ORGANIZATION AND BASIS OF PRESENTATION	6 Months Ended
Jun. 30, 2014
ORGANIZATION AND BASIS OF PRESENTATION [Abstract]
ORGANIZATION AND BASIS OF PRESENTATION	NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION: 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 mini 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"). The principal activities of Jonway up until recently were the production and sale of automobile spare parts and the production and distribution of gasoline models of the SUVs and minivans in China using the consigned UFO license from an affiliate of Jonway Group. Over the last three years, Jonway Auto continued the sales and production of its gasoline model SUV and minivan, while trying to ramp up on the production of its EV product line. This has proven to be challenging not only because of the difference in technologies between gasoline and EVs but also because the marketing strategy and the sales channel and sales network are totally different. Despite the difficulties, ZAP and Jonway Auto was able to achieve type approval of its EV SUV, and also developed two different full electric EV models for its minivan, one with lithium batteries, which has longer range and more power and the other with lead acid batteries, intended for lower speed and shorter range. Jonway Auto, as authorized auto manufacturer in China, has access to the required licenses for China type approval for both the SUV and minivan models, thus giving these models the advantage that the lithium battery versions would be eligible for Chinese government subsidies which range from 30,000 RMB (~US$5,000) to 90,000 RMB (~US$15,000) depending on the range achieved between recharges and also local government subsidies. Recently, the Chinese government announced that these subsidies have been extended to the year 2020, with the total amount of subsidies gradually tapering off each year. Additionally, the Chinese government announced the mandate that government vehicles must be Chinese made, and that a minimum of 30% of the vehicles purchased have to be full electric. These incentives, plus the elimination of sales tax, consumer tax, and license plate registration fees which can be more than US$20,000 in some cities like Shanghai, the EV opportunities for Jonway Auto's EV SUV and EV minivan are substantial. ZAP and Jonway Auto has been focused on the EV fleet markets in China So with the recent reinforced subsidies and requirements for government entities to purchase full electric vehicles, Jonway Auto's EV SUV is suited for government officials to use on a daily basis, and the EV minivan is well positioned for city utility and maintenance service transportation. Both of these EV models currently are unique in China because the auto companies have primarily focused on sedans that are generally very small, some only two seats and not suitable for government official cars to be used daily, whereas the SUV is a 5 seat vehicle with comfortable leg room and seating. As of the beginning of 2014, Jonway Auto transforming its manufacturing plant to support mass production of several full electric vehicle models. With the urgent priority to provide multiple manufacturing EV production lines to support multiple models of EVs, Jonway Auto began to reduce its resource investment in the traditional gasoline vehicle products, cutting back on funding sales and marketing of its gasoline SUV and gasoline minivans, and quickly migrating the company's organization and team to support the ramp up of electric vehicle manufacturing, and preparing the sales and marketing to leasing companies and government organizations in the major cities. The first half of 2014 was a major transitioning period, where there was significant slowdown in gasoline vehicle production and sales, and redirecting the manufacturing staff to support mass production rollout of its EVs, starting with its new Neighborhood EV (NEV) model, Urbee for city commuters. The new Urbee started its first production delivery in April 2014. The combined companies' new EV product lines include the A380 SUV EV and the minivan EV, the recently announced Urbee and Sparkee. Both the EV SUV and EV minivan products leverage the production moldings, the manufacturing engineering infrastructure and facilities currently in place for the gasoline models of these vehicles. 1Q2014 shows a decline in sales volume of the gasoline SUV and gasoline minivan, because of the realignment of resources to support EV as the mainstream business in Jonway Auto going forward. In the second quarter of 2014, close to 1000 Urbees were produced and sold in the month of June when Urbee production started to ramp. In 2Q2014 the revenues were lower when compared year over year as Jonway Auto cut back on its gasoline vehicle sales and marketing activities in order to redirect the organization and resources to focus on developing the EV dealership networks. The operational expenses were reduced to half of the comparable quarter run rate compared to 2Q2013, as the company shifts to using a few major dealerships to sell the new Urbee EVs. Given that the EV market is just now being developed in China, Jonway Auto is partnering with a few strong dealers in order to work closely on the product service support and customer service. Net loss attributable to ZAP common shareholders has been reduced from negative $4.285M last year in 2Q2013 to negative $2.768M in 2Q2014 for the quarter. The goal of the companies is for Jonway Auto to be able to improve the profitability of the company by 2014 year end by producing and selling at a rate of 2,000 Urbees per month on average, and at least 500 SUVs or minivans per month, combining the delivery of both EVs and gasoline versions of the models. ZAP and Jonway Auto strategy is to leverage the volume sales orders and the continuing demand from the market for Urbees to drive down the cost of production in the factory for EVs, and be able to substantially absorb the cost overhead of the factory. The mass production ramp of the Urbees, help streamline the EV manufacturing process, providing a good training ground for the production engineers, and paving the way for volume production of the more sophisticated EV products of minivan and EV SUVs. Jonway Auto will cut back on the number of gasoline SUV models in order to reduce the overhead costs of carrying too many different gasoline versions of the SUV models. Jonway Auto will focus on its high volume lower cost gasoline model priced at around US$10,000, replacing its 1.6 liters gasoline model by a more cost effective and efficient 1.5 liter engine model. This will be the mainstream gasoline model. In the meantime, Jonway auto established its three wholly-owned subsidiaries, namely, Taizhou Selling Co., Ltd. focusing on vehicles marketing and distribution, 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. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements include the accounts of ZAP, and its subsidiaries: Jonway Automobile, Voltage Vehicles, ZAP Stores and ZAP Hong Kong for the six months ended June 30, 2014 and 2013 and are prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP"). Management considers "subsidiaries" to be companies that are over 50% owned or controlled by ZAP,. Intercompany transactions and balances are eliminated in consolidation; profits from intercompany 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 three and six months ended June 30, 2014 and 2013 may not be indicative of the results that may be expected for the year ending December 31, 2014 or for any other future period. These unaudited 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, 2013 filed with the Securities and Exchange Commission (the "SEC") on April 15, 2014 (our "10-K"). LIQUIDITY AND RESOURCES In assessing our liquidity, we monitor and analyze our cash on-hand 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 and bank facilities from China-based banks for Jonway Auto. In November 2013, we were approved for up to an aggregate of $24.3 million of a credit line, with the credit exposure of $6.3 million from the Sanmen Branch of CITIC Bank ("CITIC") through Jonway. In March 2014, the credit exposure increased by $1.0 million to $7.3 million. When drawn down, the credit line is secured by land and buildings owned by Jonway and guaranteed by the related party Jonway Group. Jonway borrowed one year short-term loans in the aggregate amount of $6.3 million in November 2013. In April, the company partially repaid $0.56 million. The annual interest rate is 6.6%, and the loans are due in November 2014. In March 2014, Jonway borrowed one year short-term loan of $1.0 million. The annual interest rate is 7.08% and the loan is due in March 2015. We have also drawn down $4.3 million in the form of notes payable as of June 30, 2014. Except for a note payable utilizing the credit exposure of $0.56 million, we deposited cash for the balance as collateral for these notes payable this is classified as restricted cash on the accompanying condensed consolidated balance sheet. These notes are due in October, 2014. As of June 30, 2014, the credit exposure of $7.3 million has been fully used. The credit line expires in November 2015. In December 2012, we were approved up to an aggregate of $4.1 million of a credit line from Taizhou Bank. This credit line was reduced to $2.4 million in early 2014 when it was renewed. This credit line was guaranteed by related parties. As of June 30, 2014, the total outstanding under this credit line was $1.1 million. The annual interest rate is 8.89%.The loans are due in two payments separately in August and November 2014. A credit exposure of $1.2 million was used in the form of notes payable of $3.2 million with restricted cash of $2.0 million being deposited with the bank. As of June 30, 2014, a total credit exposure of $2.3 million has been used. In December 2013, we were approved up to an aggregate of $9.1 million of a credit line from Everbright Bank. This credit line can only been used in the form of notes payable with 50% restricted cash deposited. Thus, we were approved a credit exposure of $4.5 million. This credit line was guaranteed by the shareholder Wang Huaiyi, as well as a building and land use right at the carrying value of $2.1 million. As of June 30, 2014, $8.1 million was drawn down as notes payable in which $1.2 million was without a restricted cash deposit. The amount of restricted cash deposited with the bank was $3.8 million. In June 2014, Jonway borrowed $0.31 million at interest rate of 7.28% for six months from China Everbright Bank. As of June 30, 2014, the credit exposure of $4.5 million has been fully used. The credit line expires in December 2014. In December 2013, we were approved up to an aggregate of $5.4 million of a credit line from Industrial and Commercial Bank of China (ICBC). This credit line was secured by land and buildings owned by Jonway and guaranteed by related parties. As of June 30, 2014, the total outstanding loan under this credit line was $6.5 million with $1.6 million of restricted cash deposited with the bank. The annual interest rates are from 5.6% to 7.2%. The loans are due in various dates from August 2014 to June 2015. Jonway also drew down $0.49 million in the form of a note payable as of June 2014. We deposited 100% cash as restricted cash for the note payable. As of June 30, 2014, a credit exposure of $4.9 million has been used, and $0.5 million was still available for use. The credit line expires in December 2014. As of June 30, 2014, Jonway had $14.7 million in short term bank loans outstanding, which are borrowed from the above stated China-based banks with interest rates ranging from 5.6% to 8.89% per annum and expire at various times through June 2015. 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. Also our principal shareholder, Jonway Group, has agreed to provide the necessary support to meet our financial obligations through June 30, 2015 in the event that we require additional liquidity. In addition, CEVC (China Electric Vehicle Corporation) would likely renew the convertible note and in the event that CEVC decides to call on the repayment, the repayment would likely be paid in full or in part in Jonway Auto shares or ZAP shares unless there is a breach by the Company on the covenant of the convertible note. We will require additional capital to expand our current operations and support on-going operating losses until we can reach a larger sales volume in order to absorb operating overhead costs. In particular, we require additional capital to expand our presence across the world, to continue development of our electric vehicle business, to continue strengthening our dealer network and after-sale service centers and expanding our market initiatives. We also require financing the investment for the continued roll-out of new products and to add qualified sales and professional staff to execute our business plan and pursue our efforts in the research and development of advanced technology vehicles, such as the new ZAP Alias, the electric 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.

