As Filed with the Securities and Exchange Commission on December ___, 1997
Registration No.______
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
ZAP POWER SYSTEMS
(Name of small business issuer in its charter)
-----------------
California 3710 94-321 0624
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Identification No.)
or organization) Classification Code)
James McGreen
117 Morris Street
Sebastopol, CA 95472
(707) 824-4150
(Name, Address and Telephone Number of Agent for Service)
-----------------------
Copies to:
William D. Evers, Esq.
Kevin F. Barrett, Esq.
Evers & Andelin, LLP
155 Montgomery, 12th Floor
San Francisco, CA 94104
Phone No.: (415)391-4291 Fax No.: (415)391-4292
-------------------
Approximate date of commencement of proposed sale to
the public: As soon as practicable after this Registration
Statement becomes effective.
<TABLE>
CALCULATION OF REGISTRATION FEE
- -------------------------------- -------------------- ---------------------- ---------------------- -------------------
<CAPTION>
Title of each class Amount to be Proposed Maximum Proposed Maximum Amount of
of Securities to be Registered Registered Offering Price Per Aggregate Offering Registration Fee
Unit Price (1)
- -------------------------------- -------------------- ---------------------- ---------------------- -------------------
<S> <C> <C> <C> <C>
Common Stock, no par value 500,000 $6.00 $3,000,000 $910
Total $3,000,000 $910
- -------------------------------- -------------------- ---------------------- ---------------------- -------------------
<FN>
(1) Estimated pursuant to Rule 457(a) under the Securities Act of 1933, as
amended (the "Securities Act"), solely for purposes of calculating the
registration fee.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
</FN>
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification.
SUBJECT TO COMPLETION DATED _________
Preliminary Prospectus
ZAP Power Systems
[GRAPHIC OMITED]
500,000 SHARES
COMMON STOCK
All of the 500,000 shares of common stock offered by this Prospectus
are being sold either by ZAP Power Systems ("ZAP" or the "Company") or shares
will be offered through Brokers. Prior to this Offering, there has been no
public market for the Company's common stock; therefore, the public offering
price has been determined by the Company. After completion of this Offering, and
dependent largely upon the number of shares sold in this Offering, the Company's
shares may be traded on a stock exchange (no application has been made to any
stock exchange) or in the over-the-counter market, or no active trading market
may develop or be sustained. See "Risk Factors" and "Shares Eligible for Future
Resale."
This offering (the "Offering") is being made directly by the Company
for not more than 500,000 shares (the "maximum" amount). There is no minimum
number of shares to be sold in this Offering and all funds received will go
immediately to the Company. See "Use of Proceeds." This Offering will be
terminated upon the earlier of: the sale of the maximum amount, twelve months
after the date of this Prospectus or the date on which the Company decides to
close the Offering. A minimum purchase of 100 shares is required. The Company
reserves the right to reject any Share Purchase Agreement in full or in part.
See "Plan of Distribution."
The common stock offered hereby involves a high degree of risk. See
"Risk Factors."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Public Underwriting Proceeds to
Public Discounts and Company (2)
Commission (1)
<S> <C> <C> <C>
Per Share $6.00 $ .60 $5.40
Total Maximum (500,000 shares) $3,000,000 $300,000 $2,700,000
<FN>
(1) The shares are being sold directly by the Company through a designated
executive officer who is registered as sales representative, where required, and
will not receive any commission and through Brokers. See "Plan of Distribution."
Further, Centennial Capital Management, Incorporated (the "Selling Agent") has
been engaged by the Company to serve as a selling agent of the Offering on a
best-efforts basis. The Selling Agent will receive a total commission, in cash,
equal to 10% of the gross proceeds from this Offering that the Selling Agent
sells.
(2) Before deducting estimated expenses of $160,000 payable by the Company,
including registration fees, escrow agent fees, costs of printing, copying and
postage and other offering costs, in addition to legal and accounting fees.
</FN>
</TABLE>
The date of this Prospectus is December ____, 1997.
1
<PAGE>
No person has been authorized to give any information or to make any
representations in connection with this Offering other than those contained in
this Prospectus and, if given or made, such information and representations must
not be relied upon as having been authorized by the Company. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby to any person in any jurisdiction in which such
offer or solicitation is unlawful. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that the information contained herein is correct as of any date subsequent to
the date hereof.
This Prospectus is available in an electronic format, upon appropriate request
from a resident of those states in which this Offering may lawfully be made. The
Company will transmit promptly, without charge, a paper copy of this Prospectus
to any such resident upon receipt of a request.
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page Page
---- ----
<S> <C> <C> <C>
Reference Data 2 Management 17
Prospectus Summary 3 Executive Compensation 19
Risk Factors 5 Principal Shareholders 20
Use of Proceeds 7 Certain Transactions 20
Dividend Policy 7 Description of Common Stock 20
Capitalization 8 Shares Eligible for Future Resale 21
Dilution 9 Plan of Distribution 21
Management's Discussion & Analysis of Legal Matters 22
Financial Condition and Results of Operations 10 Experts 22
Business 13 Additional Information 22
Index to Financial Statements F-1
</TABLE>
Until February 27, 1998 (90 days after the date of this Prospectus) all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
REFERENCE DATA
The Company became subject to the informational filing requirements of
the Securities Exchange Act of 1934, as amended ("Exchange Act") upon the filing
of its initial Prospectus on November 29, 1996.
The Company furnishes its shareholders with quarterly annual reports
containing financial statements audited by an independent public accounting firm
after the end of its fiscal year. The Company's fiscal year ends on December 31.
In addition, the Company will send shareholders quarterly reports with unaudited
financial information for the first three quarters of each fiscal year.
The Company was incorporated under the laws of the state of California,
on September 23, 1994. The Company's corporate offices are located at 117 Morris
Street, Sebastopol, CA 95472. The Company's telephone number is (707) 824-4150.
The Company's facsimile number is (707) 824-4159. The Company's E-mail address
is [email protected] and its Web site is zapbikes.com.
2
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
The following summary is qualified in its entirety and should be read
in conjunction with the more detailed information and Financial Statements,
including Notes, appearing elsewhere in this Prospectus.
The Company
ZAP Power Systems ("ZAP") develops, manufactures and markets
lightweight low-powered electric vehicles (EVs). The Company currently produces
an electric power assist kit for bicycles and tricycles and assembles complete
electric powered bicycles and tricycles. The Company also distributes electric
scooters. Several members of ZAP's management team have more than two decades of
work in the EV and transportation industries. On February, 13, 1996, the first
of three patents applied for was granted by the U.S. Patent Office, and on
September 30, 1997 the second patent was granted by the U.S. Patent Office.
These patents cover the configuration, location and operation of the motor
system and battery.
Management's objective is to achieve strategic market dominance within
the EV marketplace, beginning with the market for electric power bicycles.
Management intends to achieve this objective by forming exclusive alliances with
leading developers of EV technologies, by structuring joint ventures with strong
manufacturing partners around the world, by creating alliances with the
governmental and private entities that support the EV industry, and by setting
up various EV distribution networks.
The Company's objective is to become a market leader in the U.S.
electric bicycle industry. The Company won the World Solar Bicycle Race in
Akita, Japan in 1995. The ZAP/Varna race bike placed first in both racing
categories, beating more than 100 entries from around the world. It established
two World Records and earned the title 1995 World Champion. These world records
still hold today.
Proposed Development
<TABLE>
The Company's development goals for 1997-1998 are to (a) further
capitalize the Company through this Offering, (b) obtain strategic partners, (c)
lower production costs through vendor and strategic partner relationships, and
increased sales volume, (d) increase the distribution network (both domestic and
in international markets) through companies that already have excellent
distribution in the bicycle, motor bike or independent ZAP electric vehicle
outlet stores and (e) continue to build the management team, both at
headquarters and internationally.
<CAPTION>
The Offering
<S> <C>
Common Stock Offered by the Company................ 500,000 shares (maximum)
Common Stock Outstanding Prior to the Offering..... 2,571,909 shares and 1,350,000
options reserved for employees
Use of Proceeds.................................... Proceeds from the sale of the
shares will be used to fund
expansion and marketing, and for
general working capital.
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE>
<TABLE>
SUMMARY OF FINANCIAL DATA
The summary financial data for the years ended December 31, 1994, 1995 and
1996 have been derived from the Financial Statements and Notes to Financial
Statements, audited by Moss Adams, LLP, independent auditors, whose report
thereon is also included. The summary financial data for the nine month periods
ended September 30, 1997 have been derived from unaudited interim financial
statements of the Company contained elsewhere herein and reflect, in
Management's opinion, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations for
these periods. Results of operations for any interim period are not necessarily
indicative of results to be expected for the full fiscal year. The selected
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements and Notes thereto included elsewhere in this Prospectus.
