10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

Amendment No. 1

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2011

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ________ to _________

Commission File Number    001-32534

ZAP
(Exact name of registrant as specified in its charter)
California	94-3210624
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
501 4th Street, Santa Rosa, CA           95401
(Address of principal executive offices) (Zip Code)
(707) 525-8658
(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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  o                 No  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  x                 No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o Accelerated filer  o Non-accelerated filer  o Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o                 No  x

As of August 12, 2011, there were 215,356,481 shares outstanding of the issuer’s common stock.

EXPLANATORY NOTE

The sole purpose of this Amendment No. 1 to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2011, filed with the Securities and Exchange Commission on August 15, 2011 (the “Form 10-Q”), is to furnish Exhibit 101 to the Form 10-Q as required by Rule 405 of Regulation S-T.  Exhibit 101 to this report furnishes the XBRL (eXtensible Business Reporting Language) Interactive Data File for the financial statements and notes included in Part I, Item 1 of the Form 10-Q.

No changes have been made to the Form 10-Q other than the furnishing of Exhibit 101 described above.  This Amendment No. 1 does not reflect subsequent events occurring after the original filing date of the Form 10-Q, or modify or update in any way disclosures made in the Form 10-Q.

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

ITEM 6.  EXHIBITS.

Exhibits.

Exhibit Number	Description
3.1*	ZAP’s Amended and Restated Articles of Incorporation.
10.1*	Amended and Restated Settlement Agreement and Release by and among ZAP, Steven Schneider, and Peter Scholl dated as of June 20, 2011.
31.1*	Certification of Co-Principal Executive Officer pursuant to Rule 13a-14/15d-14 of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Co-Principal Executive Officer pursuant to Rule 13a-14/15d-14 of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3*	Certification of Principal Financial Officer pursuant to Rule 13a-14/15d-14 of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Co-Principal Executive Officers and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance Document.
101.SCH**	XBRL Taxonomy Extension Schema Document.
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document.

______________

*  Previously filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2011, filed with the Securities and Exchange Commission on August 15, 2011.

**  Filed herewith.

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 thereunto duly authorized.

Dated:    September 7, 2011 By: /s/ Steven Schneider                              

Name: Steven Schneider

Title: Co-Chief Executive Officer

         (Co-Principal Executive Officer)

Dated:    September 7, 2011 By: /s/ Alex Wang                                         

Name: Alex Wang

Title: Co-Chief Executive Officer

         (Co-Principal Executive Officer)

Dated:    September 7, 2011 By: /s/ Benjamin Zhu                                    

Name: Benjamin Zhu

Title: Chief Financial Officer

         (Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit Number	Description
3.1*	ZAP’s Amended and Restated Articles of Incorporation.
10.1*	Amended and Restated Settlement Agreement and Release by and among ZAP, Steven Schneider, and Peter Scholl dated as of June 20, 2011.
31.1*	Certification of Co-Principal Executive Officer pursuant to Rule 13a-14/15d-14 of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Co-Principal Executive Officer pursuant to Rule 13a-14/15d-14 of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3*	Certification of Principal Financial Officer pursuant to Rule 13a-14/15d-14 of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Co-Principal Executive Officers and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance Document.
101.SCH**	XBRL Taxonomy Extension Schema Document.
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document.

______________

*  Previously filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2011, filed with the Securities and Exchange Commission on August 15, 2011.

**  Filed herewith.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data	Jun. 30, 2011	Dec. 31, 2010
Condensed Consolidated Balance Sheets
Accounts receivable, allowance	$ 19	$ 27
Inventories, reserve	856	619
Distribution fees for Jonway and Better World products, amortization	2,041	961
Intangible assets, amortization	$ 451	$ 0
Common stock, shares authorized	800,000,000	800,000,000
Common stock, par value
Common stock, shares issued	215,107,078	207,254,789
Common stock, shares outstanding	215,107,078	207,254,789

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Condensed Consolidated Statements Of Operations (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Condensed Consolidated Statements Of Operations
NET SALES	$ 16,266	$ 849	$ 27,974	$ 1,697
COST OF GOODS SOLD	14,711	748	25,359	1,481
GROSS PROFIT	1,555	101	2,615	216
OPERATING EXPENSES
Sales and marketing	3,426	297	5,341	524
General and administrative (non-cash stock-based compensation of $0.8 million and $1.01 million and $1.1 million and $1.0 million for the three and Six Months ended June 30, 2011 and 2010, respectively)	4,270	1,789	10,429	4,015
Research and development	1,145	328	1,915	704
Operating costs and expenses, total	8,841	2,414	17,685	5,243
LOSS FROM OPERATIONS	(7,286)	(2,313)	(15,070)	(5,027)
OTHER INCOME (EXPENSE)
Interest expense, net	(6,978)	(559)	(8,828)	(1,045)
Gain on extinguishment of debt		817		817
Loss from equity interest in Joint Venture	(88)		(161)
Gain (Loss) on financial instruments	10	(276)	(349)	113
Other income (expense), net	636	(151)	780	(196)
Operating expenses, total	(6,420)	(169)	(8,558)	(311)
LOSS BEFORE INCOME TAXES	(13,706)	(2,482)	(23,628)	(5,338)
PROVISION (EXPENSE) BENEFIT FOR INCOME TAX	(9)		15	(4)
CONSOLIDATED NET LOSS	(13,715)	(2,482)	(23,613)	(5,342)
Less: net loss attributable to non controlling interest	(1,134)		(3,034)
Net loss attributable to ZAP	$ (12,581)	$ (2,482)	$ (20,579)	$ (5,342)
NET LOSS PER COMMON SHARE
- BASIC AND DILUTED	$ (0.06)	$ (0.02)	$ (0.10)	$ (0.05)
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING
- BASIC AND DILUTED	214,316	105,951	211,808	105,441

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Document And Entity Information	6 Months Ended
	Jun. 30, 2011	Aug. 12, 2011
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2011
Entity Registrant Name	ZAP
Entity Central Index Key	0001024628
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		215,356,481

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Inventories

6 Months Ended

Jun. 30, 2011

Inventories

Inventories

NOTE 6 – INVENTORIES

Inventories at June 30, 2011 and December 31, 2010 are summarized as follows (in thousands):

	June 30, 2011		December 31, 2010
Advanced technology vehicles	$	821	$	1,163
Vehicles-conventional		590		345
WIP Jonway SUV's		2,785		—
Parts and supplies		5,020		656
Finished goods		3,993		277
		13,209		2,441
Less - inventory reserve		(856)		(619	)
	$	12,353	$	1,822

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Related Parties

6 Months Ended

Jun. 30, 2011

Related Parties

Related Parties

NOTE 11 – RELATED PARTIES

Sale of Stock to a Party Related to ZAP's CO-CEO and Director

As previously disclosed in our 10-Q filed for the period ended March 31, 2011, we entered into private placement subscription agreements with Mr. Luo for the purchase of ZAP's common stock for the aggregate purchase price of $7 million, of which we received $2 million as of the quarter ended March 31, 2001.  The private place subscription agreements were superseded and terminated by a stock purchase agreement with Mr. Luo in August 2011 for the purchase of ZAP's common stock for an aggregate purchase price of $2 million in multiple closings.  To date, we have received approximately $771,000 pursuant to the stock purchase agreement. The parties have not confirmed the share price of the stock to be issued.

