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.

Long-Term And Short-Term Notes

6 Months Ended

Jun. 30, 2011

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.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details