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:

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 mini 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").

The principal activities of Jonway up until recently were the production and sale of automobile spare parts and the production and distribution of gasoline models of the SUVs and minivans in China using the consigned UFO license from an affiliate of Jonway Group.

Over the last three years, Jonway Auto continued the sales and production of its gasoline model SUV and minivan, while trying to ramp up on the production of its EV product line. This has proven to be challenging not only because of the difference in technologies between gasoline and EVs but also because the marketing strategy and the sales channel and sales network are totally different. Despite the difficulties, ZAP and Jonway Auto was able to achieve type approval of its EV SUV, and also developed two different full electric EV models for its minivan, one with lithium batteries, which has longer range and more power and the other with lead acid batteries, intended for lower speed and shorter range. Jonway Auto, as authorized auto manufacturer in China, has access to the required licenses for China type approval for both the SUV and minivan models, thus giving these models the advantage that the lithium battery versions would be eligible for Chinese government subsidies which range from 30,000 RMB (~US$5,000) to 90,000 RMB (~US$15,000) depending on the range achieved between recharges and also local government subsidies. Recently, the Chinese government announced that these subsidies have been extended to the year 2020, with the total amount of subsidies gradually tapering off each year. Additionally, the Chinese government announced the mandate that government vehicles must be Chinese made, and that a minimum of 30% of the vehicles purchased have to be full electric. These incentives, plus the elimination of sales tax, consumer tax, and license plate registration fees which can be more than US$20,000 in some cities like Shanghai, the EV opportunities for Jonway Auto's EV SUV and EV minivan are substantial.

ZAP and Jonway Auto has been focused on the EV fleet markets in China So with the recent reinforced subsidies and requirements for government entities to purchase full electric vehicles, Jonway Auto's EV SUV is suited for government officials to use on a daily basis, and the EV minivan is well positioned for city utility and maintenance service transportation. Both of these EV models currently are unique in China because the auto companies have primarily focused on sedans that are generally very small, some only two seats and not suitable for government official cars to be used daily, whereas the SUV is a 5 seat vehicle with comfortable leg room and seating.

