|
6,275 | 3,790 | ||||||
Advance from customers
|
2,016 | 2,513 | ||||||
Tax payable
|
2,207 | 1,158 | ||||||
Total current liabilities
|
$ | 32,189 | $ | 72,852 | ||||
Non-current liabilities
|
||||||||
Accrued liabilities | $ | 343 | $ | 207 | ||||
Total liabilities | $ | 32,532 | $ | 73,059 | ||||
Shareholders’ equity (deficit):
|
||||||||
Registered capital
|
$ | 11,480 | $ | 1,230 | ||||
Accumulated deficit
|
(13,598 | ) | (12,668 | ) | ||||
Additional paid-in capital
|
42,164 | — | ||||||
Accumulated other comprehensive income (loss)
|
451 | (789 | ) | |||||
Total shareholders' equity (deficit)
|
40,497 | (12,227 | ) | |||||
Total Liabilities and Shareholders’ equity (deficit)
|
$ | 73,029 | $ | 60,832 |
Year ended December 31, | ||||||||
2010 | 2009 | |||||||
Net sales
|
$ | 74,142 | $ | 42,212 | ||||
Cost of sales
|
(64,792 | ) | (40,324 | ) | ||||
Gross profit
|
9,350 | 1,888 | ||||||
Operating expenses:
|
||||||||
Sales and marketing
|
(6,869 | ) | (3,596 | ) | ||||
General and administrative
|
(3,872 | ) | (2,793 | ) | ||||
Research and development
|
(888 | ) | (447 | ) | ||||
Loss from operations
|
(2,279 | ) | (4,948 | ) | ||||
Other income (expense):
|
||||||||
Interest expense
|
(84 | ) | (1,459 | ) | ||||
Other income, net
|
1,813 | 1,094 | ||||||
Total Other Income (expense)
|
1,729 | (365 | ) | |||||
Loss before income tax
|
(550 | ) | (5,313 | ) | ||||
Income tax benefit
|
105 | 100 | ||||||
Net loss
|
$ | (445 | ) | $ | (5,213 | ) | ||
Other comprehensive income (loss)
|
||||||||
Foreign currency translation adjustment | 1,241 | (5 | ) | |||||
Comprehensive income (loss) | $ | 796 | $ | (5,218 | ) |
Registered
Capital
|
Additional
Paid-in Capital
|
Accumulated
Deficit
|
Comprehensive
income/(loss)
|
Total | ||||||||||||||||
Balance at December 31, 2008
|
$ | 1,230 | $ | — | $ | (7,455 | ) | $ | (784 | ) | $ | (7,009 | ) | |||||||
Foreign currency translation adjustment
|
(5 | ) | (5 | ) | ||||||||||||||||
Net loss
|
(5,213 | ) | (5,213 | ) | ||||||||||||||||
|
||||||||||||||||||||
Balance at December 31, 2009
|
$ | 1,230 | $ | — | $ | (12,668 | ) | $ | (789 | ) | (12,227 | ) | ||||||||
Increase in registered capital
|
10,250 | 10,250 | ||||||||||||||||||
Additional paid-in capital
|
42,164 | 42,164 | ||||||||||||||||||
Foreign currency translation adjustment
|
1,240 | 1,240 | ||||||||||||||||||
Consideration given in excess of the book value of net assets received
|
(485 | ) | (485 | ) | ||||||||||||||||
Net loss
|
(445 | ) | (445 | ) | ||||||||||||||||
|
||||||||||||||||||||
Balance at December 31, 2010
|
$ | 11,480 | $ | 42,164 | $ | (13,598 | ) | $ | 451 | 40,497 |
Year ended December 31, | ||||||||
2010 | 2009 | |||||||
Operating activities:
|
(in thousands) | |||||||
Net loss
|
$ | (445 | ) | $ | (5,213 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
4,583 | 3,136 | ||||||
Inventory reserve
|
48 | 39 | ||||||
Loss on disposal of property and equipment
|
18 | 4 | ||||||
Deferred tax
|
(105 | ) | (100 | ) | ||||
Other changes in assets and liabilities:
|
||||||||
Accounts receivable
