8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Amendment No. 2

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported):  January 21, 2011

ZAP

(Exact name of Registrant as specified in its charter)

California	0-303000		94-3210624
(State or other jurisdiction of incorporation or organization)	Commission File Number		IRS Employer Identification Number
501 Fourth Street Santa Rosa, CA		95401
(Address of principal executive offices)		(Zip Code)

(707) 525-8658

(Registrant’s telephone number, including area code)

not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-14(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

On April 8, 2011, ZAP filed Amendment No. 1 to the Current Report on Form 8-K dated January 21, 2011 disclosing the completion by ZAP of the acquisition of 51% of the capital stock of Zhejiang Jonway Automobile Co. Ltd. (“Jonway”).  Included with Amendment No. 1 were financial statements of Jonway for the year ended December 31, 2010 and pro forma financial information required by Item 9.01.   However, due to a filing error, an incorrect version of the financial statements of Jonway was included with Amendment No. 1.  The correct version of the financial statements is included with this Amendment No. 2.  The financial statements included with Amendment No. 1 incorrectly presented approximately $485,000 of consideration given in excess of the book value of net assets received under “Accumulated deficit”  rather than under “Other comprehensive income (loss)”.

This Amendment No. 2 also corrects the description of the Transaction in Item 2.01 and Exhibit 99.2 and removes Exhibit 23.1, which was filed in error and not required to be filed.  

Section 2 Completion of Acquisition or Disposition of Assets

Item 2.01 Completion of Acquisition or Disposition of Assets.

On January 21, 2011, the Company completed the acquisition of 51% of the equity shares of Jonway (the “Transaction”) for a total purchase price of $30,580,000 of which $29,030,000 in cash and 4 million shares of stock valued at $1 million have been paid.  Currently, Jonway Group and ZAP are discussing the form of payment of the remaining $550,000 owed to Jonway Group and the interpretation of a provision regarding an adjustment due to currency fluctuations in the exchange rate of the U.S. dollar to Chinese Yuan between ZAP’s payment dates. The Company funded a portion of the purchase price of the Transaction through a Senior Secured Convertible Note and Warrant Purchase Agreement (the “Agreement”) with China Electric Vehicle Corporation (“CEVC”), a British Virgin Island company whose sole shareholder is Cathaya Capital, L.P.

Pursuant to the Agreement, (i) CEVC purchased from the Company a Senior Secured Convertible Note (the “Note”) in the principal amount of US$19 million, (ii) the Company issued to CEVC a warrant (the “Warrant”) exercisable for two years for the purchase up to 20,000,000 shares of the Company’s Common Stock at $0.50 per share, subject to adjustments as set forth therein, (iii) the Company, certain investors and CEVC entered into an Amended and Restated Voting Agreement that amended and restated that certain Voting Agreement, dated as of August 6, 2009, (iv) the Company, certain investors and CEVC entered into an Amended and Restated Registration Rights Agreement that amended and restated that certain Registration Rights Agreement, dated as of August 6, 2009, which granted certain registration rights relating to the Note and the Warrant, and (v) the Company and CEVC entered into a Security Agreement that secures the Note with all of the Company’s assets other than those assets specifically excluded from the lien created by the Security Agreement.

The purpose of this Amendment No. 2 to the Current Report on Form 8-K is to file the financial statements and the pro forma financial information required by Item 9.01 hereunder.

Section 9 Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(a)   Financial Statements of Business Acquired.

The following financial statements of Jonway are attached as Exhibit 99.1 of this Report and are incorporated by reference herein:

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Audited financial statements:

· Report of Independent Registered Public Accounting Firm

· Balance Sheets as of December 31, 2010 and 2009

· Statements of Operations and Comprehensive Income for the years ended December 31, 2010 and 2009

· Statements of Changes in Shareholder’s Equity for the years ended December 31, 2010 and 2009

· Statements of Cash Flows for the years ended December 31, 2010 and 2009

· Notes to Financial Statements

(b)  Pro Forma Financial Information.