<CAPTION>
September 23 Nine Months Nine Months
Through Year Ended Year Ended Ended Ended
December 31, 1994 December 31, December 31, September 30, September 30,
1995 1996 1996 1997
(audited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Statements of Income Data:
Revenue $ 61,300 $650,800 $1,170,900 $ 852,634 $1,327,148
Cost of goods sold 67,100 435,400 862,700 618,225 1,035,096
-------- -------- ---------- --------- ----------
Gross profit (loss) (5,800) 215,400 308,200 234,409 292,052
Operating 67,200 447,200 1,132,000 761,015 1,123,049
Operating Income (loss) (73,000) (231,800) (823,800) (526,606) (818,710)
Other Income 300 222,000 19,500 10,278 9,537
Interest Expense - (2,700) (11,400) (6,517) (22,217)
Income before provision for taxes (72,700) (12,500) (815,700) (522,845) (831,390)
Provision for taxes on income 800 3,500 1,600 0 0
Net income (loss) $(73,500) $(16,000) $(817,300) $(522,845) $(831,390)
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data: Dec. 31, Dec. 31, Sept. 30, Dec. 31, Sept 30,
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Working capital $39,591 $20,100 $(46,308) $(44,800) $128,581
Total assets 80,988 191,400 415,125 770,200 924,710
Long-term debt, less current portion 311,701 0 43,408 28,400 26,928
Shareowners' equity (32,267) 60,400 21,652 112,400 336,808
</TABLE>
4
<PAGE>
RISK FACTORS
This Offering involves a high degree of risk. In addition to the other
information set forth in this Prospectus, the following risk factors should be
considered carefully in evaluating the Company and its business before
purchasing any of the shares of Common Stock offered hereby. This Prospectus
contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed in this Prospectus. Factors that could
cause or contribute to such differences include those discussed below, as well
as those discussed elsewhere in this Prospectus.
The EV market may be very limited and slow to develop.
A market for EVs depends upon their cost relative to internal
combustion vehicles, the politics of air pollution control, the buying
preferences of people who want private transportation, and many other factors.
Past predictions about the growth rate of the EV market have generally been
wrong. EV Market predictions are subject to changes in government polices and
the price of gasoline.
Management's strategy for the EV market may not work.
Members of management have considerable experience in designing and
implementing EV product, marketing and distribution strategies. For ZAP, they
have selected a particular entry product, manufacturing process and marketing
and distribution methods. There is a wide range of alternative strategies for
the EV market, and the potential for competition is immense.
Management will need to manage major growth and new markets.
The plan described in "Business: Proposed Development" envisions growth
to a level beyond management's past experience. Revisions to the proposed
development may be required and new challenges will be presented to management.
Sufficient capital may not be available for the Company to carry out its plan.
The proceeds of this Offering are intended to achieve certain
objectives. See "Use of Proceeds." More capital may be required for those
purposes than the Company will have. See "Capitalization." Changes in the
Company's objectives, to take advantage of opportunities or to meet competitive
challenges, may require more capital. Management may not be able to obtain
additional funds, from public or private sources. If any further capital is
raised by issuing equity securities, dilution to then existing shareholders will
result. Any debt financing would require additional interest expense and
principal repayments, reducing the Company's earnings potential and net cash
flow. If additional funds are required and not available, the Company may be
forced to limit growth. See "Business-Strategy," "Capitalization" and
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations -- Liquidity and Capital Resources."
New competition could quickly appear.
The Company's current competition is described in "Business:
Competition." However, many businesses in related activities could add an
operation to compete directly with the Company. Most of those businesses have
far greater financial and marketing resources, operating experience and name
recognition than ZAP.
Loss of the founders or other key employees could interrupt progress.
The founders, Gary Starr and James McGreen, started and developed the
Company to its present position and further development is largely dependent
upon their continued commitment and full-time efforts. The Company has no
key-person life insurance policy on either of them or upon other key employees.
5
<PAGE>
No dividends are presently intended.
The Company presently intends to retain any earnings and pay no
dividends. Future dividends, if any, will depend on the Company's profitability,
financial condition, capital requirements and other considerations determined by
the Company's Board of Directors. See "Dividend Policy."
Voting control will remain with the founders.
Immediately prior to this Offering, the Company's Managing Director and
its President together beneficially owned 52% of the Company common stock. After
the completion of this Offering, they will own 43% if the maximum is sold and
will effectively be able to control the Company. See "Principal Shareholders."
Sales of existing shares could affect the market price.
Sales of common stock outstanding prior to this Offering may adversely
affect the market price of the shares after this Offering. See "Shares Eligible
for Future Resale."
The share offering price was set by the Company.
Prior to this Offering, there has not been any public market for shares
of Zap common stock; therefore, the initial offering price for the shares was
determined by the Company. Among factors considered in determining the public
offering price were the Company's results of operations, its current financial
condition, its future prospects, the state of the markets for its products, the
experience of management, the economics of the industry segments in general and
the demand for similar securities of companies considered comparable to ZAP. See
"Plan of Distribution -- Determination of Offering Price."
There may not be a trading market for the shares.
The Company does not currently meet the requirements for listing on an
organized stock exchange or quotation of over-the-counter market maker trades on
the NASDAQ market. After completion of this Offering, the Company intends to
apply for a listing on a United States regional exchange, if the Company meets
certain numerical listing requirements. However, there can be no assurance that
the Company will be listed or that a market will develop or be sustained. If it
does not, the Company has been advised that a registered securities
broker-dealer would provide an order matching service for persons wishing to buy
or sell shares, upon completion of this Offering. However, there is currently no
agreement between the Company and a registered securities broker-dealer.
The share price can vary after this Offering.
The price of the Company's Common Stock, after the completion of this
Offering, can vary due to general economic conditions and forecasts, the general
business condition of the Company, the release of the Company's financial
reports and sales of Common Stock outstanding prior to this Offering.
No minimum amount for this Offering.
Because there is no required minimum amount of shares required to be
sold in this Offering, all the cash received will go directly to the Company, to
be used as described in "Use of Proceeds." If only a minimum amount were sold,
the result could be that all the proceeds were used to pay expenses of this
Offering.
The purchasers will have a dilution of book value per share.
Purchasers of shares in this Offering will realize immediate
substantial dilution of approximately $4.77 per share (or 80%) in the pro forma
net tangible book value from the initial public Offering price, if the maximum
amount offered is raised. See "Dilution" and "Plan of Distribution --
Determination of Offering Price."
State and federal regulation could affect the company's future.
States that have passed laws concerning electric bikes are not
consistent with one another, or with Federal laws. Management is working with
both state and federal agencies to obtain common language and regulations for
electric bikes and to keep them from being regulated as motor vehicles. See
"Business --
6
<PAGE>
Government Regulation." If they are regulated as motor vehicles this would add
additional marketing and product development costs.
Protection of patent and trademark rights could be costly.
The ZAP electric bicycle power system is a U.S. patented system. One
additional patent is pending for ZAP's folding scooter product "Zappy." ZAP is
an internationally registered trademark. Management believes that its
intellectual property is very important to the success of the Company and it
intends to protect against imitation. Litigation may be necessary and it could
cause considerable drain on the Company's cash and diversion of management's
time.
<TABLE>
USE OF PROCEEDS
The net proceeds available to the Company from the sale of the shares
in this Offering are estimated to be approximately $2,540,000 if the maximum is
sold, after deducting underwriting discounts, commissions and other offering
expenses (estimated to be $460,000). The Company expects to use the net proceeds
for the purposes outlined below. If the Company raises less than the maximum
amount of this Offering, it intends to prioritize expenditures as follows:
first, use funds from the Offering for working capital and corporate needs,
second, increase sales and manufacturing capacity and third, improve existing
products and develop new products.
<CAPTION>
500,000 shares
-----------------------
<S> <C> <C> <C>
1. Development of additional distribution channels.......... $ 772,160 30.4%
2. Increase of manufacturing capacity....................... 515,620 20.3%
3. New product development.................................. 515,620 20.3%
4. Product improvements..................................... 101,600 4.0%
5. Working Capital and General Corporate Purposes........... 635,000 25.0%
-----------------------
$ 2,540,000 100.0%
=======================
</TABLE>
Management does not anticipate changes in the proposed allocation of
estimated net proceeds of this Offering, but reserves the right to make changes
if management believes those changes are in the best interests of the Company.
Management does not foresee reallocating any significant portion of the proceeds
to working capital and general corporate purposes.
DIVIDEND POLICY
The Company has not declared or paid dividends since its inception. The
Company presently intends to retain any earnings to facilitate growth and does
not anticipate paying cash dividends in the foreseeable future. The company's
future lending agreements may also prohibit the payment of dividends.
7
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company
on September 30, 1997.
Short-term debt:
Short-term debt.......................................... $152,429
Current maturities of long-term debt..................... 3,583
----------
Total short-term debt ........................... 156,002
----------
Long-term debt:
Total long-term debt, less current maturities............ 26,928
----------
Shareowners' equity:
Common stock, no par value,
10,000,000 shares authorized;
2,343,135 at 9/30/97 shares outstanding.................. 2,087,361
Accumulated Deficit .......................................... (1,750,553)
----------
Shareowners' equity ..................................... 336,808
----------
Total capitalization ........................... $519,738
==========
8
<PAGE>
DILUTION
On September 30, 1997 the Company had a net tangible book value of
$336,808, or $0.14 per share. The net tangible book value per share is equal to
the Company's total tangible assets, less its total liabilities and divided by
its total number of shares of common stock outstanding. After giving effect to
the sale of shares being offered, at the public Offering price of $6.00 per
share, and the application of the estimated net proceeds, the pro forma net
tangible book value of the Company as of September 30, 1997, would have been
$2,876,808 or $1.23 per share. This represents an immediate increase in net
tangible book value of $1.09 per share to existing shareowners and an immediate
dilution of $4.77 per share to new investors purchasing shares in this Offering.