 Commitment to Purchase Company Owned by ZAP President

                ZAP's President Gary Dodd created the company ZAP Motor Manufacturing Kentucky, Inc., a Kentucky corporation, or ZMMK, and has applied for a loan from the U.S. Department of Energy under its Advanced Technology Vehicles Manufacturing Incentive Program.  ZAP has entered into a Manufacturing and Supply Agreement, dated as of March 29, 2009, pursuant to which, conditional upon ZMMK's receipt of the loan, ZAP would engage ZMMK to manufacture certain of its products. Conditional upon ZMMK's receipt of the loan, ZAP has the right to purchase a substantial equity ownership interest in ZMMK.

Rental Agreements

The Company rents office space, land and warehouse space from Mr. Steven Schneider, its CEO and a major shareholder. These properties are used to operate the car outlet and to store inventory. Rental expense was approximately $46,200 and $45,500 for the six months ended June 30, 2011 and 2010.

8% Senior Convertible Debt Due to China Electric Vehicle Corporation

On January 12, 2011, ZAP entered into 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.  Priscilla Lu, the chairman of the board of directors of ZAP, is also a general partner of Cathaya and a director of CEVC.

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, subject to adjustments as set forth therein, as amended, (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 amended (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 grants 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 Note matures on February 12, 2012, accrues interest at a rate per annum of 8%, and is convertible upon the option of CEVC at any time, into (a) shares of Jonway capital stock owned by ZAP at a conversion rate of 0.003743% of shares of Jonway capital stock owned by ZAP for each $1,000 principal amount of the Note being converted or (b) shares of ZAP common stock at a conversion rate of 4,435 shares of common stock for each $1,000 principal amount of the Note being converted. Upon conversion, any accrued interest on the  Note is waived. Effective March 31, 2011, the Company and ZAP entered into an amendment to the Note and Warrant to remove certain price-based anti-dilution features. At January 12, 2011, a discount of $10.4 million was recorded. This amount was to be amortized over 13 months. We amortized $2.6 million and $4.4 million of the discount in the three and six months ended June 30, 2011, respectively. In addition, the Company recorded $666,300 in accrued interest through the first six months ended June 30, 2011.

Management Agreement with Cathaya Capital, L.P.

As previously disclosed in the Company's Current Report on Form 8-K filed on August 10, 2009, on August 6, 2009, Cathaya purchased 20 million shares of the Company's Common Stock. On August 6, 2009, the Company entered into a Secured Convertible Promissory Note with Cathaya for aggregate principal advances of up to $10 million. In addition, the Company issued two warrants to Cathaya exercisable for shares of the Company's Common Stock.

On July 9, 2010, Cathaya entered into a securities purchase agreement, pursuant to which, Cathaya purchased 44 million shares of the Company's Common Stock at a price of $0.25 per share for an aggregate purchase price of $11 million.

Priscilla Lu, the chairman of the board of directors of ZAP, is also a general partner of Cathaya.

On November 10, 2010, ZAP entered into a Management Agreement with Cathaya, for the payment of $2.5 million in exchange for Cathaya's prior and ongoing transaction advisory, financial and management consulting services.  Pursuant to the agreement, principals of Cathaya will be available to serve on the Board and will devote such time and attention to the Company's affairs as reasonably necessary to accomplish the purposes of the agreement.  The agreement is renewable yearly and the management fee was payable in cash or in common stock of ZAP at $0.50 per share.  5 million shares were issued to Cathaya Capital L.P. on behalf of Cathaya Management Co. Ltd. in payment of this fee.  As of June 30, 2011, ZAP has accrued $1.2 million for management fees due to Cathaya.

Joint Venture ZAP Hangzhou

On December 11, 2009, the Company entered into a Joint Venture Agreement to establish a new US-China company incorporated as ZAP Hangzhou to design and manufacture electric vehicle and infrastructure technology with Holley Group, the parent company of a global supplier of electric power meters and Better World International, Limited, or Better World, a company focused on infrastructure technology and services for electric vehicles.  Priscilla Lu, Ph.D. who is the current Chairman of the Board of ZAP is also a director and shareholder of Better World. In January of 2011, Holley Group's interest in ZAP Hangzhou was purchased by Alex Wang, Co-CEO and director of ZAP. ZAP and Better World own 37.5% of the equity shares of ZAP Hangzhou, and Alex Wang owns 25% of the equity shares of ZAP Hangzhou. The joint venture partners have also funded the initial capital requirements under the agreement for a total of $3 million, of which ZAP's portion is $1.1 million.

We account for 37.5% interest in the ZAP Hangzhou Joint Venture by the equity method of accounting.  For the three months ended June 30, 2011, the joint venture incurred an operating loss of $429,230 of which $160,961 is our share.

Jonway Agreement with Zhejiang UFO

Based on a contract by and among the Zhejiang UFO, Jonway Group and Jonway dated as of January 1, 2006, Zhejiang UFO has authorized Jonway to operate its Sanmen Branch to assemble and sell UFO branded SUVs for a period of 10 years starting from January 1, 2006.

According to the contract, Jonway shall pay Zhejiang UFO a variable contractual fee which is calculated based on the number of SUVs that the Sanmen Branch assembles every year, at the following rates:

The first 3,000 vehicles	$44 per vehicle
Vehicles from 3,001 to 5,000	$30 per vehicle
Vehicles over 5,000	$22 per vehicle

Zhejiang UFO is considered a related party because Wang Huaiyi, Alex Wang (son of Wang Huaiyi) and Wang Xiao Ying (daughter of Wang Huaiyi), who are shareholders of Jonway, also have certain non-controlling equity interests in Zhejiang UFO. 

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Restatement Of 2010 Financial Statements

6 Months Ended

Jun. 30, 2011

Restatement Of 2010 Financial Statements

Restatement Of 2010 Financial Statements

NOTE 2-RESTATEMENT OF 2010 FINANCIAL STATEMENTS

On January 1, 2009, the Company adopted new accounting guidance Accounting Standards Codification ("ASC") 815-40, formerly EITF 07-5 "Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock") that required additional analysis as to whether or not stock purchase warrants are indexed to the Company's stock, a condition that is required to attain equity accounting.  Upon adoption of this guidance, the Company concluded that its previously issued stock purchase warrants should be classified as equity and therefore, the adoption of the new guidance did not have any impact on the historical financial statements or on the 2009 financial statements.