The following unaudited pro forma financial information is attached as Exhibit 99.2 of this Report and is incorporated by reference herein:

·   Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2010

·   Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2010

·   Notes to Pro Forma Condensed Combined Financial Statements

	(d)Exhibits
99.1		Audited Financial Statements and Report Thereon listed in Item 9.01(a)
99.2		Unaudited Pro Forma Financial Information listed in Item 9.01(b)

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ZAP
Dated:    April 20, 2011	By:	/s/ Steven M. Schneider
		Steven M. Schneider
		Chief Executive Officer

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EX-99.1

EXHIBIT 99.1

Index to financial statements

Report of Independent Registered Public Accounting Firm	2
Balance Sheets as of December 31, 2010 and 2009	3
Statements of Operations and Comprehensive Income for the years ended December 31, 2010 and 2009	4
Statements of Changes in Shareholder’s Equity for the years ended December 31, 2010 and 2009	5
Statements of Cash Flows for the years ended December 31, 2010 and 2009	6
Notes to Financial Statements	7

Report of Independent Registered Public Accounting Firm

Board of Directors

Zhejiang Jonway Automobile Co., Ltd.

We have audited the accompanying balance sheets of Zhejiang Jonway Automobile Co., Ltd. (the “Company”) as of December 31, 2010 and 2009, and the related statements of operations and comprehensive income, changes in shareholders’ equity (deficit), and cash flows for the years then ended.These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2010 and 2009, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Grant Thornton

Shanghai, PRC

April 8, 2011

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Zhejiang Jonway Automobile Co., Ltd

BALANCE SHEET

 DECEMBER 31, 2010 and 2009

(In thousands)

ASSETS
	12/31/10			12/31/09
Current assets:
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		(13,113	)		(12,668	)
Additional paid-in capital		42,164			--
Accumulated other comprehensive income (loss)		(34	)		(789	)
Total shareholders’ equity (deficit)		40,497			(12,227	)
Total Liabilities and Shareholders’ equity (deficit)	$	73,029		$	60,832

The accompanying notes are an integral part of these financial statements.

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Zhejiang Jonway Automobile Co., Ltd

STATEMENTS OF OPERATION AND COMPREHENSIVE INCOME

For the year ended December 31, 2010 and 2009

 (In thousands)

	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		1,240			(5	)
Consideration given in excess of the book value of net assets received		(485	)		-
Total other comprehensive income (loss)	$	755		$	(5	)
Comprehensive income (loss)	$	310		$	(5,218	)

The accompanying notes are an integral part of these financial statements.

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Zhejiang Jonway Automobile Co., Ltd

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

 (In thousands)

	Registered Capital		Additional Paid-in Capital		Accumulated Deficit			Other 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	$	(13,113	)	$	(34	)		40,497

The accompanying notes are an integral part of these financial statements.

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Zhejiang Jonway Automobile Co., Ltd

STATEMENT OF CASH FLOWS

 (In thousands)

	Year ended December 31,
	2010			2009
	(in thousands)
Operating activities:
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	)	$	--

The accompanying notes are an integral part of these financial statements.

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Zhejiang Jonway Automobile Co., Ltd

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND OPERATIONS:

Zhejiang Jonway Automobile Co., Ltd. (“Jonway” or “the Company”) is a limited liability company incorporated in Sanmen County, Zhejiang Province of the People’s Republic of China (“the PRC”) on April 28, 2004 by Jonway Group Co., Ltd. (“Jonway Group”) and two individuals. Jonway Group is ownered by three individuals, Wang Huaiyi, Wang Gang (son of Wang Huaiyi) and Wang Xiao Ying (daughter of Wang Huaiyi) (collectively referred to as “Wang Family”). Jonway has an approved operating period of 10 years.

On January 14, 2010, net assets of Sanmen Li Te Rotating Machinery Co., Ltd., Sanmen Jonway Motorcycle Spare Parts Co., Ltd. and Sanmen Shenke Motorcycle Co., Ltd., which were owned by Wang Family, were injected to the registered capital of Jonway. The amount of this capital injection was in excess of the book value of the net assets by $485,000.

On July 8, 2010, ZAP entered into an agreement with Jonway Group for acquisition of 51% equity interests of Jonway. This transaction was approved by Department of Commerce of Zhejiang Province on September 3, 2010. Jonway obtained the Certificate of Approval for Enterprises with Foreign Investment on September 3, 2010 and the updated business license on October 8, 2010. As at January 21, 2011, ZAP completed the 51% equity acquisition of Jonway.