The following table illustrates the per share dilution in net tangible book
value per share to new investors:
(500,000 shares)
----------------
Public offering price per share...................... $6.00
Net tangible book value per share
on September 30, 1997......................... $0.14
Increase in net tangible book value per share
attributed to new investors................... $1.09
-----
Pro forma net tangible book value per share
As of September 30, 1997, after this Offering... $1.23
-----
Net tangible book value dilution per share
to new investors................................ $4.77
=====
<TABLE>
The following table sets forth on a pro forma basis as of September 30,
1997 the difference between existing shareowners and new investors purchasing
shares in this Offering, with respect to the number of shares purchased, the
total consideration paid and the average price paid per share, at the maximum:
<CAPTION>
Shares Purchased Total Consideration
------------------------- ------------------------- Average Price
Number Percent Amount Percent Per Share
-------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C>
Existing Shareowners...... 2,343,135 83.00% $3,139,827 51.00% $ 1.32
New Investors............. 500,000 17.00 3,000,000 49.00 6.00
--------- ------- ----------- ------- ------
Total.................. 2,843,135 100.00% $6,139,827 100.00%
========= ======= =========== =======
</TABLE>
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Financial Statements
and Notes thereto, "Capitalization" and "Prospectus Summary" appearing elsewhere
in this Prospectus. Operating data presented in this discussion are unaudited.
Overview
The Company designs, assembles, manufactures and distributes electric
bicycle power kits, electric bicycles, electric scooters and tricycles, and
other low-power electric transportation vehicles. Historically, unit sales have
been approximately 50% kits and 50% electric bicycles. Dollar sales have been
40% kits and 60% electric bicycles.
The Company sells its electric bicycles and kits to retail customers,
auto dealerships, bike dealerships and mail order catalogs. Net revenue is net
of returns. The Company sells to the mail order catalogs and selected customers
on credit with net 30 day terms. The Company sells to bike dealerships with
terms being cash on delivery. The retail sales are primarily paid for with a
credit card or personal check before shipment of the product.
During 1994, 1995, 1996 and 1997 the Company was being paid by
governmental agencies and private foundations to further develop the electric
bike to fit into various roles in the US and overseas markets. During this
period the Company developed electric motor systems for offshore sales and
manufacturing. In addition, the Company has developed an electric police bike.
The Company's work to develop offshore manufacturing abilities for the domestic
and foreign markets involved private and public foundations in South East Asia.
Since in the fourth quarter of 1995 the company has sold bikes to retail and
wholesale customers as its core business.
The Company manufactures an electric motor system that is sold as a kit
to be installed by the customer on their own bike. The Company also installs the
motor system on bikes the Company buys and then sells the complete electric bike
to the customer. The Company purchases complete bikes from various bike
manufacturers for use with the company's electric motor system. The
electric motor kit has approximately 62 unique parts. The electric motor kit
manufacturing and installation of the motor systems to the bikes is done at its
Sebastopol location. The electric motors are purchased from an original
equipment manufacturer (OEM) in the auto and air-conditioning industry. The
company is using one company for its motors, although there are other companies
that could be used with slight modifications to the motor support brackets. The
batteries are standard batteries used in the computer industry for power
interrupt systems. The electronic system uses standard electronic components.
The electric motor kits and electric bikes sold by ZAP are shipped
typically by U.P.S. and Federal Express. Larger quantity orders to wholesale
distributors are shipped common carrier. The Company has developed long term
purchase arrangements with its key vendors. The Company has no contractual
relationships with any of its vendors.
The Company's growth strategy is to increase net sales by augmenting
its marketing and sales force, and by increasing distribution channels through
retail organizations and wholesale distributors both domestically and overseas.
The Company will continue to increase production capability to meet the
increasing demand for its product. The Company will continue to develop the
product so it is the low cost leader in the industry. Product improvements and
new product introductions will continue to enlarge ZAP's presence in the
electric vehicle industry.
10
<PAGE>
<TABLE>
Results of Operations
The following table sets forth, as a percentage of net sales, certain
items included in the Company's Income Statements (see Financial Statements and
Notes thereto elsewhere in this Prospectus) for the periods indicated:
<CAPTION>
Years Ended Nine Months Ended Nine Months Ended
December 31, September 30, September 30,
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statements of Income Data:
Net sales 100% 100% 100% 100% 100%
Cost of sales 109 67 74 73 78
Gross Profit (9) 33 26 27 22
Operating expenses 110 69 97 89 85
Loss from operations (119) (36) (71) (62) (63)
Other income (expense) 0 34 1 0 (1)
Profit (Loss) before income taxes (119) (2) (70) (62) (64)
Provision for income taxes 1 1 0 0 0
Net profit (loss) (120) (2) (70) (62) (64)
</TABLE>
Quarter Ended September 30, 1996 Compared to Quarter Ended September 30, 1997
Net sales. Most sales were to retail customers, wholesale customers and
distributors. Net sales increased $97,407 or 34% from September, 1996 to
September, 1997 due to sales of kits and bicycles to a large bicycle company.
Gross profit (loss). Gross profit increased as a percentage of net
sales, from 31% to 34%. The increased bike and kit sales volume resulted in
manufacturing cost reductions on a per unit basis.
Selling. Selling expense decreased from 33% of sales to 30% of sales.
In 1997 the company increased its marketing and sales expenditures due to a
launching of its new products into the marketplace.
General and administrative expense. General and administrative expenses
decreased as a percentage of net sales from 32% in 1996 to 30% in 1997. This was
due to allocating fixed salary and rent expenses over more sales dollars than in
the previous year.
Research and development expense. Research and development expense
increased as a percentage of net sales from 5% in 1996 to 13% in 1997. The
Company expenditures for development of its products was significant in 1997 due
to the development of more new products including the Zappy and single motor
cruiser.
Other income (expense). Other income decreased significantly in 1997 to
189% due to higher interest expense.
Nine Months Ending September 30, 1996 Compared to Nine Months Ending September
30, 1997
Net sales. Net sales increased by $474,514 or 56% from $852,634 for the
nine months ended September 30, 1996 ("the 1996 period") to $1,327,148 for the
nine months ended September 30, 1997 ("the 1997 period"). The net sales increase
resulted from increased bike and kit sales through expanded distribution
channels both domestically and off shore.
Gross profit (loss). As a percentage of sales, gross profit decreased
from 27% in the 1996 period to 22% in the 1997 period. This decrease was due to
the liquidation of 1996 models and start up costs of 1997 models.
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Selling expense. Selling expense decreased as a percentage of sales
from 40% in the 1996 period to 32% in the 1997 period. Sales dollars increased
at a higher rate than the percentage of selling expense dollars.
General and administrative expense. General and administrative expense
decreased as a percentage of sales from 43% in the 1996 period to 39% in the
1997 period. Sales dollars increased at a higher rate than General
Administrative expenditures.
Miscellaneous income and interest expense. Miscellaneous income and
interest expense decreased as a percentage of sales from 1% in the 1996 period
to 0% in the 1997 period.
Liquidity and Capital Resources
At September 30, 1997 and September 30, 1996 the Company had a working
capital of $128,581 and ($46,308) respectively. The increase in the working
capital was primarily due to funds received from the prior public offering,
which was begun November 29, 1996. The proceeds from that prior offering went to
fund increased inventories levels, accounts receivables and capital
expenditures. The increase in current liabilities was due to the increases in
purchases of inventory to support the increase in sales. Upon completion of this
Offering, the company expects to have a working capital of approximately
$2,400,000.
The Company had net cash provided by operating activities of ($522,791)
in September, 1996 and net cash provided by operating activities of ($831,390)
in September, 1997. The decrease in net cash provided by operating activities
from September, 1996 to September, 1997 was due to greater finance emphasis on
product marketing and development.
The Company had net cash provided by investing activities of ($74,639)
for the nine months ending September, 1996 and net cash provided by investing
activities totaling ($107,613) for the nine months ended September 30, 1997.
These related principally to the purchase of upgraded computer equipment and
other machinery.
The Company had net cash provided by financing activities of $120,000
for the nine months ended September 30, 1996, and $899,487 for the nine months
ended September 30, 1997. Net cash provided by financing activities for the nine
months ended September 30, 1997 was from the sale of common stock from the prior
public offering. Net cash provided by financing activities in 1996 was provided
by notes payable and sales of common stock.
The Company's primary capital needs are to fund its growth strategy, which
includes increasing its net sales, increasing distribution channels, introducing
new products and continuing to improve existing product lines.
