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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-QSB
QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
-----------------------------
For the quarterly period ended March 31, 2000
ZAPWORLD.COM
(Name of small business issuer in its charter)
CALIFORNIA 94-3210624
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
117 Morris Street
Sebastopol, CA 95472
(707) 824-4150
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Securities registered under section 12(b) of the Exchange Act:
None
Securities registered under section 12(g) of the Exchange Act:
None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
XNo
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
5,212,663 shares of common stock as of April 30, 2000.
Transitional Small Business Disclosure Format Yes[ ] No[x ]
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<PAGE>
<TABLE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
ZAPWORLD.COM
CONSOLIDATED BALANCE SHEET (Unaudited)
(In thousands)
<CAPTION>
March 31,
2000
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ASSETS
<S> <C>
CURRENT ASSETS
Cash $2,660
Accounts receivable, net of allowance for doubtful accounts of $53 461
Inventories 1,357
Notes receivable 35
Prepaid expenses and other assets 353
-------------------
Total current assets 4,866
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $400 395
OTHER ASSETS
Patents & Trademarks, net of accumulated amortization of $53 1,314
Goodwill, net of amortization of $3 109
Advances to retail stores & technology companies 260
Deposits 36
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Total other assets 1,719
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Total assets $6,980
===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $458
Accrued liabilities and other expenses 177
Current maturities of long-term debt 12
Current maturities of obligations under capital leases 7
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Total current liabilities 654
OTHER LIABILITIES
Long-Term Debt, less current maturities 24
Obligations under capital leases, less current maturities 13
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Total other liabilities 37
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Total liabilities 691
STOCKHOLDERS' EQUITY
Preferred stock, authorized 10,000,000 shares; no shares
Issued or outstanding
Common stock, authorized 20,000,000 shares of
no par value; issued and outstanding 5,212,663 12,257
Accumulated deficit (5,601)
Unearned compensation (82)
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6,574
Less: notes receivable from shareholders (285)
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Total stockholders' equity 6,289
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Total liabilities and stockholders' equity $6,980
===================
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
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<TABLE>
ZAPWORLD.COM
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Thousands, except share amounts)
<CAPTION>
Three months ended March 31,
2000 1999
---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET SALES $ 1,897 $ 1,164
COST OF GOODS SOLD 1,183 756
--------- ---------
GROSS PROFIT 714 408
OPERATING EXPENSES
Selling 401 200
General and administrative 680 218
Research and development 145 48
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1,226 466
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LOSS FROM OPERATIONS (512) (58)
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OTHER INCOME (EXPENSE)
Interest income 37 1
Other income (expense) (8) (75)
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29 (74)
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NET LOSS $ (483) $ (132)
========= =========
NET LOSS PER COMMON SHARE, BASIC AND DILUTED
$ (0.09) $ (0.05)
========= =========
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING 5,149,721 2,833,180
========= =========
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
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<TABLE>
ZAPWORLD.COM
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<CAPTION>
Three months ended March 31,
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($483) ($132)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 99 24
Allowance for doubtful accounts 18 -
Amortization of the fair market value of warrants 13 108
Changes in:
Receivables (141) (84)
Inventories 333 (20)
Deposits (11) (116)
Advances to retail stores & technology companies 291 -
Prepaid expenses and other assets (51) -
Accounts payable (284) 113
Accrued liabilities and customer deposits (191) (27)
----------- ---------------
Net cash used by operating activities (407) (134)
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CASH FLOWS FROM INVESTING ACTIVITES
Purchase of equipment (153) (42)
Purchase of Patents (162) -
Payment advance for acquisitions - (15)
----------- ---------------
Net cash provided by (used for) investing activities (315) (57)
----------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans payable - 19
Sale of common stock, net of stock offering costs 204 1,955
Principal repayments on long-term debt (4) (290)
Payments on obligations under capital leases (2) (4)
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Net cash provided by financing activities 198 1,680
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NET INCREASE/(DECREASE) IN CASH (524) 1,489
CASH, beginning of period 3,184 475
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----------- ---------------
CASH, end of period $2,660 $1,964
=========== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the quarter for interest $2 $1
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
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</TABLE>
ZAPWORLD.COM
4
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NOTES TO THE INTERIM UNAUDITED FINANCIAL STATEMENTS
(1) Basis of Presentation
The financial statements included in this Form 10-QSB have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, pursuant to such rules and
regulations, although management believes the disclosures are adequate to make
the information presented not misleading. The results of operations for any
interim period are not necessarily indicative of results for a full year. These
statements should be read in conjunction with the financial statements and
related notes included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1999.