|
(2,529 | ) | (1,147 | ) | ||||
Notes receivable
|
1,041 | (3,630 | ) | |||||
Inventories
|
(3,827 | ) | (5,687 | ) | ||||
Prepayment to suppliers
|
937 | — | ||||||
Other receivables
|
1,193 | (310 | ) | |||||
Accounts payable
|
2,312 | 8,080 | ||||||
Notes payable
|
5,119 | (1,053 | ) | |||||
Tax payable
|
1,059 | 445 | ||||||
Advance from customers
|
(497 | ) | 6,433 | |||||
Other payables
|
(5,998 | ) | 1,138 | |||||
Accrued liabilities
|
2,448 | 63 | ||||||
Cash used for operating activities
|
5,357 | 2,198 | ||||||
Investing activities:
|
||||||||
Purchase of property and equipment
|
(4,522 | ) | (4,835 | ) | ||||
Proceeds from disposal of property and equipment
|
83 | 12 | ||||||
Cash used for investing activities
|
(4,439 | ) | (4,823 | ) | ||||
Financing activities:
|
||||||||
Proceeds from short term loan
|
1,812 | — | ||||||
Prepayment of short term loan
|
(1,812 | ) | — | |||||
Proceeds from related party
|
5,710 | 7,792 | ||||||
Repayment to related party
|
(7,361 | ) | (4,966 | ) | ||||
Proceeds from paid in capital
|
4,691 | — | ||||||
Cash provided by financing activities
|
3,040 | 2,826 | ||||||
Effect of exchange rate changes on cash
|
160 | (3 | ) | |||||
Increase in cash
|
4,118 | 198 | ||||||
Cash at beginning of year
|
1,391 | 1,193 | ||||||
Cash at end of year
|
5,509 | 1,391 | ||||||
Supplementary disclosure of cash flow information
|
||||||||
Interest expenses paid | $ | (67 | ) | $ | — |
Machinery and equipment
|
10 years
|
Computer equipment and software
|
3-10 years
|
Office furniture and equipment
|
5 years
|
Vehicles
|
5 years
|
Building and improvements
|
20 years
|
Land
|
50 years
|
2010 | 2009 | |||||||
Parts and supplies
|
$ | 5,536 | $ | 2,680 | ||||
Work in progress
|
2,047 | 1,200 | ||||||
Finished goods-SUVs
|
5,503 | 5,532 | ||||||
|
13,086 | 9,412 | ||||||
Less - inventory reserve
|
(258 | ) | (363 | ) | ||||
|
$ | 12,828 | $ | 9,049 |
2010 | 2009 | |||||||
Balance as of January 1,
|
$ | 363 | $ | 328 | ||||
Provision for slow moving inventories
|
48 | 39 | ||||||
Write-off of slow moving inventories
|
(153 | ) | (4 | ) | ||||
Balance as of December 31,
|
$ | 258 | $ | 363 |
2010 | 2009 | |||||||
Land
|
$ | 4,404 | $ | 1,232 | ||||
Buildings and improvements
|
16,823 | 15,197 | ||||||
Machinery and equipment
|
33,390 | 30,099 | ||||||
Computer equipment and software
|
210 | 132 | ||||||
Office furniture and equipment
|
2 | 2 | ||||||
Vehicles
|
337 | 284 | ||||||
|
55,166 | 46,946 | ||||||
Less - accumulated depreciation and amortization
|
(9,605 | ) | (5,764 | ) | ||||
|
$ | 45,561 | $ | 41,182 | ||||
2010 | 2009 | |||||||
Current liabilities:
|
||||||||
Accrued contractual fees due to UFO
|
$ | 1,274 | $ | 842 | ||||
Accrued sales rebate
|
2,561 | 1,322 | ||||||
Accrued employee bonus
|
799 | 598 | ||||||
Customer deposits
|
652 | 480 | ||||||
Warrant liabilities
|
247 | 40 | ||||||
Accrued transportation fee
|
742 | 508 | ||||||
|
$ | 6,275 | $ | 3,790 | ||||
Non-current liabilities:
|
||||||||
Warrant liabilities | $ | 343 | $ | 207 |
2010 | 2009 | |||||||