Recent Accounting Pronouncements
During October 1995, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
which established a fair value-based method of accounting for stock-based
compensation plans. The Company is currently following the requirements of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." The Company plans to adopt SFAS No. 123 utilizing the disclosure
alternative during 1997.
Seasonality and Quarterly Results
The Company's business is subject to seasonality influences. Although the
company has not experienced these influences on sales volumes, the bike industry
typically slows down during the winter months, November to March in the U.S. The
company is selling worldwide and will focus its business to allow net sales to
increase evenly throughout the year by obtaining distribution channels in
different global regions to compensate for slowdowns in other regions.
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Inflation
The Company's raw materials are sourced from stable cost competitive
industries. As such the company does not foresee any material inflationary
trends for its raw material sources.
BUSINESS
The Company
The Company designs, assembles, manufactures and distributes electric
bicycle power kits, electric bicycles, electric tricycles, electric scooters,
and other low-power electric transportation vehicles. Management's objective is
to establish the Company as a leading electric vehicle manufacturer and
distributor. To achieve this objective, Management intends to form exclusive
alliances with leading developers of EV technologies, structure joint ventures
with strong manufacturing partners around the world, and create alliances with
the governmental and private entities that support the EV industry.
Company Background
Founded in 1994, the Company resulted from more than two decades of
work by its Management in the electric vehicle and transportation industries.
See "Management." The Company currently has 39 employees.
In three years, ZAP has already made great strides towards its global
mission of transforming transportation. Over 6,000 people in over thirty
countries are now using ZAP vehicles as their preferred mode of transportation.
The Company's principal assembly facility and corporate offices are
located at 117 Morris Street in Sebastopol, California. The Company also rents a
facility at 111 Morris for research and development projects.
Products
ZAP's products are designed to encourage and enable bicyclists to ride
their existing bicycles more often (by providing additional power to overcome
hills or headwinds) or to provide the user with an electric bicycle or electric
vehicle that can sustain faster speeds with less exertion than a conventional
bicycle. ZAP's market surveys have shown that the user of a ZAP electric vehicle
will often use a ZAP product for recreation or short commutes instead of a
conventional vehicle.
ZAP currently offers a number of different power assist retrofit kits.
These ZAP power systems include dual or single motors, a sealed maintenance free
battery, one or two-speed controller, and an automatic battery charger. The
ZPS-2 power system is designed for mountain, road and cruiser type bikes. The
ZPS-T is designed for tricycles.
All of ZAP's bicycles incorporate the ZAP patented power system
technology:
ElectriCruizer(TM) is a cruiser style bicycle that has upright comfort
style handle bars and six manual gears.
ZAP Power Bike(TM) is a hybrid road bike with 18 manual gears.
ZAP Trike(TM) is a three wheeled bike which contains a larger battery
and a carry basket.
ZAP Patrol Bike(TM) is a suspension mountain bike with built-in lights
and siren.
Zappy(TM) is a stand-up, portable, lightweight scooter featuring a
12-volt battery with a built-in charger and a collapsible frame.
World Bike(TM) is a unisex bike designed for the World Market.
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Proposed Development
The Company has several improvements and new products under
development. The most significant of these are listed below:
Electricycle(TM) Scooter features a 24-volt sealed and integrated
battery system along with a 10 amp charger. This product is being
manufactured in China.
Electric Go-Cart. A prototype has been built that Management
anticipates will successfully tap into this worldwide market. This
product should do particularly well, compared to its gas alternatives,
in locations where it's preferable to race indoors or where noise is a
limiting factor.
The Company's research and development team continues to refine the
overall efficiency and performance of its products. The current development
process for its electric bicycle includes creating a new solid state control
circuit, a compact and lightweight "smart" charger, a throttle-type speed
control, and an integral quick release plastic battery case, adaptable to nearly
any bicycle.
Research and development of auxiliary products is also ongoing.
Bicycling Magazine recently showcased a prototype futuristic composite electric
bicycle powered by a ZAP system. Using the same technology as developed for land
vehicles, the Company is in research to take advantage of the growing need for
non-polluting, 3-wheel tuk-tuk type vehicles. The Company is also studying an
electric wheel motor that will incorporate an advanced motor built into the
wheel of a bicycle.
The Company has been awarded two grants totaling $40,000 from the U.S.
Government to assist in the development of its improved battery containment
design, its electric scooter, and to provide marketing assistance in Southeast
Asia. The Company has also received a $25,000 grant from the State of California
Energy Commission to assist in this effort.
Strategic Partnering
Management has established affiliations and/or contracts with several
organizations in the EV industry. The most significant of these are listed
below.
The Electric Power Research Institute (EPRI) contracted with the
Company to develop bicycles for police departments and utility
applications. EPRI is a research group that is funded by more than 600
electric utility companies. The Company works closely with the
commercialization division of EPRI to develop markets for low-power
EVs. ZAP, through EPRI, leased 40 demo electric bikes to participating
utilities in 1995.
Electrical Utility Companies. Several electrical utility companies are
now either selling, marketing or promoting the ZAP product line. ZAP
has sold over 200 electric bikes and retrofit kits to utilities to
date. Over 60 utilities have donated over 100 electric bikes to police
departments for their testing. The balance of units have been sold to
the utilities' service customers and used by the utilities to promote
electric vehicle transportation.
ZAP is also building a positive partnership with law enforcement
agencies around the country. Over 90 police departments are now using ZAP
vehicles.
Growth Strategies
Management intends to expand its domestic market share (recreational
and police enforcement EVs) by increasing the number of its manufacturer
representatives and by expanding its distribution organization. Trade shows,
print advertising, and public relation activities are planned. The Company also
plans to continue its demonstration projects with electrical utility companies.
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ZAP is preparing the necessary documentation to open ZAP electric
vehicle franchise outlet stores. Part of the proceeds from this Offering will be
utilized to market and develop these stores.
Leverage of the Company's brand name: the Company's brand name and
products receive promotion through editorial references in cycling, recreation,
and electric vehicle publications. ZAP intends to expand into other low-power
electric vehicle products.
The Industry
Worldwide, bicycles and scooters are the number one mode of
transportation.
There are an estimated one billion bicycles in daily use. More than 100
million new bicycles enter the world market each year.
In the U.S., the market for bicycles is approximately 10 percent of the
world market with 99 million bicycles in service. According to a 1995 study by
the Bicycle Market Research Institute (BMRI), approximately 15 million bicycles
were sold in the United States in 1996, representing approximately $2.5 billion
of retail sales. The industry is currently experiencing growth in both the
recreational market and the market for police departments.
The Company currently assembles and sells complete electric bicycles in
addition to its sale of electric power assist kits. Its market depends upon the
extent to which current and future bicycle owners choose to add electric energy
to assist their own physical energy. According to the Orange County Register,
September 1996, an estimated 26 million Americans want bikes but are put off by
the potential strain. It is estimated that up to one third of all bikes sold
could be electrified.
The growth of the market for electric vehicles has been, and will
likely continue to be, driven by aggressive federal, state, and local laws.
These laws require the reduction of pollution from conventional gas vehicles,
particularly from two-stroke vehicles (i.e., motorcycles and scooters).
Following are representative examples:
The U.S. Energy Policy Act of 1992 (EPAC) provides that federal, state
and public utility fleets must begin to purchase alternative fuel
vehicles in 1993 with major acceleration of these purchases to begin in
1998.
The State of California has mandated that 10% of all new car sales in
the state must be Zero Emission Vehicles (ZEV) by the year 2003. New
York, Massachusetts and other Northeastern states have similar
directives. General Motors, Ford and Toyota announced that they are
offering electric vehicles through specific auto dealers this year.
Management believes that these expensive high-profile EVs will assist
the market for low cost EVs (electric bicycles).
In support of these laws, utility companies have setup over 500 "free"
public charging stations in the state of California. High profile
retailers such as WalMart, Denny's and Raley's have agreed to
participate in the program to promote the use of EV's.
In foreign counties:
The Republic of China gives buyers of electric scooters a rebate
equivalent to $200 (U.S.). It is considering a Zero Emission Vehicle
scooter mandate by the year 2000.
Japan, Thailand, and Costa Rica have agreed to provide low duties on
any electric vehicle subcomponents.
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China has recently banned the licensing of new gas powered bicycles in
the cities of Shanghai and Beijing.
France has agreed to provide rebates of the additional cost of EVs over
conventional vehicles and is providing free parking to EVs in Paris.
The major identified barrier to widespread adoption of EVs has been the
initial cost of an electric vehicle compared to the non-electric alternative.
The Company's technology, however, provides for an extremely low cost electric
vehicle.
Franchising
The Company intends to franchise outlets to sell the Company's
products. The Company has received qualification to franchise in California,
Florida and Texas. The Company intends to seek qualification to franchise in
additional states.
Competition
There are several companies manufacturing, distributing and selling
electric bicycles in the U.S. Of these, the Electric Transportation Company
("ETC") and the GT "Charger" are the best financed and highest profile.