In connection with the review of certain equity transactions in 2010, the Company determined that certain stock purchase warrants issued in prior years should have been classified as derivative liabilities due to the presence of "price protection" provisions in those warrant agreements.  These provisions require that the Company modify existing warrants (as to the actual number of warrants and their exercise price) in the event that the Company issues subsequent equity (or equity linked instruments) at a price below the exercise price of the existing warrants.  As a result, the Company restated its 2010 financial information in its Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on April 15, 2011, to correct the misapplication of the new accounting guidance related to the accounting and classification of stock purchase warrants.  The financial information in this quarterly report reflects the restated financial information.

	(unaudited)			(unaudited)
Amounts in (000s)	Qtr 1 3/31/10			Qtr 2 6/30/10
Total liabilities as reported	$	12,715		$	8,594
Adjustments		1,053			1,329
Restated total liabilities & stockholders' equity	$	13.768		$	9,923
Net loss as reported	$	(3,248	)	$	(2,206	)
Adjustments		392			(276	)
Restated loss	$	(2,856	)	$	(2,482	)

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Distribution Agreements

6 Months Ended

Jun. 30, 2011

Distribution Agreements

Distribution Agreements

NOTE 8-DISTRIBUTION AGREEMENTS

Distribution agreements as of June 30, 2011 and December 31, 2010 are presented below (in thousands):

	June 30, 2011		December 31, 2010
Better World Products	$	2,160		2,160
Jonway Products		14,400		14,400
		16,560		16,560
Less amortization		(2,041)		(961)
	$	14,519		15,599

 Distribution Agreement with Better World International Limited

On January 15, 2010, ZAP entered into a Stock Purchase Agreement with Better World International Limited, a British Virgin Islands company, whereby the Company issued 6 million shares of it common stock valued at $2.16 million in exchange for an agreement on terms relating to rights to the distribution of Better World's products, such as charging stations for electric vehicles both in the U.S. and internationally.  Priscilla Lu, the chairman of the board of directors of ZAP, is also the director and a shareholder of Better World International Limited.

Distribution Agreement with Goldenstone Worldwide Limited for Jonway Products

On October 10, 2010, ZAP entered into an International Distribution with Goldenstone Worldwide Limited as the distributor of Jonway products such as gas SUVs and gas and electric motor scooters, both in the U. S. and internationally. In connection with the distribution agreement the Company also issued 30 million shares of ZAP common stock valued at $14.4 million.  The Jonway Group previously granted exclusive worldwide distribution of Jonway products to Goldenstone Worldwide Limited.   ZAP acquired a 51% equity interest in Jonway, but this equity interest did not include the world wide distribution rights for Jonway products.  Therefore, it was necessary for ZAP to acquire distribution rights for Jonway products.

Distribution Agreement with Samyang Optics

On January 27, 2010, ZAP entered into an International Distribution Agreement (the "Distribution Agreement") with Samyang Optics Co. Ltd. ("Samyang") pursuant to which ZAP appointed Samyang as the exclusive distributor of certain ZAP electric vehicles including the Jonway A380 5-door electric sports utility vehicle equipped with  ZAP's electric power train, in the Republic of Korea. The Distribution Agreement also provides that ZAP and Samyang will negotiate to enter into additional agreements related to the manufacture and assembly of ZAP vehicles by Samyang in Korea.  The Distribution Agreement shall be in effect for one year and may be extended annually by Samyang provided that Samyang has satisfied sales quotas determined by ZAP and Samyang is otherwise in compliance with the Distribution Agreement. The parties are currently discussing the extension of the agreement.

In addition, on January 27, 2010, ZAP and Samyang entered into an initial purchase order pursuant to the Distribution Agreement for the purchase of one hundred ZAP Jonway UFO electric sports utility vehicles.  Selling prices have yet to be determined and no purchases have been made as of June 30, 2011.

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Subsequent Events

6 Months Ended

Jun. 30, 2011

Subsequent Events

Subsequent Events

NOTE 13 - SUBSEQUENT EVENTS

                As previously disclosed in our 10-Q filed for the period ended March 31, 2011, we entered into private placement subscription agreements with Mr. Luo for the purchase of ZAP's common stock for the aggregate purchase price of $7 million, of which we received $2 million as of the quarter ended March 31, 2001.  The private place subscription agreements were superseded and terminated by a stock purchase agreement with Mr. Luo in August 2011 for the purchase of ZAP's common stock for an aggregate purchase price of $2 million in multiple closings.  To date, we have received approximately $771,000 pursuant to the stock purchase agreement. The parties have not confirmed the share price of the stock to be issued.

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Long-Term And Short-Term Notes

6 Months Ended

Jun. 30, 2011

Long-Term And Short-Term Notes

Long-Term And Short-Term Notes

 NOTE 9-  LONG-TERM AND SHORT-TERM NOTES

8% Senior Convertible Notes

On January 12, 2011, the Company entered into 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., a Cayman Islands exempted limited partnership ("Cathaya") Priscilla Lu is the chairman of the board of directors of ZAP, a managing partner of Cathaya and a director of CEVC.

 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, as amended, (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, as amended  (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 grants 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 Note matures on February 12, 2012, accrues interest at a rate per annum of 8%, and is convertible upon the option of CEVC at any time, into (a) shares of Jonway capital stock owned by ZAP at a conversion rate of 0.003743% of shares of Jonway capital stock owned by ZAP for each $1,000 principal amount of the Note being converted or (b) shares of ZAP common stock at a conversion rate of 4,435 shares of common stock for each $1,000 principal amount of the Note being converted. Upon conversion, any accrued interest on the  Note is waived. Effective March 31, 2011, the Company and ZAP entered into an amendment to the Note and Warrant to remove certain price-based anti-dilution features. At January 12, 2011, a discount of $10.4 million was recorded. This amount was to be amortized over 13 months. We amortized $2.6 million and $5.5million of the discount in the three and six months ended June 30, 2011, respectively. In addition, the Company recorded $666,300 in accrued interest through the first six months ended June 30, 2011.

The Company accounts for derivative instruments and debt instruments in accordance with the interpretative guidance of ASC 815, "Derivatives and Hedging", which codified SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), EITF 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock," APB No. 14, "Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants," EITF 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios" ("EITF 98-5"), and EITF 00-27, "Application of Issue No. 98-5 to Certain Convertible Instruments" ("EITF 00-27"), and associated pronouncements related to the classification and measurement of warrants and instruments with conversion features. It is necessary for the Company to make certain assumptions and estimates to value derivatives and debt instruments.

Short Term Notes

               As of June 30, 2011, ZAP had $2.3 million in short term notes, of which $1.5 million is a loan from a bank in China with an interest rate of 12.06% per year due on November 1, 2011.