Deferred tax assets:
|
||||||||
Property and equipment, due to differences in depreciation
|
$ | 127 | $ | 72 | ||||
Inventories, due to impairment
|
65 | 91 | ||||||
Accrued liabilities
|
147 | 62 | ||||||
|
||||||||
Total deferred tax assets, gross
|
339 | 225 | ||||||
Valuation allowance
|
— | — | ||||||
Deferred tax assets, net of valuation allowance
|
$ | 339 | $ | 225 |
2010 | 2009 | |||||||
Less than 1 year:
|
$ | 2 | $ | 3 |
The first 3,000 vehicles
|
USD 44 per vehicle
|
Vehicles from 3,001 to 5,000
|
USD 30 per vehicle
|
Vehicles over 5,000
|
USD 22 per vehicle
|
Year ended December 31 | ||||||||
2010 | 2009 | |||||||
Conversion of payables into paid-in capital
|
$ | 47,135 | $ | — | ||||
Capital injection by net assets of related parties | $ | 587 | $ | — |
As reported
|
Pro Forma
|
Pro Forma
|
||||||||||||||||
ZAP
|
Jonway
|
Adjustments
|
Notes
|
Combined
|
||||||||||||||
Assets:
|
||||||||||||||||||
Current Assets:
|
||||||||||||||||||
Cash and cash equivalents | $ | 1,503 | $ | 5,509 | $ | 19,000 |
(a)
|
$ | 6,982 | |||||||||
(19,030 | ) |
(b)
|
||||||||||||||||
Investment in related party | 1,888 | - | - | 1,888 | ||||||||||||||
Accounts receivable, net | 294 | 2,380 | - | 2,674 | ||||||||||||||
Due from related parties | - | 1,730 | - | 1,730 | ||||||||||||||
Notes receivables | - | 2,618 | - | 2,618 | ||||||||||||||
Inventories, net | 1,822 | 12,828 | 236 |
(b)
|
14,886 | |||||||||||||
Prepaid expenses and other current assets | 266 | 2,064 | - | 2,330 | ||||||||||||||
Deferred tax assets | - | 339 | - | 339 | ||||||||||||||
Total current assets | 5,773 | 27,468 | 206 | 33,447 | ||||||||||||||
Property and equipment, net
|
173 | 45,561 | 662 |
(c)
|
46,396 | |||||||||||||
Investment in non-consolidated joint venture
|
808 | - | - | 808 | ||||||||||||||
Distribution fees for Jonway Products and
|
||||||||||||||||||
Better World Products, net
|
15,599 | - | - | 15,599 | ||||||||||||||
Deposit on Jonway acquisition
|
11,000 | - | (11,000 | ) |
(b)
|
- | ||||||||||||
Goodwill and intangible assets
|
- | - | 19,455 |
(c)(d)
|
19,455 | |||||||||||||
Deposits and other assets, net
|
159 | - | - | 159 | ||||||||||||||
Total assets
|
$ | 33,512 | $ | 73,029 | $ | 9,323 | $ | 115,864 | ||||||||||
Liabilities and shareholder's equity
|
||||||||||||||||||
Current liabilities:
|
||||||||||||||||||
Accounts payable | $ | 328 | $ | 13,729 | $ | - | $ | 14,057 | ||||||||||
Accrued expenses and other current liabilities | 2,197 | 9,507 | - | 11,704 | ||||||||||||||
Current portion of long-term debt | 668 | - | - | 668 | ||||||||||||||
Notes payable | - | 4,239 | - | 4,239 | ||||||||||||||
Due to related parties | - | 2,698 | - | 2,698 | ||||||||||||||
Advances from customers | - | 2,016 | - | 2,016 | ||||||||||||||
Total current liabilities | 3,193 | 32,189 | - | 35,382 | ||||||||||||||
Derivative liability | 5,539 | - | - | 5,539 | ||||||||||||||
Other long term liabilities | - | 343 | - | 343 | ||||||||||||||
Deferred tax liability | - | - | 166 |
(c)
|
166 | |||||||||||||
Convertible note | - | - | 8,624 |
(a)