Globally, large companies such as Yamaha, Honda, and Suzuki have entered the
market. Although they are primarily marketing their electric bicycles in Japan,
there are no barriers to any of these companies, or other companies, from
offering similar electric bicycles in other markets.
Management believes that it brings to the Company experience that is
unparalleled in the emerging EV industry. The Company's management team
possesses a strong background in the management, marketing, engineering, and
financial aspects of the EV industry (see "Management").
Employees
The company has 31 full-time and 8 part-time employees.
Facilities
The Company leases office and manufacturing space at 117 Morris Street,
Sebastopol, California. The lease expires on June 1, 1998 and has a monthly rent
of $4,400. The Company also leases a research and development shop with a
monthly rent of $1,500.
Legal Proceedings
The Company is not currently involved in any material litigation or
legal proceedings and is not aware of any material litigation or proceeding
pending or threatened against it.
Government Regulation
The Company is subject to various federal, state and local
environmental laws and regulations which limit the discharge, storage and
disposal of a variety of substances such as paints and solvents. Operations of
the Company are also governed by laws and regulations relating to workplace
safety and worker health, principally the Occupational Safety and Health
Administration Act and regulations and applicable state laws thereunder.
Electric bicycles have been defined as mopeds or motorcycles in some states and
as such are required to conform to the regulations for mopeds or motorcycles.
The state of California recently passed a law exempting electric bikes from
motor vehicle requirements, 22 other states have similar laws. The Federal
Department of Transportation is currently reviewing the ZAP product for
interpretation.
Intellectual Property Protection
The ZAP electric bicycle power system is a U.S. patented system.
Additional patents are pending. ZAP is an internationally registered trademark.
Additional trademarks are pending. The Company intends to
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take action to protect against imitation of its products and to protect its
patents, copyrights and trademarks as necessary.
Qualified Small Business Stock
The Omnibus Budget Reconciliation Act of 1993 provides, in certain
circumstances, a reduction in the capital gains tax for certain taxpayers who
purchase shares at original issue from a "qualified small business" and dispose
of those shares after a holding period of at least five years. One-half of the
gain (up to certain limits) is generally excluded from taxable income for
regular tax purposes. A "qualified small business" must have not more than $50
million in gross assets at any time after August 10, 1993 through the date of
issuance of the shares. In addition, at least 80% of its assets must be used "in
the active conduct of one or more qualified trades or businesses" throughout the
holding period. The Internal Revenue Service has issued proposed Regulations
under this law. Qualifying for its benefits will depend in part on future
events. The Company makes no representation as to the availability of the
benefits of this provision to prospective purchasers of its Common Stock. The
Company intends to submit reports to the Internal Revenue Service and to the
Company's shareholders as may be required under the law for use of this
exclusion. Potential investors are advised to consult their own tax counsel for
further details.
MANAGEMENT
Name Age Position
- ---------------------- ----- -----------------------
Gary Starr 42 Managing Director
James McGreen 44 President and Director
Sanford Theodore 33 Principal Financial Officer and Controller
Andrew Hutchins 37 General Manager
Jessalyn Nash 38 Director
Lee S. Sannella, M.D 81 Director
Nancy K. Cadigan 39 Director and Secretary
Richard Balzhiser 65 Member, Advisory Board
Hal Larson 73 Member, Advisory Board
Jack Guy 65 Member, Advisory Board
Gary Starr is Managing Director of the Company. He has been building
and driving electric cars for more than 20 years. In addition to overseeing the
marketing of more than 5,000 electric vehicles, Mr. Starr has invented several
solar electric products and conservation devices. Mr. Starr founded U.S.
Electricar's electric vehicle operations in 1983. That company recently signed a
licensing agreement with Hundai.
Mr. Starr also serves as an advisor to Zebra Motors, Inc., a designer
of an electric sports car, and has been a technical advisor to UCLA's Lewis
Center for Regional Policy Studies. He's been a member of the California
Environmental Technology Advisory Council and has been a guest lecturer at
Stanford University Graduate School of Business.
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In 1993, Mr. Starr earned a Private Industry Council Recognition Award
for creating job opportunities in the EV industry and was named as one of the
ten most influential electric car authorities by Automotive News. More recently,
he was honored by the American Lung Association of San Francisco with a Clean
Air Award in Technology and was recognized by U.S. Senator Barbara Boxer for his
contribution towards clean air.
Mr. Starr has several publications: Electric Cars: Your Guide to Clean
Motoring, The Shocking Truth of Electric Cars, and The True Cost of Oil. In
addition, he has appeared on more than 300 radio and television talk and news
shows (including Larry King Live, The Today Show, Inside Edition, CNN Headline
News, Prime Time Live, and the CBS Evening News and the McNeil Lehrer News Hour)
as a recognized authority in the field of electric vehicles.
James McGreen, President, has over 25 years experience in design,
development, engineering, manufacturing and marketing. He has brought over 100
successful consumer products from conception to the mass market. He has been a
pioneer in the ultralight aircraft, personal watercraft, and motorcycle racing
fields. He is the founder and/or former president of Protopipe Exhaust Systems,
Inc., McGreen Metalworking, Kanemoto Racing and McGreen Development. His
commitment to electric transportation began in 1991 with successful competition
in Electrathon racing. He holds several records and winning times for this
lightweight electric vehicle class. He has been a racer of motorcycles and has
built motor parts, frames, chassis and other specialty parts for both
manufacturers and other racers. McGreen designed and built composite racing sail
boats. A skilled machinist, welder, and tool and die maker, he has designed and
built nearly every kind of lightweight motorized vehicle. A prolific inventor,
McGreen has filed five patents (1 granted, 2 pending, 2 expired) in the resource
conservation and transportation fields. He also managed the world championship
team that won the World Solar Bike Races, in Akita, Japan in 1995. In 1996,
McGreen was selected as an honored member of the Who's Who of American Inventors
for his positive impact on society.
Sanford Theodore, Principal Financial Officer and Controller has been
involved in various financial and accounting positions for over 10 years. Well
versed with computerized accounting and auditing processes, he has worked with
Optical Coating Laboratory, Western Dairy Products, and Blue Cross. Mr. Theodore
received a bachelor's degree in Business Administration from San Diego State
University in 1985.
Andrew Hutchins, General Manager has been involved in the retail
bicycle industry since he was 11 years old when he worked for his family's
retail bicycle shop. He successfully started, managed, and operated a retail
bicycle store for 11 years prior to selling it for several times his initial
costs. Before opening his bicycle store, Mr. Hutchins received a degree in
Business Economics and Communication Studies from the University of California
at Santa Barbara in 1982.
Jessalyn Nash, Masters in Business, is an environmental and business
consultant to rapid growth entrepreneurial companies. She has specialized in
marketing, distributor relations and sales programs. Ms. Nash previously held
positions with NeXT, Inc. and in National Sales and Marketing with Apple
Computer, Inc. Nash has been an environmental advocate for over 20 years. She
has operated her consulting business since 1989.
Lee Sannella, M.D. has been an active researcher in the fields of
alternative transportation, energy and medicine for more than 25 years. Dr.
Sannella has been a founding shareholder in many start up high tech companies.
He was a Director of U.S. Electricar from 1983 to 1992. A graduate of Yale
University, he maintained an active medical practice for many years in
ophthalmology and psychiatry. He worked with the Sonoma Medical Society on
improving radiation standards and is a best-selling author. He has served on
advisory boards of the City of Petaluma, California, on the Board of Directors
of the San Andreas Health Council of Palo Alto, California, the Veritas
Foundation of San Francisco, California and the AESOP Institute. He earned his
M.D. from Yale University.
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Nancy K. Cadigan assisted Jim McGreen in managing McGreen Development,
the research organization that developed the original ZAP Power System. She has
broad experience in sales, trade show events, and office management. With an
educational background in Recreation and Leisure, Ms. Cadigan has worked in
public and commercial recreation for more than twenty years. She has conducted
public education classes on recycling, reuse and composting practices.
Currently, Ms. Cadigan is involved in organic farming. In all of her work, she
looks for environmentally sound solutions to ordinary problems and has been a
strong advocate of the ZAP mission since its inception. In the past five years
she has worked for the Oakland Parks and Recreation Department (1990-92),
Alameda Waste Management Authority (1992-93), Urban Ore (1993-94), McGreen
Development (1994), ZAP Power Systems (1994-present), and Women's Health
Specialists (1995-1996).
Advisory Board.
Dr. Richard E. Balzhiser, President Emeritus of the Electric Power
Research Institute (EPRI), served as President and CEO of EPRI from 1988-1996.
He joined EPRI in 1973 at the time of its founding after serving as Deputy
Director for Energy and Environment in the White House Office of Science and
Technology. Dr. Balzhiser currently serves on the Houston Industries and
Electrosource Boards as well as Advisory Boards to Mobil, MIT, University of
Michigan, and the University of Wisconsin. He is chairing committees for the
World Bank and World Energy Council. Dr. Balzhiser earned his Ph.D. from the
University of Wisconsin.