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Goodwill & Other Intangibles

6 Months Ended

Jun. 30, 2011

Goodwill & Other Intangibles

Goodwill & Other Intangibles

NOTE 7-GOODWILL & OTHER INTANGIBLES

The intangible assets at June 30, 2011 are summarized as follows:

	Weighted				Comprehensive	Net
	Average	Net		Accumulated	Translation	Book
	Useful Life	Book Value	Additions	Amortization	Adjustment	Value
	(In Years)	12/31/2010	2011	6/30/2011	6/30/2011	6/30/2011
Exchange rate		6.62270			6.5825	6.463
Customer Relationships	8	-	3,300	(181)	16	3,135
Developed Technology	7	-	4,228	(249)	20	3,999
In Process Technology		-	547		3	550
Tradename		-	9,326		294	9,620
Intangibles			17,401	(430)	333	17,311
						-
Goodwill Assets			6,393		124	6,517
Goodwill & Intangibles			23,794	(430)	457	23,828

As of June 30, 2011, estimated future amortization expense for intangibles assets, subject to amortization, is as follows (in thousands):

Year	Amortization Expense
2011	$	510
2012		1,021
2013		1,021
2014		1,021
2015		1,021
Thereafter		2,540
	$	7,134

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Condensed Consolidated Statements Of Cash Flows (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Operating activities:
Consolidated net loss	$ (23,613)	$ (5,342)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based employee compensation	1,012	1,000
Stock-based compensation for consulting and other services	359	397
Depreciation and amortization	6,063	30
Derivative liability		(113)
Inventory Reserve	12
Provision for doubtful accounts	2	9
Investment in joint venture and other investments	161	148
Gain on extinguishment of debt		(817)
Loss on disposal of equipment	(29)
Management fees due to related party	1,250
Convertible debt discount	8,108	133
Changes in assets and liabilities (net of acquisition):
Accounts receivable	1,338	14
Notes receivable	4,287
Inventories	2,389	(295)
Prepaid expenses and other assets	(401)	393
Accounts payable	(1,147)	(232)
Accrued liabilities	2,174	(82)
Notes payable	(3,127)
Taxes payable	(601)
Advances to customers	(1,389)
Restricted cash	1,957
Cash used in operating activities	(1,195)	(4,757)
Investing activities:
Purchase of marketable securities		(2,000)
Acquisition of 51% Interest in Zhejiang Jonway Automobile, net	(18,477)
Acquisition of property and equipment	(580)
Proceeds from sale of equipment	81	16
Cash used in investing activities	(18,976)	(1,984)
Financing activities:
Proceeds from issuance of common stock	331
Proceeds from issuance of convertible debt	19,000	3,000
Proceeds from stock subscription agreement	2,000
Proceeds from insurance financing	174
Payment of short term debt	(2,185)
Proceeds from short term borrowing	1,535
Stock issuances for convertible debt discounts		667
Cash provided by financing activities	20,855	3,667
Effect of exchange rate changes on cash and cash equivalents	16
Decrease in cash and cash equivalents	700	(3,074)
Cash and cash equivalents at beginning of year	1,503	4,800
Cash and cash equivalents at end of year	2,203	1,726
Supplemental disclosure of cash flow information:
Cash paid during the period for interest
Cash paid during the period for income taxes	$ 4	$ 4

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Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Significant Accounting Policies

Significant Accounting Policies

NOTE 3-SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. The more significant estimates relate to revenue recognition, contractual allowances and uncollectible accounts, intangible assets, accrued liabilities, derivative liabilities, income taxes, litigation and contingencies. Estimates are based on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for judgments about results and the carrying values of assets and liabilities. Actual results and values may differ significantly from these estimates.

Concentration of Credit Risk

Financial instruments which subject the Company to potential credit risk consist of its cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with one high credit quality financial institution. Deposits may exceed the amount of insurance provided; however, these deposits typically are redeemable upon demand and, therefore, the Company believes the financial risks associated with these financial instruments are minimal. The Company has not experienced any losses to date on its deposits.

The Company performs ongoing credit evaluations of its customers, and generally does not require collateral on its accounts receivable. The Company estimates the need for allowances for potential credit losses based on historical collection activity and the facts and circumstances relevant to specific customers and records a provision for uncollectible accounts when collection is uncertain. The Company has not experienced significant credit related losses to date.

The Company currently relies on various outside contract manufacturers in China to supply electric vehicles and products for its customers and management believes that other contract manufactures could provide similar services and intends to transition its manufacturing to Jonway's facilities in Sanmen, China. However, if these Chinese companies are unable to supply electric vehicles and the Company is unable to transition manufacturing to Jonway's facilities or find alternative sources for these product and services, the Company might not be able to fill existing backorders and/or sell more electric vehicles. Any significant manufacturing interruption could have a material adverse effect on the Company's business, financial condition and results of operations.

Revenue Recognition

The Company records revenues for non-Jonway sales when all of the following criteria have been met:

·                       Persuasive evidence of an arrangement exists. The Company generally relies upon sales contracts or agreements, and customer purchase orders to determine the existence of an arrangement.

·                       Sales price is fixed or determinable. The Company assesses whether the sales price is fixed or determinable based on the payment terms and whether the sales price is subject to refund or adjustment.

·                       Delivery has occurred. The Company uses shipping terms and related documents, or written evidence of customer acceptance, when applicable, to verify delivery or performance. The Company's customary shipping terms are FOB shipping point.

·                       Collectability is reasonably assured.  The Company assesses collectability based on creditworthiness of customers as determined by our credit checks and their payment histories. The Company records accounts receivable net of allowance for doubtful accounts and estimated customer returns.

The Company records revenues for Jonway sales only upon the occurrence of all of the following conditions:

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

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

·                       The Company has delivered the product from its factory to a common carrier acceptable to the customer; and

·                       The Company deems the collection of the amount invoiced probable.

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

Shipping and Handling costs

Shipping and handling costs have been included in cost of goods sold.

Research and Development

Research and product development costs are expensed as incurred.

Stock-based Compensation

The Company accounts for stock-based compensation under the provisions of FASB ASC Topic 718, Compensation—Stock Compensation ("ASC 718"), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. The Company adopted ASC 718 (previously Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 123(R) on January 1, 2006 using the modified prospective method. The Company estimates the fair value of stock-based awards on the date of grant using the Black-Scholes-Merton option pricing model (the "Black-Scholes model"). The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method. We estimate forfeitures at the time of grant and revise our estimate in subsequent periods if actual forfeitures differ from those estimates. See Note 4 "Stock-Based Compensation" for a complete discussion of our equity compensation programs and the fair value assumptions used to determine our stock-based compensation expense.

The Company accounts for stock-based compensation awards and warrants granted to non-employees in accordance with FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees ("ASC 505-50"). Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is complete.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. To the extent a deferred tax asset cannot be recognized under the preceding criteria, allowances are established. At June 30, 2011 and 2010, all deferred tax assets, without offsetting liabilities in the same jurisdiction, were fully reserved.

Net Loss per Share Attributable to Common Stockholders

                Basic and diluted net loss per share is computed by dividing consolidated net loss attributable to ZAP by the weighted-average number of common shares outstanding during the period. The Company's potentially dilutive shares, which include outstanding common stock options convertible debt and warrants, have not been included in the computation of diluted net loss per share for all periods presented as the result would be anti-dilutive. Such potentially dilutive shares are excluded when the effect would be to reduce a net loss per share. There were outstanding options and warrants exercisable to purchase 100.7 million and 94 million shares of ZAP common stock at June 30, 2011 and 2010, respectively. ZAP also had outstanding debt, which is convertible into 84,265,000 shares of ZAP common stock or a number of shares of Jonway stock owned by ZAP to be determined in accordance with the Note with CEVC dated January 12, 2011.