|
8,624 | |||||||||||||
Total Long term Liabilities | 5,539 | 343 | 8,790 | 14,672 | ||||||||||||||
Total Liabilities | 8,732 | 32,532 | 8,790 | 50,054 | ||||||||||||||
Shareholders' equity
|
||||||||||||||||||
Common stock | 179,775 | - | 2,000 |
(b)
|
181,775 | |||||||||||||
Registered capital | - | 11,480 | (11,480 | ) |
(e)
|
- | ||||||||||||
Additional paid-in capital | - | 42,164 | (42,164 | ) |
(e)
|
- | ||||||||||||
Warrants | - | - | 10,376 |
(a)
|
10,376 | |||||||||||||
Accumulated deficit | (154,883 | ) | (13,598 | ) | 13,598 |
(e)
|
(154,883 | ) | ||||||||||
Accumulated other comprehensive income (loss) | (112 | ) | 451 | (451 | ) |
(e)
|
(112 | ) | ||||||||||
Shareholders' equity attributable to ZAP | 24,780 | 40,497 | (28,121 | ) | 37,156 | |||||||||||||
Non-controlling interest | - | - | 28,654 |
(e)
|
28,654 | |||||||||||||
Total shareholders' equity | 24,780 | 40,497 | 533 | 65,810 | ||||||||||||||
Total liabilities and shareholders' equity
|
$ | 33,512 | $ | 73,029 | $ | 9,323 | $ | 115,864 |
As reported
|
Pro Forma
|
Pro Forma
|
|||||||||||||||
ZAP
|
Jonway
|
Adjustments
|
Notes
|
Combined
|
|||||||||||||
Net sales
|
$ | 3,816 | $ | 74,142 | $ | - | $ | 77,958 | |||||||||
Cost of goods sold
|
3,387 | 64,792 | 236 |
(f)
|
68,528 | ||||||||||||
113 |
(g)
|
||||||||||||||||
Gross profit
|
429 | 9,350 | (349 | ) | 9,430 | ||||||||||||
Operating expenses:
|
|||||||||||||||||
Sales and marketing
|
2,013 | 6,869 | 12 |
(g)
|
8,894 | ||||||||||||
General and administrative
|
11,458 | 3,872 | (600 | ) |
(h)
|
14,737 | |||||||||||
7 |
(g)
|
||||||||||||||||
Research and development
|
1,054 | 888 | - | 1,942 | |||||||||||||
Amortization of intangible assets
|
- | - | 3,858 |
(i)
|
3,858 | ||||||||||||
Loss from operations
|
(14,096 | ) | (2,279 | ) | (3,626 | ) | (20,001 | ) | |||||||||
Other (expense) income, net:
|
|||||||||||||||||
Interest expense
|
(1,322 | ) | (84 | ) | (1,520 | ) |
(j)
|
(12,504 | ) | ||||||||
(9,578 | ) |
(k)
|
|||||||||||||||
Loss on financial instruments
|
(4,094 | ) | - | - | (4,094 | ) | |||||||||||
Gain on extinguishment of debt
|
817 | - | - | 817 | |||||||||||||
Interest and other (expense) income, net
|
(319 | ) | 1,813 | - | 1,494 | ||||||||||||
Loss before income taxes
|
(19,014 | ) | (550 | ) | (14,724 | ) | (34,288 | ) | |||||||||
Provision (benefit) for income taxes
|
4 | (105 | ) | - | (101 | ) | |||||||||||
Loss after income taxes
|
(19,018 | ) | (445 | ) | (14,724 | ) | (34,187 | ) | |||||||||
Loss attributable to non-controlling interest
|
- | - | (2,289 | ) |
(l)
|
(2,289 | ) | ||||||||||
Net income (loss) after non-controlling interest
|
$ | (19,018 | ) | $ | (445 | ) | $ | (12,435 | ) | $ | (31,898 | ) | |||||
Net loss per common share
|
|||||||||||||||||
Basic and diluted
|
$ | (0.16 | ) | $ | - | $ | - | $ | (0.27 | ) | |||||||
Weighted average shares of common
|
|||||||||||||||||
shares outstanding
|
|||||||||||||||||
Basic and diluted
|
118,387 | - | - | 118,387 |
(a)
|
