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Organization And Operations
6 Months Ended
Jun. 30, 2012
Organization And Operations [Abstract]  
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. In pursuit of a manufacturing plant and a partner with an existing product line, a distribution and customer support network in China and experience in vehicle manufacturing, ZAP acquired a majority of the outstanding equity in Zhejiang Jonway Automobile Co., Ltd. ("Jonway"). 
 
On January 21, 2011, the Company completed the acquisition of 51% of the equity shares of Jonway for a total purchase price of $31.75 million consisting of approximately $29 million in cash and 8 million shares of ZAP common stock valued at $2.7 million.  The Company believes that the acquisition will allow it to expand its electric vehicle ("EV") business and distribution network around the world, give it access to the rapidly growing Chinese market for electric vehicles and have competitive production capacity in an ISO 9000 certified manufacturing facility with the capacity and resources to support production of ZAP's electric vehicles and new product line of mini vans and new SUVs.
 
              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 licensed SUV vehicles.  The principal activities of Jonway are the production and sale of automobile spare parts and the production and distribution of SUVs in China using the consigned UFO license from an affiliate of Jonway Group. 
 
With the completion of the acquisition of a majority interest in Jonway, the combined companies' new product lines planned for the second half of 2012 include the A380 SUV EV and the minivan EV. Both products leverage the production moldings, the manufacturing engineering infrastructure and facilities currently in place for the gasoline models of these vehicles. Since the acquisition, the companies have been working on developing the joint product line, marketing and sales plans for the 2012 EV product lines.
 
Jonway is preparing for certification of the EV production line by the Chinese electric vehicle authorities, which we expect to occur in the second half of 2012, since we anticipate that the EV production facilities in Jonway will be ready for the certification process in the second half of 2012.  Meanwhile, the engineering teams from both companies are undertaking extensive testing of the A380 SUV EV at Jonway Auto and ZAP Hangzhou EV research and development center.
 
Our target is to deliver the China type approved EV A380 SUV and EV minivan in the second half of 2012, with the purpose of generating sales by taking advantage of the Chinese central government electric vehicle incentives of up to RMB 60,000 or over $9,680 per vehicle.  ZAP intends to use the existing manufacturing plant from Jonway that is being upgraded for the production of g the electric vehicles and utilizing the existing Jonway models to gain economy of scale and reduce molding investment costs. ZAP also intends to leverage Jonway's distribution and customer support centers in China to support the sales and marketing of its new EV product line. In May 2012, we launched the gasoline-powered minivan models into China market.  We expect this gasoline minivan series can contribute our business expansion across the world. In the 2nd quarter of 2012, Jonway auto established its two wholly owned subsidiaries, namely, Taizhou Fuxing Vehicle Sale Co., Ltd. focusing on minivan marketing and distribution in China and Taizhou Vehicle Leasing Co., Ltd. focusing on the vehicle leasing business in Taizhou, China.

     ZAP plans to focus on developing new international markets such as Brazil, South Africa, Russia and some of the Central America countries such as Costa Rica, Ecuador and Mexico. These countries are looking for affordable gasoline and electric SUVs and minivans with a competitive price and qualities.

 
BASIS OF PRESENTATION
 
The accompanying unaudited consolidated financial statements include the financial statements of ZAP, and its subsidiaries: Jonway Automobile, Voltage Vehicles and ZAP Stores and are prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP").  In these financial statements, "subsidiaries" are companies that are over 50% controlled, the financial statements of which are consolidated with those of the Company.  Significant inter-company transactions and balances are eliminated in consolidation; profits from inter-company sales, are also eliminated; non –controlling interests are included in equity.
 
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 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (all of which are of a normal recurring nature) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2012 are not indicative of the results that may be expected for the year ending December 31, 2012 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, 2011 filed with the Securities and Exchange Commission (the "SEC") on April 16, 2012 (our "10-K").
 