Cash and Cash Equivalents

The Company invests its excess cash in short-term investments with various banks and financial institutions. Short-term investments are cash equivalents, as they are part of the cash management activities of the Company and are comprised of investments having maturities of three months or less when purchased.  The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents

Restricted Cash

The Company has cash restricted in connection with the issuance by Jonway's automobile dealers of bank notes instead of cash payment for Jonway's mature payables, due to Jonway's lack of cash in the three months ended June 30, 2011.  To issue these notes, the banks require a deposit of approximately 40-60% of the amount of the note and to have the full amount of the note on the note's due date, which is usually 6 months from issuance.

Due to Related Party

Based on a contract by and among the Sanmen Branch of Zhejiang UFO Automobile Manufacturing Co., Ltd. ("Zhejiang UFO"), Jonway Group and Jonway dated as of January 1, 2006, Zhejiang UFO has authorized Jonway to operate its Sanmen Branch to assemble and sell UFO branded SUVs for a period of 10 years starting from January 1, 2006.

According to the contract, Jonway shall pay Zhejiang UFO a variable contractual fee which is calculated based on the number of SUVs that the Sanmen Branch assembles every year, at the following rates:

The first 3,000 vehicles	$44 per vehicle
Vehicles from 3,001 to 5,000	$30 per vehicle
Vehicles over 5,000	$22 per vehicle

Zhejiang UFO is considered a related party because the Wang Family, who are shareholders of Jonway, have certain non-controlling equity interests in Zhejiang UFO.  The balance due from Jonway at June 30, 2011 is $2.7 million.

Marketable Securities

The Company has an investment in a related party that is comprised of marketable equity securities, which are classified as available-for-sale and recorded at fair value, the value of which fluctuates with the stock market value.   The securities are shares of stock in Samyang Optics Co., Ltd., which shares are traded on the Korean stock exchange.  ZAP's ownership is not material to Samyang Optics Co., Ltd. Net unrealized holding gains and losses, net of tax, are reported as a separate component of shareholders' deficit, except where holding losses are determined to be "other-than-temporary", whereby the losses are reported in gains and losses on investments in the consolidated statement of operations.  Gains and losses on disposals of marketable equity securities are determined using the specific identification method.  The market value of these securities declined $230,000 in the three months ended June 30, 2011 and $517,000 for the six months ended June 30, 2011.

Notes Receivable

Notes receivable balances consist of bank notes issued by Jonway's automobile dealers instead of cash payment for Jonway's mature payables, due to Jonway's lack of cash in the three months ended June 30, 2011.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities at fair value. 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 the Company's financial instruments, including cash equivalents, accounts receivable, accounts payable 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.  These tiers include:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs other than quoted prices in active markets that are directly or indirectly observable;

Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions and methodologies that result in management's best estimate of fair value.

The change in fair value of derivative liabilities is classified in other income (expense) in the Company's statement of operations.  The fair value of the Company's derivative liabilities related to stock purchase warrants was determined using the Black-Scholes option pricing model – a Level 3 input.

Derivative Financial Instruments

The Company generally does not use derivative financial instruments to hedge exposures to cash flow or market risks. However, certain other financial instruments, such as warrants, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net-share settlement is not within the control of the Company. In such instances, net-cash settlement is assumed for financial accounting and reporting, even when the terms of the underlying contracts do not provide for net-cash settlement. Such financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period.

The Company accounts for derivative instruments and debt instruments in accordance with the interpretative guidance of ASC 815 ("Derivatives and Hedging").   It is necessary for the Company to make certain assumptions and estimates to value derivatives and debt instruments.

During the three months ended June 30, 2011, certain derivative liabilities were converted into 233,192 shares of ZAP stock.

The following table set forth a summary of changes in the fair value of Level 3 liabilities for the three months ended June 30, 2011 (in thousands):

	Balance		Exercise			Change in		Balance
	3/31/2011		of warrants			fair value		6/30/2011
Derivative Liabilities	$	201	$	(70	)	$	10	$	0

                The Company does not have any non-financial assets or liabilities that it measures at fair value.

Beneficial Conversion Feature

The Company accounts for potentially beneficial conversion features under Emerging Issues Task Force No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios and EITF Issue No. 00-27, Application of Issue 98-5 to Certain Convertible Instruments. On January 12, 2011, the Company issued $19 million of Convertible debt to CEVC which is convertible into 84.3 million shares of ZAP Stock or a number of shares of Jonway stock owned by ZAP to be determined in accordance with the note. At the time of each of this issuance, the value of the common stock into which the note is convertible had a fair value greater than the proceeds for such issuance. Accordingly, the Company has recorded a beneficial conversion feature of $8.6 million. The amount of the conversion feature was limited where the warrants issued in conjunction with the CEVC note were valued at $10.3 million plus the conversion feature would not exceed $19 million

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts when management estimates collectibles to be uncertain. Accounts receivable are continually reviewed to determine which, if any, accounts are doubtful of collection. In making the determination of the appropriate allowance amount, the Company considers current economic and industry conditions, relationships with each significant customer, overall customer credit-worthiness and historical experience. The allowance for doubtful accounts was approximately $19,000 and $27,000 at June 30, 2011 and December 31, 2010, respectively for ZAP's U.S. operations.  Zhenjiang Jonway Automobile Co., Ltd. ("Jonway") primarily sells vehicles to its qualified dealers. An on-going credit evaluation of its customers' financial condition is performed. Jonway maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. As a result of this analysis no allowance for doubtful accounts was determined to be required at June 30, 2011.

                Inventories

Inventories consist primarily of vehicles, both gas and electric, parts and supplies, and finished goods and are carried at the lower of cost (first-in, first-out basis) or market (net realizable value or replacement cost). 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. Any changes to the Company's estimates of its reserves are reflected in cost of goods sold within the statement of operations during the period in which such changes are determined by management.

Property and Equipment

Property and equipment consists of land, building and improvements, machinery and equipment, office furniture and equipment, vehicles, and leasehold improvements. Property and equipment is stated at cost, net of accumulated depreciation and amortization, and is depreciated or amortized using straight-line and accelerated methods over the asset's estimated useful life. Costs of maintenance and repairs are charged to expense as incurred; significant renewals and betterments are capitalized

Long-lived Assets

Long-lived assets are comprised 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. The Company reports an asset to be disposed of at the lower of its carrying value or its estimated net realizable value.

Intangible Assets

Intangible assets consist of trade names, developed technology, in process research and development and customer relationships (including client contracts). For financial statement purposes, identifiable intangible assets with a defined life are being amortized using the straight-line method over the estimated useful lives of seven years for developed technology and eight years for the customer relationships. Costs incurred by the Company in connection with trademark applications and approvals from governmental agencies, including legal fees and trademark fees and specific testing costs, are expensed as incurred. Purchased intangible costs of completed developments are capitalized and amortized over an estimated economic life of the asset commencing on the acquisition date. Costs subsequent to the acquisition date are expensed as incurred.