The financial statements presented herein, for the three months ended March 31,
2000 and 1999 reflect, in the opinion of management, all material adjustments
consisting only of normal recurring adjustments necessary for a fair
presentation of the financial position, results of operations and cash flow for
the interim periods.
The net loss per common share is based on the weighted average number of common
shares outstanding in each period. Common stock equivalents associated with
stock options have been excluded from the weighted average shares outstanding
since the effect of these securities would be anti-dilutive.
(2) - PRINCIPALS OF CONSOLIDATION--The accounts of the Company and its
consolidated subsidiaries are included in the consolidated financial statements
after elimination of significant inter-company accounts and transactions.
(3) - COMMON STOCK
ZAPWORLD.COM's Common Stock is traded on the OTC Bulletin Board under the stock
symbol "ZAPP". In the first quarter of 2000, the Company 1) realized $195,000 in
proceeds from the exercise of stock options and issued 94,000 shares, and 2)
realized $7,351 on the sale of stock to employees through a stock purchase plan
and issued 1,036 shares.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Special Note Regarding Forward-Looking Statements
Certain statements in this Form 10-QSB, including information set forth under
this Item 2 "Management's Discussion and Analysis of Financial Condition and
Results of Operations" constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "ACT").
ZAPWORLD.COM (the "Company" or ZAP) desires to avail itself of certain "safe
harbor" provisions of the Act and is therefore including this special note to
enable the Company to do so. Forward-looking statements included in this Form
10-QSB or hereafter included in other publicly available documents filed with
the Securities and Exchange Commission, reports to the Company's stockholders
and other publicly available statements issued or released by the Company
involve known and unknown risks, uncertainties, and other factors which could
cause the Company's actual results, performance (financial or operating) or
achievements to differ from the future results, performance (financial or
operating) or achievements expressed or implied by such forward looking
statements. Such future results are based upon management's best estimates based
upon current conditions and the most recent results of operations.
Overview
The Company designs, assembles, manufactures, and distributes electric bicycle
power kits, electric bicycles and tricycles, and other low-power electric
transportation vehicles.
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The Company manufactures several electric motor kits that have up to 62 unique
parts. The electric motor kit manufacturing and installation of the motor
systems to the bicycles 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 Company has a contractual relationship with
Smith & Wesson who provides the Company with Law Enforcement Bicycles. The
Company has agreed to purchase at least 250 bikes from Smith & Wesson in
exchange for specific exclusive distribution and pricing rights. The Company has
no other contractual agreements with any of its other vendors.
The Company as of March 31, 2000 had a $751,900 sales backlog. The company
expects to fill these orders within the next 45 days.
The Company's growth strategy is to increase net sales by augmenting its
marketing and sales force, increasing distribution channels through the
internet, retail organizations, and wholesale distributors both domestically and
overseas. The Company will continue to increase its production capability to
meet the increasing demand for its product. The Company will continue to develop
products so that it is the low cost leader in the industry. Product improvements
will continue to enlarge ZAP's presence in the electric vehicle industry.
The Company acquired Electric Vehicles Systems, Inc. (EVS) in February 2000. EVS
provides the Company with access to patented technology for the Powerski(tm).
The Powerskitm is a recreational transportation product that the Company began
marketing in the second quarter of 2000. The Company acquired ZAP of Santa Cruz,
a bicycle retailer in March 2000. ZAP of Santa Cruz will provide an additional
sales channel for ZAP products.
On March 21, 2000 the Company announced its plan to distribute the E-Kart, an
electric go-kart. The Company began marketing the E-Kart in the second quarter
of 2000.
On April 17 ZAP announced that it terminated its agreement to merge with
neighborhood electric vehicle manufacturer Global Electric MoterCars, LLC and
rental company EV Rentals, LLC both of Fargo, ND.
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)
for the periods indicated:
Three months ended March 31,
2000 1999
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Statements of Income Data:
Net sales................................... 100.0% 100.0%
Cost of sales............................... 62.4 65.0
Gross profit ............................... 37.6 35.0
Operating expenses......................... 64.6 40.0
Loss from operations........................ (27.0) (5.0)
Other income (expense)..................... 1.5 (6.3)
Loss before income taxes.................... (25.5) (11.3)
Provision for income taxes.................. 0.0 0.0
Net loss.................................... (25.5) (11.3)
Quarter Ended March 31, 2000 Compared to Quarter Ended March 31, 1999
6
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Net sales for the quarter ended March 31, 2000, were $1,897,000 compared to
$1,164,000 in the prior year, an increase of $733,000 or 63%. The increase in
sales in 2000 over the same period in 1999 was primarily due to increased sales
of ZAP products to overseas markets.