Hal Larson was the Executive Creative Director for the advertising
agency Tatham, Laird & Kudner. He has been responsible for the advertising for
Kraft Cheese, Sears, Quaker, 7-up, and Oscar Meyer. He also served as Creative
Director of J. Walter Thompson and West Coast Creative Director of Cunningham &
Walsh. Mr. Larson has directed advertising for the Republican National Committee
and has written several books and lectured at several Universities. Mr. Larson
earned his B.S. degree from the University of Oregon and his M.S. degree from
Boston University.
Jack Guy has been employed by the Electric Power Research Institute
(EPRI) since 1974. He is responsible for commercializing EPRI's new products and
technologies in Electric Transportation. From 1956 to 1974 , Mr. Guy was a
manager for General Electric Co. Mr. Guy has also served as a special agent for
the U.S. Army Counterintelligence Corps.
Indemnification of Directors and Officers
The Company's Articles of Incorporation provide that the liability of
the directors for monetary damages shall be limited to the fullest extent
permissible under California law. Insofar as indemnification for liabilities
arising under the federal securities laws may be permitted to directors,
officers and controlling persons of the Company pursuant to that provision, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in those laws and is, therefore, unenforceable.
Director Term of Office and Compensation
All directors terms of office expire at the next annual meeting of
shareholders. The Company's directors do not receive any cash compensation for
their service on the Board of Directors, but directors may be reimbursed for
certain expenses in connection with their attendance at Board meetings.
EXECUTIVE COMPENSATION
For 1996, Gary Starr and James McGreen, the Company's executive
officers, received compensation of $31,175 and $33,270 respectively.
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<TABLE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's Common Stock immediately
prior to this Offering, and as adjusted to reflect the sale of the shares being
offered, for (i) each director and executive officer of the Company, (ii) each
shareholder known by the Company to own beneficially 5% or more of the
outstanding shares of its Common Stock and (iii) all directors and officers as a
group. The Company believes that the beneficial owners of the Common Stock
listed below, based on information furnished by them, have sole investment and
voting power with respect to their shares, subject to community property laws
where applicable.
<CAPTION>
Percentage of Common Shares Outstanding:
Directors, Shares Before Offering Maximum Sold
Executive Officers Beneficially -------------------- -------------------
and 5% Shareholders: Owned (2,571,909 shares) (3,071,909 shares)
- ---------------------- ------------ -------------------- -------------------
<S> <C> <C> <C>
James McGreen 709,160* 28% 23%
Gary Starr 611,978* 24% 20%
All directors and 1,321,138 52% 43%
executive officers
as a group (2 persons)
<FN>
* Includes 72,000 shares of Common Stock issuable upon exercise of currently
exercisable incentive stock options but excludes 25,000 shares of Common Stock
issuable under options but not currently exercisable.
</FN>
</TABLE>
CERTAIN TRANSACTIONS
On September 23, 1994, the date the Company commenced business, James
R. McGreen, the Company's President, transferred various assets, subject to
certain liabilities, to the Company, receiving in exchange 900,000 shares (post
split) of the Company's common stock. The net amount recorded on the Company's
accounting records was $9,000. Mr. McGreen's net cost of those assets, less
prior amortization of cost for tax purposes, was $10,691. On the same date, Gary
Starr paid $6,000 for 600,000 shares (post split) of the Company's common stock.
There have been no other transactions, nor are any transactions
proposed, in which the Company was or is to be a party, in which any member of
its management or director had any direct or indirect material interest.
DESCRIPTION OF COMMON STOCK
The Company has authorized 10,000,000 shares of Common Stock, without
par value. Immediately prior to this Offering, there were 2,571,909 shares of
Common Stock outstanding and held of record by 1,100 shareholders. Owners of
Common Stock are entitled to one vote for each share held of record on all
matters to be voted on by shareholders, except that, upon giving the legally
required notice, shareholders may cumulate their votes in the election of
directors. The owners of Common Stock are entitled to receive dividends when, as
and if declared by the board of directors out of funds legally available
therefor. In the event of liquidation, dissolution or winding up of the Company,
the Common Stock shareholders are entitled to share ratably in all assets
remaining which are available for distribution to them after payment of
liabilities and after provision has been made for each class of stock, if any,
having preference over the Common Stock. Common Stock shareholders, as such,
have no conversion, preemptive or other subscription rights, and there are no
redemption provisions applicable to the Common Stock. All of the outstanding
shares of Common Stock are, and the shares of Common Stock offered by this
Offering Circular, when issued for the consideration set forth in this Offering
Circular, will be fully paid and non-assessable.
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Registration Rights
There are no agreements between current shareholders and the Company
with respect to the registration of such shares under the Securities Act.
Transfer Agent and Registrar
The transfer agent and registrar for the Company's Common Stock is
American Securities Transfer & Trust, Inc.
SHARES ELIGIBLE FOR FUTURE RESALE
Upon completion of this Offering, the Company will have 3,071,909
shares outstanding if the maximum amount is sold. The shares sold in this
Offering will be freely tradable without restriction or further registration
under the Securities Act unless purchased by "affiliates" of the Company, as
that term is defined in Rule 144 under the Securities Act ("Rule 144") described
below. Sales of outstanding shares to residents of certain states or
jurisdictions may only be effected pursuant to a registration in or applicable
exemption from the registration provisions of the securities laws of those
states or jurisdictions.
Further, the 361,890 shares of Common Stock sold in the Company's prior
initial public offering, which commenced on November 28, 1996, are freely
tradable without restriction or further registration under the Securities Act.
The remaining 2,210,019 shares of Common Stock outstanding upon
completion of this Offering, which are held of record by shareholders prior to
this Offering and prior to the initial public offering, are "restricted
securities" and may not be sold in a public distribution except in compliance
with the registration requirements of the Securities Act or an applicable
exemption under the Securities Act, including an exemption pursuant to Rule 144.
In general, Rule 144 allows a person who has held restricted securities for at
least one year to sell into the public trading market, in any three-month
period, up to one percent of the total number of the Company's then outstanding
shares (approximately 30,720 shares immediately after completion of this
Offering), provided there is adequate current public information available about
the Company and the securities are sold in regular brokers' transactions. Rule
144(k) provides that persons who are not deemed to be "affiliates" and who have
beneficially owned shares for at least two years are entitled to sell their
shares at any time under Rule 144 without regard to the limitations described
above. These one and two-year periods began in September 1994 with respect to
1,500,000 shares, in January 1995 for 159,000 shares and in the period from
January 1996 to October 3, 1996 for 364,950 shares. Sales of substantial amounts
of shares in the public market could adversely affect prevailing market prices
and could impair the Company's future ability to raise capital through an
offering of its equity securities.
The Company's common stock is not listed or quoted on any organized
exchange or other trading market, nor has the Company applied for a formal
listing or quotation. There can be no assurances that a market will develop or
be sustained. The post-offering fair value of the Company's common stock,
whether or not any secondary trading market develops, is variable and may be
impacted by the business and financial condition of the Company, as well as
factors beyond the Company's control. The price may also vary due to economic
conditions and forecasts and general conditions in the electric bike, and bike
industries.
PLAN OF DISTRIBUTION
General
The Company proposes to offer and sell the shares directly to members
of the public residing in selected states. (A listing of those states in which
residents may purchase shares is on the Share Purchase Agreement, which
accompanies this Prospectus). Announcements of this Offering, in the
formprescribed by Rule 134 of the Securities Act, will be communicated to
selected persons. A copy of this Prospectus will be
21
<PAGE>
delivered to those who request it, together with the Subscription Agreement. All
shares will be sold at the public offering price of $6.00 per share and a
minimum purchase of 100 shares is required. The Company reserves the right to
reject any subscription or share purchase agreement in full or in part.
The Company will effect offers and sales of shares through printed
copies of this Prospectus delivered by mail and electronically and through
broker dealers. Any voice or other communications will be conducted in certain
states through its executive officers, and in other states through a designated
sales agent, licensed in those states. Under Rule 3a4-1 of the Exchange Act,
none of these employees of the Company will be deemed a "broker," as defined in
the Exchange Act, solely by reason of participation in this Offering, because
(1) none is subject to any of the statutory disqualifications in Section
3(a)(39) of the Exchange Act, (2) in connection with the sale of the shares
hereby offered, none will receive, directly or indirectly, any commissions or
other remuneration based either directly or indirectly on transactions in
securities, (3) none is an associated person (partner, officer, director or
employee) of a broker or dealer and (4) each meets all of the following
conditions: (A) primarily performs substantial duties for the issuer otherwise
than in connection with transactions in securities; (B) was not a broker or
dealer, or an associated person of a broker or dealer, within the preceding 12
months; and (C) will not participate in selling an offering of securities for
any issuer more than once every 12 months.
Determination of Offering Price
Prior to this Offering there has been no market for the common stock of
the Company, and there can be no assurances that a market will develop or be
sustained. Accordingly, the public offering price has been determined by the
Company's Board of Directors. Among factors considered in determining the public
offering price were the Company's results of operations, the Company's current
financial condition, its future prospects, the state of the markets for its
products, the experience of management and the economics of the industry segment
in general.