Liquidity and Capital Resources
 
In assessing our liquidity, we monitor and analyze our cash on-hand, liquidation value of our investment in 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, bank facilities from China-based banks for Jonway Auto, our investment in securities with Samyang Optics, Ltd. and transactions with Luo Hua Liang, the brother-in-law of Alex Wang, the Co-CEO and a director of ZAP.  In 2011, we entered into private placement subscription agreements with Mr. Luo for the purchase of ZAP common stock for the aggregate purchase price of $7 million, of which we received $2 million as of the quarter ended March 31, 2011.  The private placement subscription agreements were then superseded and terminated by a stock purchase agreement with Mr. Luo in August 2011. Pursuant to the stock purchase agreement, Mr. Luo agreed to purchase ZAP common stock for an aggregate purchase price of $2 million in multiple closings. On September 8, 2011, we issued approximately 2.3 million shares of ZAP common stock in connection with the initial closing of $771,000. We received an additional $1.025 million in subsequent closings for which we have issued approximately 3.35 million shares of ZAP common stock. During 2011, we issued 7.7 million shares to Mr. Liang for cash of $3.8 million.
 
In 2011, we were approved up to an aggregate of $6.2 million of bank facility from the Taizhou Branch of China Merchants Bank ("CMB") through our majority-owned subsidiary, Jonway. Although we have been approved for the credit line, there are no legal obligations or rights to the credit line until we execute agreements with the lender to borrow funds under the credit line. When drawn down, the credit line will be secured by lands owned by Jonway and guaranteed by Jonway Group.
 
Under the above mentioned credit line of $6.2 million granted by CMB on August 19, 2011, Jonway entered into a Credit Agreement with CMB for a revolving short term bank loan in the aggregate amount of approximately US$3.2 million which was drawn down in 2011.  The annual interest rate is 7.22% and is due on August 18, 2012. The loan is secured by a Maximum Amount Mortgage Contract by and between Jonway and CMB dated August 11, 2011 in which land use rights over two parcels of land owned by Jonway at Sanmen Factory have been pledged as security for this loan. During the six months ended June 30, 2012, the Company had repaid $2.1 million and $1.1 million remained outstanding.
 
In December 2011, Jonway established additional short term bank loans amounting to approximately $2.2 million from three small-size banks based in Taizhou City, which are subject to a Jonway Group guarantee with $790,000 of such loans also secured by bank notes received from Jonway dealers. The $2.2 million  was repaid on March 31, 2012.
 
On March 31, 2012, to support the monthly business performance target of CMB, Jonway entered into another credit agreement with this bank for a sum of short term bank loan in the aggregate amount of approximately $520,000 which was drawn down on March 31, 2012, and repaid on April 1, 2012.
 
In May 2012, we were approved up to an aggregate of $ 7.1 million of bank facility from the Sanmen Branch of CITIC Bank ("CITIC")  through Jonway. Although we have been approved for the credit line, there are no legal obligations or rights to the credit line until we execute agreements with the lender to borrow funds under the credit line. When drawn down, the credit line will be secured by land and buildings on this land  owned by Jonway and guaranteed by Jonway Group.
 

     Under the above mentioned credit line of $7.1 million granted by CITIC, Jonway entered into a Credit Agreement with CITIC for a revolving short term bank loan in the aggregate amount of approximately US$ 1.6 million which was drawn down on May 25, 2012. The annual interest rate is 8.33% and is due on December 28, 2012. The loan is secured by a Maximum Amount Mortgage Contract by and between Jonway and CITIC dated May 25, 2012 in which land use right over one parcels of land and the buildings on this land owned by Jonway at Sanmen Factory have been pledged as security for this loan. The remaining $5.6 million of the credit line was executed through the issuance of bank acceptance notes by CITIC to Jonway suppliers for the due payables.

     During the quarter ended June 30, 2012, Jonway entered into additional short term loan agreements with various banks based in Taizhou city for proceeds aggregating amount of approximately $1 million. Such bank loans are secured by Jonway Group, certain individuals and Jonway's property, plant and equipment.

As of June 30, 2012, Jonway had $3.6 million in short term bank loans, which are borrowed from the above stated China-based banks with interest rates ranging from 7.22% to 9.47% per annum due through August 18, 2012.
 
Jonway intends to utilize the credit lines to expand its electric vehicle business as well as other future vehicle models.  This includes on-going working capital needs, electric vehicle production equipment requirements, testing, homologation and new EV product molds. These credit lines will also be used to support the company's expansion plans, with emphasis on its electric vehicle production line facilities in China. The credit will also help advance new electric vehicle initiatives, launch new strategic global sales and marketing operations, bolster infrastructure, and finance working capital.
 
In the event that we require additional liquidity, our principal shareholders, Cathaya and Jonway Group, have agreed to provide the necessary support to meet our financial obligations through May 21, 2013.