Product warranty costs

The Company provides 30 to 90 day warranties on its personal electric products, including the ZAPPY3 and the Zapino scooters, six month warranties for the Xebra®, the ZAPTRUCK XL, the ZAPVAN Shuttle vehicles, and a six month warranty for Xebra® vehicles repaired by ZAP pursuant to its product recall.  The Company records the estimated cost of the product warranties at the time of sale using the estimated costs of products 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.

The Company provides a 2-year or 60,000 kilometer mileage warranty for its Jonway SUV products. The Company 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

                 Common Stock

At the ZAP Annual Meeting held on June 20, 2011, the shareholders approved the following proposed resolutions that affect our common stock:

• an amendment to increase the authorized shares of common stock from 400 million to 800 million;
• an amendment to our charter to effect a reverse stock split within a range of one-for-four or one–for-eight with the ultimate ratio to be determined by our Board of Directors; and
• an amended and restated 2008 equity plan to, among other things, increase the number of shares of common stock available for issuance under the plan to a total of 40 million shares.

Comprehensive loss

Comprehensive loss represents the net loss for the period plus the results of certain changes to shareholders' equity that are not reflected in the consolidated statements of operations. The Company's comprehensive loss consists of net losses, foreign currency cumulative translation adjustments and unrealized net losses on investments.  Comprehensive loss was as follows (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2011		2010		2011		2010
			Restated				Restated
Consolidated net loss	$	(13,715)	$	(2,482)	$	(23,613)	$	(5,342)
Increase in foreign cumulative translation adjustment		365		—		669		—
Decrease in net unrealized gains on available-for-sale securities		(230)		—		(517)		—
Comprehensive loss		(13,580)		(2,482)		(23,461)		(5,342)
Comprehensive loss attributable to non controlling interest		(1,134)		—		(3,034)		—
Comprehensive loss attributable to ZAP	$	(12,446)	$	(2,482)	$	(20,427)	$	(5,342)

                Quantitative and Qualitative Disclosures about Market Risk

ZAP foreign currency exchange risks are as follows:

The financial position and results of operations of our Chinese subsidiary Jonway are measured using Chinese Renminbi (RMB) as the functional currency.  The financial position and results of operations of our Chinese subsidiary are reported in United States dollars (USD) and included in our consolidated financial statements.  Our exposure to foreign currency fluctuation is mitigated, in part, by the fact that we incur certain operating costs in the same foreign currencies in which revenues are denominated.  The foreign currency transaction gain (loss) is attributable to the impact of foreign currency exchange rate changes on intercompany debt balances and on receivable and payables denominated in a currency other than a subsidiary's functional currency.  ZAP benefits from a weaker dollar and is adversely affected by a stronger dollar relative to major currencies worldwide.  Accordingly, changes in exchange rates, and in particular a strengthening of the US dollar, may negatively affect the company's consolidated revenues or operating costs and expenses as expressed in U.S. Dollars.  Adjustments resulting from the process of translating foreign functional currency financial statements into US dollars are included in accumulated other comprehensive income (loss) a separate component of  common shareholders equity.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation

Stock-Based Compensation

NOTE 4-STOCK-BASED COMPENSATION

Services performed and other transactions settled in the Company's common stock are recorded at the estimated fair value of the stock issued, if that value is more readily determinable than the fair value of the consideration received.

We have stock compensation plans for employees and directors, which are described in Note 8 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on April 15, 2011. We recognize the stock-based compensation expense over the requisite service period of the individual grantees, which generally equals the vesting period. All of our stock-based compensation is accounted for as an equity instrument.

  A summary of options under the Company's stock option plans from January 1, 2011 through June 30, 2011 is as follows (the number of shares is in thousands):

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Outstanding December 31, 2010		26,778	$	0.56		7.74
Options granted under the plan		500	$	1.10		4.90
Options exercised		(659)	$	0.31		—
Options forfeited and expired		—		—		—
Outstanding March 31, 2011		26,619	$	0.49		7.74
Options granted under the plan		__		___		__
Options exercised		(1,198)		0.26		__
Options forfeited and expired		__		__		__
Outstanding June 30, 2011		25,421	$	0.50		7.25

Aggregate intrinsic value is the sum of the amounts by which the quoted market price of our stock exceeded the exercise price of the options at June 30, 2011 for those options for which the quoted market price was in excess of the exercise price ("in-the-money options").  There were 19.4 million options valued at $1.4 million in the money at June 30, 2011.

 As of June 30, 2011, total compensation cost of unvested employee stock options is $2 million. This cost is expected to be recognized through December 2012. We recorded no income tax benefits for stock-based compensation expense arrangements for the three months ended June 30, 2011, as we have cumulative operating losses, for which a valuation allowance has been established.

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Litigation

6 Months Ended

Jun. 30, 2011

Litigation

Litigation

NOTE 12 – LITIGATION

In the normal course of business, we may become involved in various legal proceedings. Except as stated below, 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. However, as with most businesses, we are occasionally parties to lawsuits incidental to our business, none of which are anticipated to have a material adverse impact on our financial position, results of operations, liquidity or cash flows. The Company estimates the amount of potential exposure it may have with respect to litigation claims and assessments.

Rainbow Cycle & Marine & Siloam Springs Cycle, v. Voltage Vehicles, Arkansas Motor Vehicle Commission, Case No. 10-008. On April 1, 2010, Rainbow Cycle & Marine & Siloam Spring Cycle (the "Dealer"), an automobile dealer in the State of Arkansas, submitted a complaint to the Arkansas Motor Vehicle Commission (the "Commission") regarding 6 Xebra® vehicles purchased from ZAP in 2008, for a total purchase price of $65,000.Due to a concern related to the vehicles raised by the Dealer, the Dealer requested that the Commission order the Company to refund all monies paid by the Dealer to the Companyto pay all transportation costs, and in addition to assess penalties and interest charges against ZAP in an unspecified amount.The Commission issued a Notice of Hearing on August 11, 2010, setting a hearing for September 15, 2010 on the Dealer's Complaint. ZAP responded with a Motion to Dismiss, which the Commission set for hearing on December 15, 2010 and at the same time continued the hearing on the Dealer's Complaint to the same date. After the hearing, the Commission ruled that ZAP was required to refund the Dealer's purchase price for the vehicles and to pay for transportation of the vehicles off of the Dealer's premises. In response, ZAP filed an appeal on April 25, 2011 in Superior Court, State of Arkansas, challenging the Commission's decision. A brief in support of petition for judicial review was filed by ZAP on August 5, 2011 requesting that the decision of the Arkansas Motor Vehicle Commission be reversed and the complaints of the Dealer be dismissed with prejudice and for all other just and proper relief.