LEGAL MATTERS
The validity of the shares hereby offered will be passed upon for the
Company by Evers & Andelin, LLP, San Francisco, California.
EXPERTS
The Financial Statements of the Company as of and for the year ended
December 31, 1996 have been included herein and in the Registration Statement in
reliance on the report of Moss Adams, LLP, Santa Rosa, California, independent
certified public accountant, appearing elsewhere herein, and upon the authority
of said firm as an expert in accounting and auditing.
ADDITIONAL INFORMATION
A Registration Statement on Form SB-2, including amendments thereto,
relating to the shares offered hereby has been filed with the Securities and
Exchange Commission, Office of Small Business Policy, Washington, D.C. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. For further information with respect to the Company and the shares
offered hereby, reference is made to such Registration Statement, exhibits and
schedules. A copy of the Registration Statement may be inspected by anyone
without charge at the Commission's principal office located at 450 Fifth Street,
N.W., Washington, D.C. 20549, the Northeast Regional Office located at 7 World
Trade Center, 13th Floor, New York, New York, 10048 and copies of all or any
part thereof may be obtained from the Public Reference Branch of the Commission
upon the payment of certain fees prescribed by the Commission. In addition the
Commission maintains a World Wide Web site on
22
<PAGE>
the Internet at http://www.sec.gov that contains reports, proxy and information
statements and other documents filed electronically with the Commission,
including the Registration Statement. The Company intends to furnish its
shareholders with annual reports containing financial statements audited by its
independent public accountants and quarterly reports containing unaudited
financial information for the first three quarters of each fiscal year.
23
<PAGE>
CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT ................................................F-2
CONSOLIDATED FINANCIAL STATEMENT
Balance Sheets ..............................................................F-3
Statements of Operations ....................................................F-4
Statements of Stockholder's Equity ..........................................F-5
Statements of Cash Flows ....................................................F-6
Notes to Consolidated Financial Statements ..................................F-8
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated February 14, 1997, except for Note 2,
which is as of March 21, 1997, on our audit of the financial statements of Zap
Power Systems, included in the registration statement on Form SB-2 in connection
with the offering of common stock of Zap Power Systems. We also consent to the
reference to our Firm under the caption "Experts".
/s/ MOSS ADAMS LLP
Santa Rosa, California
December 5, 1997
F-2
<PAGE>
<TABLE>
<CAPTION>
December 31, 1996 1995 SEPT.30, 1997
- ---------------------------------------------------------------------------------------------
(unaudited)
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS
Cash $161,600 $ 21,800 $129,385
Receivables 60,900 30,700 203,734
Inventories 246,600 58,400 270,151
Prepaid expenses and other assets 115,500 -- 86,285
-------- -------- --------
Total current assets 584,600 110,900 689,555
-------- -------- --------
PROPERTY AND EQUIPMENT 100,300 66,300 140,200
-------- -------- --------
OTHER ASSETS
Investment in joint venture 52,500 -- 66,381
Cash restricted to payment of long-term debt 10,000 -- --
Intangibles, net of accumulated amortization
of $1,600 and $700, respectively 7,300 8,200 18,905
Deposits 15,500 6,000 21,956
-------- -------- --------
85,300 14,200 107,242
-------- -------- --------
Total assets $770,200 $191,400 $936,997
======== ======== ========
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
December 31, 1996 1995 SEPT.30, 1997
- ----------------------------------------------------------------------------------------------------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 301,200 $ 94,200 $ 193,437
Accrued liabilities and other expenses 66,500 12,600 211,525
Income taxes payable -- 2,700 --
Notes payable 236,400 21,500 144,362
Current maturities of long-term debt 12,800 -- 8,067
Current maturities of obligations under capital leases 12,500 -- 3,583
------------ ------------ ------------
Total current liabilities 629,400 131,000 560,974
------------ ------------ ------------
OTHER LIABILITIES
Long-term debt, less current maturities 4,700 -- --
Obligations under capital leases, less current 23,700 -- 26,928
------------ ------------ ------------
28,400 -- 26,928
------------ ------------ ------------
STOCKHOLDERS' EQUITY
Common stock, no par value; 10,000,000
shares authorized, 2,076,500 and 1,644,000
shares issued and outstanding, respectively 1,019,200 149,900 2,087,361
Accumulated deficit (906,800) (89,500) (1,738,266)
------------ ------------ ------------
112,400 60,400 349,095
------------ ------------ ------------
Total liabilities and stockholders' equity $ 770,200 $ 191,400 $ 936,997
============ ============ ============
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 SEPT.30, 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
(unaudited)
NET SALES $ 1,170,900 $ 650,800 $ 1,327,148
COST OF GOODS SOLD 862,700 435,400 1,035,096
----------- ----------- -----------
GROSS PROFIT 308,200 215,400 292,052
----------- ----------- -----------
OPERATING EXPENSES
Selling 476,800 90,300 424,887
General and administrative 554,800 282,200 500,873
Research and development 100,400 74,700 185,002
----------- ----------- -----------
1,132,000 447,200 1,110,762
----------- ----------- -----------
LOSS FROM OPERATIONS (823,800) (231,800) (818,710)
----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest expense (11,400) (2,700) (22,217)
Miscellaneous 19,500 (8,000) 9,537
Grant income -- 20,000 --
Royalty income -- 210,000 --
----------- ----------- -----------
8,100 219,300 (12,680)
----------- ----------- -----------
LOSS BEFORE INCOME TAXES (815,700) (12,500) (831,390)
PROVISION FOR INCOME TAXES 1,600 3,500 --
----------- ----------- -----------
NET LOSS $ (817,300) $ (16,000) $ (831,390)
=========== =========== ===========
NET LOSS PER COMMON SHARE $ (0.45) $ (0.01) $ (0.37)
=========== =========== ===========
WEIGHTED AVERAGE OF COMMON
SHARES OUTSTANDING 1,805,317 1,582,656 2,233,385
=========== =========== ===========
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
Common Stock Accumulated
-------------------------------
Shares Amount Deficit Total
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 1,500,000 $ 15,000 $ (73,500) $ (58,500)
Sale of common stock 97,500 94,900 -- 94,900
Conversion of notes payable 46,500 40,000 -- 40,000
Net loss -- -- (16,000) (16,000)
----------- ----------- ----------- -----------
Balance, December 31, 1995 1,644,000 149,900 (89,500) 60,400
Sale of common stock 362,100 574,500 -- 574,500
Conversion of notes payable 3,000 5,000 -- 5,000
Stock issued for current and
future services 57,400 181,000 -- 181,000
Stock issued to joint venture 10,000 52,500 -- 52,500
Warrants issued for finance fees -- 56,300 -- 56,300
Net loss -- -- (817,300) (817,300)
----------- ----------- ----------- -----------
Balance, December 31, 1996 2,076,500 $ 1,019,200 $ (906,800) $ 112,400
=========== =========== =========== ===========
Sale of common stock 1,000,400 1,000,400
Stock issued for current and
future services 67,700 67,700
Net loss (831,400) (831,400)
----------- ----------- ----------- -----------
Balance, September 30, 1997 $ 2,087,300 $(1,738,200) $ 349,100
=========== =========== =========== ===========
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 SEPT.30, 1997
- --------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Netloss $ (817,300) $ (16,000) $ (831,390)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 47,400 11,100 46,024
Allowance for doubtful accounts 7,400 1,000 (2,538)
Issuance of common stock for services rendered 127,400 24,900 67,770
Changes in:
Receivables (37,600) (21,800) (140,286)
Inventories (188,200) (41,400) (23,581)
Prepaids expenses (6,400) -- 29,155
Deposits (9,500) (6,000) 165,981
Accounts payable 207,000 71,000 (107,753)
Accrued liabilities and other expenses 53,900 (39,500) (27,453)
Income taxes payable (2,700) 2,700 --
----------- ----------- -----------
Net cash used by operating activities (618,600) (14,000) (824,071)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment (80,500) (61,700) (80,618)
Purchase of patent and trademark -- (8,900) (13,882)
Patent Defense -- -- (13,113)
----------- ----------- -----------
Net cash used by investing activities (80,500) (70,600) (107,613)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 271,900 41,500 30,000
Proceeds from long-term debt 25,000 -- --
Sale of common stock, net of stock offering costs 544,400 70,000 1,000,405
Principal repayments on long-term debt (7,500) -- (9,409)
Payments on obligations under capital leases (4,900) -- (9,509)
Cash restricted to payment of certain notes payable 10,000 -- 10,000
Principal repayments on note payable -- (19,300) (122,000)
----------- ----------- -----------
Net cash provided by financing activities 838,900 92,200 899,487
----------- ----------- -----------
NET INCREASE/(DECREASE) IN CASH 139,800 7,600 (32,197)
CASH, beginning of year 21,800 14,200 161,582
----------- ----------- -----------
CASH, end of year $ 161,600 $ 21,800 $ 129,385
=========== =========== ===========
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 SEPT.30, 1997
- ---------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
SUPPLEMENTAL CASH-FLOW INFORMATION:
Cash paid during the year for:
Interest $ 11,400 $ 100 $ 22,000