As of the beginning of 2014, Jonway Auto transforming its manufacturing plant to support mass production of several full electric vehicle models. With the urgent priority to provide multiple manufacturing EV production lines to support multiple models of EVs, Jonway Auto began to reduce its resource investment in the traditional gasoline vehicle products, cutting back on funding sales and marketing of its gasoline SUV and gasoline minivans, and quickly migrating the company's organization and team to support the ramp up of electric vehicle manufacturing, and preparing the sales and marketing to leasing companies and government organizations in the major cities. The first half of 2014 was a major transitioning period, where there was significant slowdown in gasoline vehicle production and sales, and redirecting the manufacturing staff to support mass production rollout of its EVs, starting with its new Neighborhood EV (NEV) model, Urbee for city commuters. The new Urbee started its first production delivery in April 2014.

The combined companies' new EV product lines include the A380 SUV EV and the minivan EV, the recently announced Urbee and Sparkee. Both the EV SUV and EV minivan products leverage the production moldings, the manufacturing engineering infrastructure and facilities currently in place for the gasoline models of these vehicles.

1Q2014 shows a decline in sales volume of the gasoline SUV and gasoline minivan, because of the realignment of resources to support EV as the mainstream business in Jonway Auto going forward. In the second quarter of 2014, close to 1000 Urbees were produced and sold in the month of June when Urbee production started to ramp. In 2Q2014 the revenues were lower when compared year over year as Jonway Auto cut back on its gasoline vehicle sales and marketing activities in order to redirect the organization and resources to focus on developing the EV dealership networks. The operational expenses were reduced to half of the comparable quarter run rate compared to 2Q2013, as the company shifts to using a few major dealerships to sell the new Urbee EVs. Given that the EV market is just now being developed in China, Jonway Auto is partnering with a few strong dealers in order to work closely on the product service support and customer service. Net loss attributable to ZAP common shareholders has been reduced from negative $4.285M last year in 2Q2013 to negative $2.768M in 2Q2014 for the quarter. The goal of the companies is for Jonway Auto to be able to improve the profitability of the company by 2014 year end by producing and selling at a rate of 2,000 Urbees per month on average, and at least 500 SUVs or minivans per month, combining the delivery of both EVs and gasoline versions of the models.

ZAP and Jonway Auto strategy is to leverage the volume sales orders and the continuing demand from the market for Urbees to drive down the cost of production in the factory for EVs, and be able to substantially absorb the cost overhead of the factory. The mass production ramp of the Urbees, help streamline the EV manufacturing process, providing a good training ground for the production engineers, and paving the way for volume production of the more sophisticated EV products of minivan and EV SUVs.

Jonway Auto will cut back on the number of gasoline SUV models in order to reduce the overhead costs of carrying too many different gasoline versions of the SUV models. Jonway Auto will focus on its high volume lower cost gasoline model priced at around US$10,000, replacing its 1.6 liters gasoline model by a more cost effective and efficient 1.5 liter engine model. This will be the mainstream gasoline model.

In the meantime, Jonway auto established its three wholly-owned subsidiaries, namely, Taizhou Selling Co., Ltd. focusing on vehicles marketing and distribution, 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.

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the accounts of ZAP, and its subsidiaries: Jonway Automobile, Voltage Vehicles, ZAP Stores and ZAP Hong Kong for the six months ended June 30, 2014 and 2013 and are prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP"). Management considers "subsidiaries" to be companies that are over 50% owned or controlled by ZAP,. Intercompany transactions and balances are eliminated in consolidation; profits from intercompany 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 three and six months ended June 30, 2014 and 2013 may not be indicative of the results that may be expected for the year ending December 31, 2014 or for any other future period. These unaudited 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, 2013 filed with the Securities and Exchange Commission (the "SEC") on April 15, 2014 (our "10-K").

LIQUIDITY AND RESOURCES

In assessing our liquidity, we monitor and analyze our cash on-hand 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 and bank facilities from China-based banks for Jonway Auto.