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Acquisition

6 Months Ended

Jun. 30, 2011

Acquisition

Acquisition

NOTE 5-ACQUISITION

On January 21, 2011(the "Closing Date"), the Company completed the acquisition of 51% of the equity shares of Zhejiang Jonway Automobile Co., Ltd. ("Jonway").  The transaction was accounted for in accordance with the provisions of ASC 805-10, Business Combinations. The Company retained independent appraisers to advise management in the preliminary determination of the fair value of the various assets acquired and liabilities assumed. The values assigned in these financial statements are preliminary and represent management's best estimate of fair values as of the Closing Date.

As required by ASC 805-20, Business Combinations—Identifiable Assets and Liabilities, and Any Noncontrolling Interest, management conducted a review to reassess whether they identified all the assets acquired and all the liabilities assumed, and followed ASC 805-20's measurement procedures for Closing Date recognition of the fair value of net assets acquired.

The following are the preliminary estimated fair value of assets acquired and liabilities assumed as of the Closing Date (in thousands):  

Cash and cash equivalents	$	993
Restricted cash		3,088
Inventories, net		12,715
Property & equipment		46,322
Other tangible assets		14,167
Accounts payable		(14,549	)
Notes payable		(4,261	)
Deferred tax liability		(166	)
Other liabilities assumed		(14,358	)
Net tangible assets acquired		43,951
Goodwill and intangible assets		23,794
Net assets acquired		67,745
Non controlling interest		(31,875	)
Purchase price	$	35,870

The fair value of the major components of the intangible assets acquired and their estimated useful lives is as follows (dollars in thousands):

	Preliminary Fair Value		Weighted Average Useful Life (in Years)
Customer relationships	$	3,300		8
Developed technology		4,228		7
Tradename		9,326	(a)
In-process research and development costs		547	(b)
Total	$	17,401

(a)  The Jonway tradename has been determined to have an indefinite life.

(b)  In-process research and development is accounted for as an indefinite life intangible asset until the completion or abandonment of the associated research and development efforts.

Under ASC 805-10, acquisition-related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred, but are accounted for as expenses in the periods in which the costs are incurred. Acquisition-related costs were $204,000 and $410,000 in the three and six months ended June 30, 2011.

The following unaudited pro forma condensed financial information presents the combined results of operations of ZAP and Jonway as if the acquisition had occurred as of the beginning of each period presented (in thousands except per share amounts): 

	Pro Forma Combined				Pro Forma Combined
	Six Months Ended June 30,				Three Months ended June 30,
	2011		2010		2011		2010
Net sales	$	35,815	$	38,916	$	16,311		19,317
Net( loss) Income		(20,535)		(4,182)		(9,321)		(1,658)
Net loss per common share, basic and diluted	$	(0.09)	$	(0.04)	$	(0.04)	$	(0.02)
Shares outstanding, basic and diluted		214,316		105,951		211,806		105,441

The unaudited pro forma condensed financial information is not intended to represent or be indicative of the consolidated results of operations of the Company that would have been reported had the acquisition been completed as of the beginning of the period presented, and should not be taken as being representative of the future consolidated results of operations of the Company.

The pro forma adjustments are based upon available information and certain assumptions that the Company believes are reasonable. The pro forma results of operations do not include the potential post-acquisition effects of any restructuring, impairment or integration costs related to the combined operations nor of any revenue opportunities, operating synergies or cost savings anticipated as eventual benefits of the acquisition.

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Condensed Consolidated Statements Of Operations (Parenthetical) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Condensed Consolidated Statements Of Operations
General and administrative, non-cash stock-based compensation	$ 0.80	$ 1.10	$ 1.01	$ 1.00

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Organization And Operations

6 Months Ended

Jun. 30, 2011

Organization And Operations

Organization And Operations

NOTE 1-ORGANIZATION AND OPERATIONS:

ZAP was incorporated in California in September 1994 (together with its subsidiaries, "the Company," or "ZAP"). ZAP markets advanced transportation, including alternative energy and fuel efficient automobiles, motorcycles, bicycles, scooters, personal watercraft, hovercraft, neighborhood electric vehicles and commercial vehicles. The Company's business strategy has been to develop, acquire and commercialize electric vehicles and electric vehicle power systems, which the Company believes have fundamental practical and environmental advantages over available internal combustion modes of transportation that can be produced commercially on an economically competitive basis. The Company intends to further expand its technological expertise through selective acquisitions of companies with innovative products in the advanced transportation industry and strategic alliances with certain manufacturers, distributors and sales organizations.

On January 21, 2011, the Company completed the acquisition of 51% of the equity shares of Zhejiang Jonway Automobile Co., Ltd. ("Jonway") for a total purchase price of $35,870,000 consisting of approximately $29 million in cash and    8 million shares of ZAP common stock. The Company believes that the acquisition will allow it to expand its distribution network and give it access to the rapidly growing Chinese market for electric vehicles.

Jonway 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"). Jonway Group is under the control of three individuals, Wang Huaiyi, Alex Wang (the son of Wang Huaiyi) and Wang Xiao Ying (the daughter of Wang Huaiyi and all three individuals collectively referred to as the "Wang Family")

Jonway's approved scope of business operations includes the production and sale of vehicle spare parts, and the sale of UFO branded vehicles.  The principal activities of Jonway are the production and sale of automobile spare parts, and the consignment production and distribution of SUVs.

Basis of Presentation

The accompanying condensed consolidated financial statements include the financial statements of ZAP, its wholly owned subsidiaries Voltage Vehicles and ZAP Stores and its 51% owned subsidiary Jonway. All significant inter-company transactions and balances have been eliminated.  We account for our 37.5% interest in the ZAP Hangzhou Joint Venture using the equity method of accounting.  During the three and six months ended June 30, 2011, ZAP Hangzhou incurred an operating loss of  $193,730 and $429,230 of which $72,650 and $160,961 is our share at March 31, 2011 and June 30, 2011 respectively.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. All adjustments (all of which are of a normal recurring nature) considered necessary for a fair presentation have been included. Operating results for the three and six months ended March 31, 2011 and June 30, 2011 are not indicative of the results that may be expected for the year ending December 31, 2011 or for any other future period. These condensed consolidated financial statements and the notes thereto should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission (the "SEC") on April 15, 2011 (our "2010-K").

ZAP's common stock is quoted on the OTC Bulletin Board under the symbol "ZAAP. OB."

Liquidity and Capital Resources

In assessing our liquidity, we monitor and analyze our cash on-hand, liquidation value of our investment in related party securities, and our operating and capital expenditure commitments.  Our principal liquidity needs are to meet our working capital requirements, operating expenses and capital expenditure obligations. 

Our principal sources of liquidity consist of our existing cash on hand, our investment in related party securities with  Samyang Optics, Ltd. and transactions with Luo Hua Liang, the brother-in-law of Alex Wang, the Co-CEO and director of ZAP.  As previously disclosed in our 10-Q filed for the period ended March 31, 2011, we entered into private placement subscription agreements with Mr. Luo for the purchase of ZAP's common stock for the aggregate purchase price of $7 million, of which we received $2 million as of the quarter ended March 31, 2001.  The private place subscription agreements were superseded and terminated by a stock purchase agreement with Mr. Luo in August 2011 for the purchase of ZAP's common stock for an aggregate purchase price of $2 million in multiple closings.  To date, we have received approximately $771,000 pursuant to the stock purchase agreement.