Income taxes $ 1,600 $ 800 $ --
Non-cash investing and financing activities:
Conversion of notes payable to common stock $ 5,000 $ 40,000 $ --
Stock issued for future services $ 53,600 $ -- $ --
Stock issued to joint venture $ 52,500 $ -- $ --
Stock issued for current services $ 127,400 $ -- $ 67,770
Warrants issued for financing fees $ 56,300 $ -- $ --
</TABLE>
F-8
<PAGE>
Machinery and equipment 7 years
Equipment under capital leases 5 years
Demonstration bicycles 2 years
Office furniture and equipment 7 years
Vehicle 5 years
Leasehold improvements 15 years
F-9
<PAGE>
1996 1995
-------------------- ------------------
Trade accounts receivable $ 77,300 $ 39,700
Less allowance for doubtful accounts 16,400 9,000
-------------------- ------------------
$ 60,900 $ 30,700
==================== ==================
F-10
<PAGE>
1996 1995
-------------------- --------------------
Raw materials $ 99,900 $ 25,900
Work-in-process 95,500 24,900
Finished goods 51,200 7,600
-------------------- --------------------
$ 246,600 $ 58,400
==================== ====================
F-11
<PAGE>
<TABLE>
<CAPTION>
1996 1995
------------------ -----------------
<S> <C> <C>
Machinery and equipment $ 41,600 $ 35,600
Equipment under capital leases 42,100 -
Demonstration bicycles 33,500 15,400
Office furniture and equipment 30,000 20,000
Leasehold improvements 6,600 6,600
Vehicle 4,300 -
------------------ -----------------
158,100 77,600
Less accumulated depreciation and amortization 57,800 11,300
------------------ -----------------
$ 100,300 $ 66,300
=================== =================
</TABLE>
F-12
<PAGE>
<TABLE>
<CAPTION>
1996 1995
------------------ --------------------
<S> <C> <C>
Notes to stockholders, with interest at 12%; interest and
principal due when the notes mature in November and
December, 1997; the Company is allocating 50% of the
proceeds received from the Company's Direct Public
Offering towards repayment of the loans until fully
repaid; the noteholders have been issued warrants to
purchase, in the aggregate, 37,800 shares of common
stock at $5.25 per share through October, 1999. $ 189,000 $ -
Notes to a stockholder, with interest at 10%; principal and
interest is due when the notes mature in March and
December, 1997; unsecured 35,400 16,500
Notes, with interest at 10%; principal and interest is due
when the notes mature in January and February, 1997;
unsecured 12,000 -
Note, with interest at 10%; the note was converted
to 3,000 shares of common stock in 1996 - 5,000
-------------------- --------------------
$ 236,400 $ 21,500
==================== ====================
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
<S> <C> <C>
Note to bank, with interest at 15%; principal and interest
due in monthly installments and maturing in March,
1998; secured by an interest in other checking or
savings accounts in the bank and held by the Company $ 17,500 $ -
Less current maturities 12,800 -
-------------------- --------------------
$ $
4,700 -
==================== ====================
</TABLE>
F-14
<PAGE>
Year Ending December 31,
1997 $ 17,900
1998 17,900
1999 9,200
-------------------
Total minimum lease payments 45,000
Less amounts representing interest 8,800
-------------------
Present value of minimum lease payments 36,200
Less current maturities 12,500
-------------------
$ 23,700
===================
F-15
<PAGE>
1996 1995
------------------- -------------------
Current tax liability
Federal $ - $ 1,700
State $ 1,600 $ 1,800
------------------- -------------------
1,600 3,500
=================== ===================
Deferred tax assets (liabilities)
Federal tax loss carryforward $ 297,000 $ 25,900
State tax loss carryforward 79,000 4,700
Other, net (19,600) (500)
------------------- -------------------
356,400 30,100
Less valuation allowance 356,400 30,100
------------------- -------------------
$ - $ -
=================== ===================
F-16
<PAGE>
<TABLE>
<CAPTION>
1996 Plan 1995 Plan
------------------------------------------- --------------------------------------------
Number Exercise Price Number Exercise Price
of Shares Per Share of Shares Per Share
------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Outstanding at
December 31, 1994 - $ - - $ -
Granted - $ - 237,000 $ 0.40
Canceled - $ - - $ -
------------------- -------------------- -------------------- --------------------
Outstanding at
December 31, 1995 - $ 237,000 $ 0.40
Granted 501,000 $ 1.00 318,000 $ 0.40
Canceled - $ - - $ -
------------------- -------------------- -------------------- --------------------
Outstanding at
December 31, 1996 501,000 $ 1.00 555,000 $ 0.40
=================== ==================== ==================== ====================
</TABLE>
F-17
<PAGE>
1996 1995
-------------------- --------------------
Net loss - as reported $ (817,300) $ (16,000)
Net loss - pro forma $ (981,000) $ (36,600)
-------------------- --------------------
Loss per share - as reported $ (0.45) $ (0.01)
-------------------- --------------------
Loss per share - pro forma $ (0.54) $ (0.02)
==================== ====================
F-18
<PAGE>
1996 1995
------------------- --------------------
Dividends None None
Expected volatility 30% 30%
Risk free interest rate 6.28% 5.43%
Expected life 10 years 10 years
F-19
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 4 of Article X of the Registrant's By-laws provides that it may
indemnify any director, officer, agent or employee as to those liabilities and
on those terms and conditions as are specified in Section 317 of the California
Corporations Code. In any event, the Registrant shall have the right to purchase
and maintain insurance on behalf of any such persons whether or not the
Registrant would have the power to indemnify such person against the liability
insured against.
Insofar as indemnification for liabilities arising under the Securities Act,
indemnification may be permitted to directors, officers or persons controlling
the Registrant pursuant to the foregoing section. The Registrant has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses of the Registrant in connection with the issuance and distribution of
the securities being registered are estimated as follows, assuming the Maximum
offering amount is sold:
Securities and Exchange Commission filing fee $ 910
Blue Sky filing fees 5,500
Accountant's fees and expenses 25,000
Legal fees and expenses 56,000
Printing 15,000
Marketing expenses 10,000
Postage 25,000
Transfer Agent's fees 5,000
Miscellaneous 17,590
--------
Total $160,000
========
The Registrant will bear all expenses shown above.
Item 26. RECENT SALES OF UNREGISTERED SECURITIES
a) The following information is given for all securities that ZAP Power
Systems (the "Company") sold within the past three years without
registering the securities under the Securities Act. Note the Company sold
registered securities via a public offering effective November 28, 1996.
42
<PAGE>
Date Title Amount
1/31/95 to 12/30/95 Common Stock 159,000
12/31/95 to 10/3/96 Common Stock 551,019
b) No underwriters were used in connection with any of the issuances of
shares. The class of persons to whom the Company issued shares was those
persons known to the
1. Employees, Directors, consultants, Business associates, private
investors
2. Employees, Directors, Consultants, Business associates, private
investors
c) No underwriters were used in connection with any of the issuances of shares
or options so there were no underwriting discounts or commissions. The
transactions and the types and amounts of consideration received by the
Company were:
1. Cash
2. Cash
d) Total amounts are well within the $1,000,000 limit of Rule 504.
Item 27. EXHIBITS
ITEM (601) DOCUMENT PAGE
- --------- -------- ----
3.1* Articles of Incorporation, September 23, 1994
3.2* Amendment to Articles of Incorporation filed November 8, 1996
3.3* By-laws
4.1* Article II of By-laws (Reference is made to Exhibit 3.3)
4.2* Share Specimen
5.* Opinion of Evers & Andelin, LLP with respect to
the legality of the shares being registered
10.1* Lease of registrant's facilities
10.2* Contract with PowerBiking, Inc.
10.3* State of California Franchise Qualification
10.4* State of Florida Franchise Qualification
10.5* Franchise Agreement
43
<PAGE>
23.2* Consent of Evers & Andelin, LLP
99.1* Share Purchase Agreement (as revised)
- -------------
*Previously filed.
Item 28. UNDERTAKINGS
a) The Registrant hereby undertakes that it will:
1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the bona fide
offering.
3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the Offering.
e) Insofar as indemnification for liabilities arising under the securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
44
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe the registrant
meets all of the requirements of filing on Form SB-2 and authorized this
registration statement (pre-effective amendment no. 1) to be signed on its
behalf by the undersigned in the City of Sebastopol, on December ____, 1997.
ZAP Power Systems
By:_____________________________ By:_________________________________
Gary Starr James McGreen
Managing Director President and
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement (pre-effective amendment no. 1) has been signed by the
following persons in the capacities and on the dates indicated.
Signature Title Date
________________________ Managing Director December ___, 1997
Gary Starr
________________________ President and Director December ___, 1997
James McGreen
________________________ Secretary and Director December ___, 1997
Nancy K. Cadigan
________________________ Principal Financial Officer
Sanford Theodore and Controller December ___, 1997
________________________ Director December ___, 1997
Lee S. Sannella, M.D
________________________ Director December ___, 1997
Jessalyn Nash
45