Reflects the issuance of the Note in the principal amount of US$19.0 million in exchange for $19 million in cash and the issuance of the Warrant for the purchase of up to 20,000,000 shares of the Company’s common stock at $0.50 per share, subject to adjustments. The fair value of the Warrants and the Note are approximately $10.4 million and $8.6 million, respectively.
|
(b)
|
Reflects total payment consideration of approximately $32.0 million, which includes the payment of additional consideration in the form of shares to finalize the currency exchange relative to the purchase price.
|
(c)
|
Reflects the preliminary allocation of the purchase price to the Jonway assets acquired and liabilities assumed (000’s).
|
Increase due to step-up in basis of inventory
|
$ | 236 | ||
Increase due to step-up in basis of property, plant and equipment
|
662 | |||
Recognition of goodwill and intangibles
|
19,455 | |||
Recognition of deferred tax liability
|
(166 | ) | ||
Elimination of registered capital of Jonway
|
11,480 | |||
Elimination of additional paid-in capital of Jonway
|
42,164 | |||
Elimination of accumulated deficit of Jonway
|
(13,598 | ) | ||
Elimination of accumulated other comprehensive loss of Jonway
|
451 | |||
Recognition of non-controlling interest
|
(28,654 | ) |
(d)
|
Reflects the establishment of identifiable intangible assets of $19.5 million. For purposes of the pro forma condensed combined statement of operations, it was assumed that the full $19.5 million is related to an intangible asset with an assumed life of 5 years. Formal appraisals are in process for all of Jonway’s intangibles, which could result in a significantly different value being placed on the intangibles.
|
(e)
|
Reflects an adjustment to eliminate registered capital of $11.5 million, additional paid-in capital of $42.2 million, accumulated deficit of $13.6 million and other comprehensive income of $451,000 of Jonway and to reflect a non-controlling interest of $28.7 million in the pro forma condensed consolidated balance sheet at December 31, 2010.
|
(f)
|
Reflects a charge to cost of goods sold for the step up in basis of inventory.
|
(g)
|
Reflects a charge for depreciation expense relative to the step up in basis of property, plant and equipment.
|
(h)
|
Reflects estimated acquisition-related costs of approximately $600,000. An adjustment has been made to the unaudited pro forma consolidated statement of operations for these costs as they are non-recurring.
|
(i)
|
Reflects amortization expense associated with the identifiable intangible assets estimated in Note (c) above.
|
(j)
|
Reflects an adjustment to record pro forma interest expense of $1.5 million for the year ended December 31, 2010. The interest charge is based on an interest rate of 8% on the $19.0 million Note and assumes such Note was issued as of January 1, 2010 and is outstanding at December 31, 2010.
|
(k)
|
Reflects an adjustment to record imputed interest on the Note, increasing its balance from $8.6 million as of January 1, 2010 to $18.2 million as of December 31, 2010.
|
(l)
|
Reflects the loss attributable to non-controlling interest.
|