In January 2011, ZAP issued $19 million of convertible debt to make a partial payment in connection with the Jonway Acquisition.  ZAP believes that CEVC will convert the note into shares of ZAP common stock, but if CEVC does not elect to so convert the note, the note will require cash repayment in February 2012.  Assuming that the note is converted into shares of ZAP common stock and does not require cash repayment in February 2012, at June 30, 2011, we believe that we will have sufficient liquidity required to conduct operations through June 30, 2012.

At present, the Company will require additional capital to expand our current operations.  In particular, we require additional capital to expand our presence into Asia, to continue development of our methodology for converting gasoline vehicles to electric and to continue building our dealer network and expanding our market initiatives.  We also require financing to purchase consumer inventory for the continued roll-out of new products to add qualified sales and professional staff to execute our efforts in the research and development of advanced technology vehicles, such as the new ZAP alias and other fuel efficient vehicles.

We intend to fund our long term liquidity needs related to operations through the incurrence of indebtedness, equity financing or a combination of both.  Although we believe that these sources will provide sufficient liquidity for us to meet our future liquidity and capital obligations, our ability to fund these needs will depend on our future performance, which will be subject in part to general economic, financial, regulatory and other factors beyond our control, including trends in our industry and technological developments.  However, we may not be able to obtain this additional financing on terms acceptable to us or at all.

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Segment Reporting

6 Months Ended

Jun. 30, 2011

Segment Reporting

Segment Reporting

NOTE 10 – SEGMENT REPORTING

Operating Segments

Financial Accounting Standards Board ("FASB") ASC Topic 280, Segment Reporting ("ASC 280"), establishes standards for the way public business enterprises report information about operating segments. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers.

In accordance with ASC 280, the Company has identified four reportable segments consisting of Jonway Conventional Vehicles, Advanced Technology Vehicles, Consumer Product and Car Outlet.  The Jonway Conventional Vehicles segment represents sales of the gas fueled Jonway A380 three and five-door sports utility vehicles and spare parts principally through distributors in China;  the Advanced Technology Vehicles segment represents sales and marketing of the ZAPTRUCK XL, the ZAPVAN Shuttle and the Xebra® Sedan; the Consumer Product segment represents rechargeable portable energy products, our Zapino scooter, and our ZAPPY3 personal transporters; and our Car Outlet segment represents operation of a retail car outlet that sells pre-owned conventional vehicles and advanced technology vehicles.  These segments are strategic business units that offer different services.  They are managed separately because each business requires different resources and strategies.  The Company's chief operating decision making group, which is comprised of the Co-Chief Executive Officers and the senior executives of each of ZAP's strategic segments, regularly evaluate the financial information about these segments in deciding how to allocate resources and in assessing performance.  The performance of each segment is measured based on its profit or loss from operations before income taxes.

The performance of each segment is measured based on its profit or loss from operations before income taxes. Segment results are summarized as follows (in thousands):

Segment results are summarized as follow (in thousands):

	Jonway Conventional Vehicles		Consumer Products		Car Outlet		Advanced Technology Vehicles			Total
For the three months ended June 30, 2011:
Net sales		15,721		102		249		194			16,266
Gross profit (loss)		1,422		24		95		14			1,555
Depreciation, amortization		1,116		554		2		3			1,675
Net loss		(2,314)		(10,803)		(15)		(583)			(13,715)
Total assets		89,977		17,470		709		1,053			109,209
For the three months ended June 30, 2010:  Restated
Net sales		—		77		488		284			849
Gross profit (loss)		—		35		129		(63	)		101
Depreciation, amortization				36		4		11			51
Net loss (restated)		—		(2,075)		(4)		(403	)		(2,482)
Total assets		—		7,619		453		1,694			9,923
For the Six months ended June 30, 2011:
Net sales		26,668		302		614		390			27,974
Gross profit (loss)		2,357		73		153		32			2,615
Depreciation, amortization		1,972		3,802		4		9			5.787
Net loss		(6,190)		(16,362)		(71)		(990)			(23,613)
Total assets		89,977		17,470		709		1,053			109,209
For the Six months ended June 30, 2010: Restated
Net sales		—		180		1,005		512			1,697
Gross profit (loss)		—		59		223		(66)			216
Depreciation, amortization				38		2		11			51
Net loss  (restated)		—		(4,424)		(43)		(875)			(5,342)
Total assets		—		7,619		453		1,851			9,923

Operating segments do not sell products to each other, and accordingly, there is no inter-segment revenue to be reported.

Jonway's results of operations have been included since the acquisition date of January 21, 2011.

Customer Information

For the three months and six months ended June 30, 2011 and 2010, no customers accounted for more than 10% of our revenue.

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Condensed Consolidated Balance Sheets (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
ASSETS
Cash and cash equivalents	$ 2,203	$ 1,503
Restricted cash	275
Accounts receivable, net of allowance of $19 in 2011 and $27 in 2010	2,230	294
Due from related party-Jonway	2,716
Marketable securities	1,371	1,888
Notes receivable Jonway dealers	776
Deferred Tax asset	380
Inventories, net of reserve of $856 in 2011 and $619 in 2010	12,353	1,822
Prepaid expenses and other current assets	2,025	266
Total current assets	24,329	5,773
Property and equipment, net	45,658	173
Other assets:
Investment in non-consolidated joint venture	665	808
Distribution fees for Jonway and Better World products net of amortization of $2,041 in 2011 and $961 in 2010	14,519	15,599
Intangible assets, net of amortization of $451 in 2011 and $0 in 2010	17,304
Goodwill	6,517
Deposit on Zhejiang Jonway Auto		11,000
Deposits and other asset, net	217	159
Total assets	109,209	33,512
LIABILITIES AND SHAREHOLDERS' EQUITY
8 % Senior Convertible debt, net of discount	8,109
Short term debt and notes	2,272	668
Accounts payable	14,441	328
Accrued liabilities	10,520	2,197
Advances from customers	1,873
Other payables	645
Jonway purchase price payable	5,400
Due to related party	2,753
Taxes payable	888
Total current liabilities	46,901	3,193
Long term liabilities:
Derivative liability		5,539
Accrued Liabilities	372
Total long term liabilities	372	5,539
Total liabilities	47,273	8,732
Commitments and contingencies (Note 8)
Equity:
Common stock, 800 million shares authorized; no par value; 215,107,078 and 207,254,789 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively	207,932	179,691
Accumulated other comprehensive income (loss)	541	(112)
Accumulated deficit	(175,378)	(154,799)
Total ZAP shareholders' equity	33,095	24,780
Non controlling interest	28,841
Total shareholders' equity	61,936	24,780
Total liabilities and shareholders' equity	$ 109,209	$ 33,512