Jonway’s approved scope of business operations includes the production and sale of vehicle spare parts, and sale of vehicles of brand UFO. Vehicle spare parts are sold to UFO Sanmen Branch while the vehicles are sold to the dealers.

NOTE 2 BASIS OF PREPARATION AND USE OF ESTIMATIONS

The financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP).

The reporting currency of the Jonway is the US dollar (USD). The Company uses its local currency, Renminbi (RMB), as its functional currency. Results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of each period. Capital paid in RMB is translated into USD at the historical exchange rates at the contribution dates. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of changes in shareholders’ equity. Because cash flows are also translated at average translation rates, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in Jonway’s financial statements and accompanying notes. Estimates were made relating to the useful lives of fixed assets, valuation allowances, impairments of assets. Actual results could differ materially from those estimates.

NOTE 3 SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

Jonway records revenues only upon the occurrence of all of the following conditions:

-Jonway has received a binding purchase order from the customer or distributor authorized by a representative empowered to commit the purchaser (evidence of a sale);

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-The purchase price has been fixed, based on the terms of the purchase order;

-Jonway has delivered the product from its factory to a common carrier acceptable to the customer; and

-Jonway deems the collection of the amount invoiced probable.

Jonway provides no price protection. Sales are recognized net of promotional discounts, rebates and return allowances.

Fair value of  financial instruments

Jonway measures its financial assets and liabilities in accordance with U.S. GAAP. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. For certain of Jonway’s financial instruments, including notes receivable, accounts receivable, prepayment to suppliers, other receivables, notes payable, accounts payable, other payables, advance from customers, due from/(to) related parties and accrued liabilities, the carrying amount approximates fair value because of the short maturities. The fair value of debt is not determinable due to the terms of the debt and the lack of a comparable market for such debt.

Cash

Jonway’s cash refers to all cash in hand and call deposits. Jonway has not experienced any losses in such account and believes it is not exposed to any significant credit risk on cash.

Accounts Receivable

Jonway performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral from its customers. Jonway maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of Jonway’s customers should deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. As a result of this analysis, Jonway believes that no allowance for doubtful accounts is required at December 31, 2010 and 2009.

Inventories

Inventories consist primarily of Sports Utility Vehicles (“SUV”), parts and supplies and work in progress and are carried at the lower of cost (weighted average method) or market. Jonway 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 Jonway’s products and corresponding demand were to decline, then additional reserves may be deemed necessary.

Property and equipment

Property and equipment consists of land, building and improvements, machinery and equipment, office furniture and equipment and vehicles. Property and equipment is stated at cost and is depreciated or amortized using straight-line method over the asset’s estimated useful life. Costs of maintenance and repairs are charged to expense as incurred; significant renewals and betterments are capitalized. Estimated useful lives are as follows:

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

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Long-lived assets

Long-lived assets are consisted of property and equipment and intangible assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An estimate of undiscounted future cash flows produced by the asset, or by the appropriate grouping of assets, is compared to the carrying value to determine whether impairment exists. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flow and fundamental analysis. Jonway reports an asset to be disposed of at the lower of its carrying value or its estimated net realizable value.

Notes payable

These are bankers’ acceptance for payment of goods as at December 31, 2010 and 2009.

Advertising cost

The cost of advertising is expensed as incurred. Advertising and marketing expenses amounted to $2,778,000 and $1,172,000 for the years ended December 31, 2010 and 2009, respectively.

Product warranty cost

Jonway has provided a 2-year or 60,000 kilometers mileage warranty for its SUV products. Jonway records the estimated cost of the product warranties at the time of sale using the estimated cost of product warranties based on historical results. 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.

Research and development

Research and product development costs are expensed as incurred.

Comprehensive loss

The Company has no components of comprehensive loss other than its net loss, foreign currency translation adjustment and consideration given in excess of the book value of net assets received.

Income taxes

Under the relevant regulations of the Corporate Income Tax Law in the PRC, the corporate income tax rate applicable to the Company is 25%.