In November 2013, we were approved for up to an aggregate of $24.3 million of a credit line, with the credit exposure of $6.3 million from the Sanmen Branch of CITIC Bank ("CITIC") through Jonway. In March 2014, the credit exposure increased by $1.0 million to $7.3 million. When drawn down, the credit line is secured by land and buildings owned by Jonway and guaranteed by the related party Jonway Group. Jonway borrowed one year short-term loans in the aggregate amount of $6.3 million in November 2013. In April, the company partially repaid $0.56 million. The annual interest rate is 6.6%, and the loans are due in November 2014. In March 2014, Jonway borrowed one year short-term loan of $1.0 million. The annual interest rate is 7.08% and the loan is due in March 2015. We have also drawn down $4.3 million in the form of notes payable as of June 30, 2014. Except for a note payable utilizing the credit exposure of $0.56 million, we deposited cash for the balance as collateral for these notes payable this is classified as restricted cash on the accompanying condensed consolidated balance sheet. These notes are due in October, 2014. As of June 30, 2014, the credit exposure of $7.3 million has been fully used. The credit line expires in November 2015.

In December 2012, we were approved up to an aggregate of $4.1 million of a credit line from Taizhou Bank. This credit line was reduced to $2.4 million in early 2014 when it was renewed. This credit line was guaranteed by related parties. As of June 30, 2014, the total outstanding under this credit line was $1.1 million. The annual interest rate is 8.89%.The loans are due in two payments separately in August and November 2014. A credit exposure of $1.2 million was used in the form of notes payable of $3.2 million with restricted cash of $2.0 million being deposited with the bank. As of June 30, 2014, a total credit exposure of $2.3 million has been used.

In December 2013, we were approved up to an aggregate of $9.1 million of a credit line from Everbright Bank. This credit line can only been used in the form of notes payable with 50% restricted cash deposited. Thus, we were approved a credit exposure of $4.5 million. This credit line was guaranteed by the shareholder Wang Huaiyi, as well as a building and land use right at the carrying value of $2.1 million. As of June 30, 2014, $8.1 million was drawn down as notes payable in which $1.2 million was without a restricted cash deposit. The amount of restricted cash deposited with the bank was $3.8 million. In June 2014, Jonway borrowed $0.31 million at interest rate of 7.28% for six months from China Everbright Bank. As of June 30, 2014, the credit exposure of $4.5 million has been fully used. The credit line expires in December 2014.

In December 2013, we were approved up to an aggregate of $5.4 million of a credit line from Industrial and Commercial Bank of China (ICBC). This credit line was secured by land and buildings owned by Jonway and guaranteed by related parties. As of June 30, 2014, the total outstanding loan under this credit line was $6.5 million with $1.6 million of restricted cash deposited with the bank. The annual interest rates are from 5.6% to 7.2%. The loans are due in various dates from August 2014 to June 2015. Jonway also drew down $0.49 million in the form of a note payable as of June 2014. We deposited 100% cash as restricted cash for the note payable. As of June 30, 2014, a credit exposure of $4.9 million has been used, and $0.5 million was still available for use. The credit line expires in December 2014.

As of June 30, 2014, Jonway had $14.7 million in short term bank loans outstanding, which are borrowed from the above stated China-based banks with interest rates ranging from 5.6% to 8.89% per annum and expire at various times through June 2015.

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. Also our principal shareholder, Jonway Group, has agreed to provide the necessary support to meet our financial obligations through June 30, 2015 in the event that we require additional liquidity. In addition, CEVC (China Electric Vehicle Corporation) would likely renew the convertible note and in the event that CEVC decides to call on the repayment, the repayment would likely be paid in full or in part in Jonway Auto shares or ZAP shares unless there is a breach by the Company on the covenant of the convertible note.

We will require additional capital to expand our current operations and support on-going operating losses until we can reach a larger sales volume in order to absorb operating overhead costs. In particular, we require additional capital to expand our presence across the world, to continue development of our electric vehicle business, to continue strengthening our dealer network and after-sale service centers and expanding our market initiatives. We also require financing the investment for the continued roll-out of new products and to add qualified sales and professional staff to execute our business plan and pursue our efforts in the research and development of advanced technology vehicles, such as the new ZAP Alias, the electric 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.