NOTE 4-ACQUISITION

In December 2009, ZAP issued 4 million shares of ZAP common stock to Jonway Group's designee, Alex Wang, which was attributed towards $1 million of the purchase price under the amendment to the Jonway Acquisition Agreement. In June 2010, ZAP issued 40 million shares of stock to Cathaya Capital, L.P., or Cathaya, in order to pay $10 million of the purchase price under the Jonway Acquisition Agreement.

On January 21, 2011(the "Closing Date"), the Company completed the acquisition of 51% of the equity shares of 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 determination of the fair value of the various assets acquired and liabilities assumed. The values assigned in these financial statements 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 Non controlling 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. As part of the measurement process, a third party valuation firm was used to assist in estimating the fair value of the intangible assets received in the acquisition of the 51% equity of Jonway Automobile. The valuation was not completed until December 31, 2011, and therefore a provisional amount was recognized in the period ended March 31, 2011.

The following are the 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		12,740
Property & equipment		57,071
Other tangible assets		11,472
Accounts payable		(14,549)
Notes payable		(4,261)
Deferred tax liability		(166)
Other liabilities assumed		(14,192)
Net tangible assets acquired		52,196
Goodwill and intangible assets		5,382

Net assets acquired		57,578
Non controlling interest - fair value		(28,213)
Option to purchase remaining 49%		2,385
Purchase price	$	31,750

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

	Date of Acquisition Fair Value		Weighted Average Useful Life (in Years)
Customer relationships	$	745		8
Developed technology		2,076		7
Tradename		2,078	(a)
In-process research and development costs		175	(b)
Total		5,074
Goodwill		308
	$	5,382

(a)

The Jonway trade name 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 $318,300 for the period ended September 30, 2011. The excess of the purchase price over the net tangible assets and intangible assets was recorded as goodwill.

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 the period presented (in thousands except per share amounts):

	For the Nine months ended September 30, 2011 Restated			For the Three Months ended September 30, 2011 Restated
Net sales	$	49,903		$	14,088
Net loss		(27,004	)		(8,837	)
Net loss per common share, basic and diluted	$	(0.12	)	$	(0.04	)
Shares outstanding, basic and diluted		215,044			219,097

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.

Any 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.