Jonway accounts for income taxes using an asset and liability method for financial accounting and reporting purposes. Deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities, operating loss and tax credit carry-forwards and are measured using the currently enacted tax rates and laws. Jonway has made no provision for income taxes in any period presented in the accompanying financial statements because it incurred operating losses in each of these periods.

Jonway analyzes its deferred tax assets with regard to potential realization.  Jonway has established a valuation allowance on its deferred tax assets to the extent that management has determined that it is more likely than not that some portion or all of the deferred tax asset will not be realized based upon the uncertainty of their realization.  Jonway has considered estimated future taxable income and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance.

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NOTE 4 - INVENTORIES

Inventories at December 31, 2010 and 2009 are summarized as follows (in thousands):

	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

Changes in Jonway’s inventory reserve during the years ended December 31, 2010 and 2009 are as follows (in thousands):

	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

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2010 and 2009 are summarized as follows (in thousands):

	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

As at December 31, 2009, part of Jonway’s buildings were constructed on the lands totaling 62,853 square meters, of which the land use rights were under the title of three related companies owned by Wang Family, Sanmen Li Te Rotating Machinery Co., Ltd., Sanmen Jonway Motorcycle Spare Parts Co., Ltd. and Sanmen Shenke Motorcycle Co., Ltd. These lands were occupied by Jonway for free before the land use rights were transferred to Jonway upon

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the capital injection on January 14, 2010. As at December 31, 2010, Jonway was in the process of obtaining certificates of property for all its buildings. Depreciation and amortization expense for the years ended December 31, 2010 and 2009 was $4,583,068 and $3,136,302, respectively.

NOTE 6 - ACCRUED LIABILITIES

Accrued liabilities at December 31, 2010 and 2009 consisted of the following (in thousands):

	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

NOTE 7 - INCOME TAXES

Jonway has not provided for any enterprise income taxes since it has no taxable income in each year.

The tax effect of temporary differences that gave rise to significant portions of the deferred tax assets at December 31, 2010 and 2009 is presented below (in thousand):

	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

No deferred tax assets associated with tax losses were recognized during the years as it is uncertain Jonway has adequate taxable profits in the foreseeable future.

NOTE 8 – COMMITMENTS

Operating lease commitments

The future aggregate minimum lease payments due under non-cancelable operating leases are as follows (in thousands):

	2010		2009
Less than 1 year:	$	2	$	3

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NOTE 9 - SHAREHOLDERS’ EQUITY

Registered Capital

On January 14, 2010, net assets of Sanmen Li Te Rotating Machinery Co., Ltd., Sanmen Jonway Motorcycle Spare Parts Co., Ltd. and Sanmen Shenke Motorcycle Co., Ltd., were injected to the registered capital of Jonway. Jonway’s registered capital increased from USD 1,230,462 to USD 1,817,248. The increase in paid-in capital was contributed by Jonway Group and two individual shareholders, Wang Gang and Wang Xiao Ying, respectively.

Upon approval by the Shareholders Meeting on May 24, 2010, Jonway increased its registered capital from USD 1,817,248 to USD 11,479,791. The additional capital was contributed by Jonway Group by converting Jonway’s payable of USD 9,188,200 due to Jonway Group into capital, and by Wang Gang and Wang Xiao Ying in the form of cash contribution in the amounts of USD 342,581 and USD 131,762, respectively.

On July 8, 2010, ZAP entered into an agreement with Jonway Group for acquisition of 51% equity interests of Jonway. This transaction was approved by Department of Commerce of Zhejiang Province on September 3, 2010. Jonway obtained the Certificate of Approval for Enterprises with Foreign Investment on September 3, 2010 and the updated business license on October 8, 2010. As at January 21, 2011, ZAP completed the final payment for 51% equity acquisition of Jonway.

Additional Paid-in Capital

According to a resolution of the Shareholders Meeting dated May 31, 2010, Jonway’s payables due to Jonway Group of USD 37,947,442 were converted into capital contribution from Jonway Group, which was recorded as additional paid-in capital as at December 31, 2010.

According to the resolution, another two individual shareholders, Wang Gang and Wang Xiao Ying, also made cash contributions of USD 3,373,106 and USD 843,276 to Jonway. Jonway received the cash contributions from Wang Gang and Wang Xiao Ying in October 2010, which was recorded as additional paid-in capital as at December 31, 2010.

NOTE 10 - RELATED PARTY

Contractual arrangements with Zhejiang UFO Automobile Manufacturing Co., Ltd.

Based on a tripartite contract among Zhejiang UFO Automobile Manufacturing Co., Ltd. (“Zhejiang UFO”), Jonway Group and Jonway, Zhejiang UFO authorises Jonway to operate the Sanmen branch of Zhejiang UFO (“UFO Sanmen Branch”) for assembling and sale of the UFO branded SUVs for a period of 10 years starting from January 1, 2006.

According to  the contract, Jonway shall pay Zhejiang UFO a fixed license fee of USD 147,999 per annum plus a variable fee (collectively, the “contractual fee”) which is calculated based on the number of SUVs that UFO Sanmen Branch assembles every year, at the following rates:

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

As at December 31, 2010 and 2009, Jonway had total contractual fee of USD 1,273,506 and USD 841,818 due to Zhejiang UFO, which Jonway recorded as accrued liabilities in its balance sheet.

Zhejiang UFO is considered as a related party as Wang Family has certain equity interests in Zhejiang UFO.

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Purchases of raw materials

Jonway purchased raw materials from Jonway Group. The purchase of raw materials was USD 1,468,741 in 2010 and USD 451,367 in 2009.

Plant and equipments lease

According to the contractual arrangement with Zhejiang UFO, Jonway rent a workshop and equipments to Zhejiang UFO from 2006. The lease income was USD 147,999 in both 2010 and 2009.

Borrowings from Jonway Group and Repayment to Jonway Group

Jonway borrowed USD 6 million from Jonway Group and repaid USD 7 million in 2010, and borrowed USD 8 million from Jonway Group and repaid USD 5 million in 2009.

NOTE 12 – LITIGATION

We know of no pending or threatened legal proceeding to which we are or will be a party which, if successful, might result in a material adverse change in our business, properties or financial condition. 

NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION

A summary of non-cash investing and financing information is as follows (in thousands):

	Year ended December 31
	2010		2009
Conversion of payables into paid-in capital	$	47,135	$	-
Capital injection by net assets of related parties	$	587	$	-

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EX-99.2

EXHIBIT 99.2

ZAP AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On January 21, 2011, the Company completed the acquisition of 51% of the equity shares of Jonway (the “Acquisition”) for a total purchase price of $30,580,000 of which $29,030,000 in cash and 4 million shares of stock valued at $1 million have been paid.  Currently, Jonway Group and ZAP are discussing the form of payment of the remaining $550,000 owed to Jonway Group and the interpretation of a provision regarding an adjustment due to currency fluctuations in the exchange rate of the U.S. dollar to Chinese Yuan between ZAP’s payment dates. The Company funded a portion of the purchase price of the Transaction through a Senior Secured Convertible Note and Warrant Purchase Agreement (the “Agreement”) with China Electric Vehicle Corporation (“CEVC”), a British Virgin Island company whose sole shareholder is Cathaya Capital, L.P. Pursuant to the Agreement, (i) CEVC purchased from the Company an 8% Senior Secured Convertible Note (the “Note”) in the principal amount of US$19 million and (ii) the Company issued to CEVC a warrant (the “Warrant”) exercisable for two years for the purchase up to 20,000,000 shares of the Company’s common stock at $0.50 per share, subject to adjustments as set forth therein.

As prescribed by Securities and Exchange Commission guidelines, the following unaudited pro forma condensed combined consolidated financial statements are based on the historical financial statements of ZAP and Jonway after giving effect to the Acquisition, and the assumptions, and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The historical financial information has been adjusted in the unaudited pro forma condensed combined financial data to give effect to pro forma events that are, based upon available information and certain assumptions, (i) directly attributable to the Acquisition, (ii) factually supportable and reasonable under the circumstances, and (iii) with respect to the statement of operations, expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined balance sheet as of December 31, 2010 is presented as if the Acquisition had occurred on December 31, 2010.  The unaudited pro forma combined statements of operations for the year ended December 31, 2010 is presented as if the Acquisition had occurred on January 1, 2010 with recurring acquisition-related adjustments reflected in the year.

The Acquisition will be accounted for under the acquisition method of accounting in accordance with the Financial Accounting Standard Board (“FASB”), Accounting Standard Codification (“ASC”) or ASC 805-10 topic for “Business Combinations” (formerly referred to as FASB Statement of Financial Accounting Standards No. 141R).  Management has estimated the fair value of tangible and intangible assets acquired and liabilities assumed based on preliminary estimates and assumptions.  These preliminary estimates and assumptions could change significantly during the purchase price measurement period. Any change could result in material variances between our future financial results and the amounts presented in these unaudited combined financial statements, including variances in fair values recorded, as well as expenses associated with these items.

The following unaudited pro forma condensed combined financial statements are prepared for illustrative purposes only and are not necessarily indicative of or intended to represent the results that would have been achieved had the Acquisition been consummated as of the dates indicated or that may be achieved in the future.  The unaudited pro forma condensed combined financial statements do not reflect any operating efficiencies, associated cost savings or additional costs that we may achieve with respect to the combined companies.

The unaudited pro forma condensed combined financial statements should be read in conjunction with ZAPs’ historical consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2010 and the historical financial statements of Jonway for the year ended December 31, 2010 (Exhibit 99.1 to this Form 8-K/A), and other information pertaining to ZAP and Jonway contained in this Form 8-K/A.

ZAP and Subsidiaries

Pro Forma Condensed Combined Balance Sheet

As of December 31, 2010

(Unaudited)

(Amounts in thousands)

	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	)		(13,113	)		13,113		(e)		(154,883	)
Accumulated other comprehensive income (loss)		(112	)		(34	)		34		(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

2

ZAP and Subsidiaries

Pro Forma Condensed Statement of Operations

For the year ended December 31, 2010

(Unaudited)

(Amounts in thousands, except net loss per share amounts)

	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

3

ZAP AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

Note 1   Basis of Presentation

The unaudited pro forma condensed combined financial information has been compiled from underlying financial statements prepared in accordance with U.S. GAAP and reflects the acquisition of Jonway by ZAP and Subsidiaries (“ZAP” or the “Company”) (the “Acquisition”). The underlying financial information of ZAP has been derived from the audited financial statements of ZAP included in its Annual Report on Form 10-K filed with the SEC on April 8, 2011. The underlying financial information for Jonway has been derived from the audited financial statements of Jonway as of and for the year ended December 31, 2010 contained in this Form 8-K/A.

The unaudited pro forma condensed combined financial information assumes that the Acquisition had been completed on January 1, 2010 for the unaudited pro forma condensed combined statement of operations and on December 31, 2010 for the unaudited pro forma condensed combined balance sheet.

This unaudited pro forma condensed combined financial information is not intended to reflect the financial position and results of operations which would have actually resulted had the Acquisition been effected on the dates indicated. Further, the pro forma results of operations are not necessarily indicative of the results of operations that may be obtained in the future.

Note 2 Summaries of Significant Accounting Policies

The unaudited pro forma condensed combined financial information has been prepared in a manner consistent with the accounting policies adopted by ZAP.

Note 3   Pro Forma Adjustments to the Balance Sheet as of December 31, 2010 resulting from the Acquisition:

(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		(13,113	)
Elimination of accumulated other comprehensive loss of Jonway		(34	)
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.

4

(e)   Reflects an adjustment to eliminate registered capital of $11.5 million, additional paid-in capital of $42.2 million, accumulated deficit of $13.1 million and other comprehensive loss of $34,000 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.

Note 4   Pro Forma Adjustments to the Statement of Operations for the year ended December 31, 2010 resulting from the Acquisition:

(a)   Reflects a charge to cost of goods sold for the step up in basis of inventory.

(b)   Reflects a charge for depreciation expense relative to the step up in basis of property, plant and equipment.

(c)  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.

(d)  Reflects amortization expense associated with the identifiable intangible assets estimated in Note (c) above.

(e)  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.

(f)  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.

(g) Reflects the loss attributable to non-controlling interest.

5