Gross profit increased as a percentage of net sales to 38% in 2000 from 35% in
1999. The total gross profit increased $306,000 or 75%. The increase in gross
profit dollars can be attributed to gross profits generated from the sales of
the ZAP(tm) products to overseas markets.
Selling expenses in the quarter ended March 31, 2000 were $401,000 as compared
to $200,000 for the quarter ended March 31, 1999. This was an increase of
$201,000 or 100% from 1999 to 2000. As a percentage of sales, selling expenses
increased from 17% to 21% of sales in the first quarter of 2000. The increase in
selling expenses can be attributed to the hiring of personnel to handle
additional sales volume. Also, the Company's increased spending to market and
promote ZAP products in the first quarter of 2000.
General and administrative expenses for the quarter ended March 31, 2000 were
$680,000 as compared to $218,000 for the quarter ended March 31, 1999. This is
an increase of $462,000 or 212%. As a percentage of sales, general and
administrative expense increased to 36% from 19% of net sales from 1999. This
increase can be partially attributed to the hiring of management personnel to
oversee the expanding business, including the subsidiary store operations. In
the first quarter of 2000 the Company incurred legal and consulting costs
associated with the restructuring of the Company and acquisition activity. Also,
beginning in 2000 the Company began amortizing patents, trademarks, and goodwill
costs associated with the acquisitions of electrical vehicle companies in the
last quarter of 1999.
Research and development increased $97,000 or 202% in the 1st quarter of 2000 as
compared to the 1st quarter of 1999. As a percentage of net sales it increased
to 8% of sales in the 1st quarter of 2000 as compared to 4% of sales in the 1st
quarter of 1999. Expense increases in the first quarter of 2000 as compared to
the first quarter of 1999 were the result of increased personnel hired to assist
in the development of new products.
Interest income increased $36,000 from the first quarter of 2000 compared to the
first quarter of 1999. The increase is attributed primarily to interest income
derived from proceeds from financing.
Other income (expense) decreased from $75,000 to $8,000 in the 1st quarter of
2000, a decrease of $67,000 over the 1st quarter of 1999. This decrease can be
attributed to the completion of the amortization of the fair value of warrants
issued to an investment banker for securing equity financing for the company in
1999.
Liquidity and Capital Resources
In the first quarter of 2000 net cash used by the Company for operating
activities was $407,000. In the first quarter of 1999, the Company used cash
from operations of $134,000. Cash provided in the first quarter of 2000 was
comprised of the net loss incurred for the quarter of $483,000 offset by net
non-cash expenses of $130,000 and the net change in operating assets and
liabilities resulting in a use of cash of $54,000. Cash used in operations in
the first quarter of 1999 was comprised of the net loss incurred for the quarter
of $132,000, offset by net non-cash expenses of $132,000, and the net change in
operating assets and liabilities resulting in a further use of cash of $134,000.
Investing activities used cash of $315,000 in the first quarter of 2000 and used
$57,000 during the first quarter ended March 31, 1999. The uses of cash were for
the purchase of fixed assets and patents.
Financing activities provided cash of $198,000 and $1,680,000 during the first
quarters ended March 31, 2000 and 1999 respectively. In both years, the cash
provided by financing activities resulted from the sales of common stock,
$204,000 and $1,955,000 for the first quarters ended March 31, 2000 and 1999
respectively, partially offset by principal payments on outstanding debt.
At March 31, 2000 the Company had cash of $2,660,000 as compared to $1,964,000
at March 31, 1999. At March 31, 2000, the Company had working capital of
$4,212,000, as compared to working capital of $2,253,000 at March 31, 1999. The
increases in both cash and working capital in the first quarter of 2000 over the
first quarter of 1999 are primarily due to the proceeds received from the
Company's private placement offering which more than offset
7
<PAGE>
the Company's net losses during the same period. The Company, at present, does
not have a credit facility in place with a bank or other financial institution.
The Company believes that the cash on hand at March 31, 2000 will be sufficient
to allow the Company to continue its expected level of operations for the
remainder of the year.
The Company's primary capital needs are to fund its growth strategy, which
includes increasing its internet shopping mall presence, increasing distribution
channels, establish company owned and franchised ZAP stores, introducing new
products, improving existing product lines and development of strong corporate
infrastructure.
Seasonality and Quarterly Results
The Company's business is subject to seasonal influences. Sales volumes in the
bicycle industry typically slow down during the winter months, November to
March. The Company is marketing worldwide and is not impacted 100% by U.S.
seasonality.
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There were no legal proceedings.
Item 2. Changes in Securities
There were no changes in rights of securities holders.
Item 3. Defaults Upon Senior Securities
There were no defaults upon senior securities.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to the vote of security holders.
Item 5. Other Information
There were no major contracts signed during the period.
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
8
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ZAPWORLD.COM
- ---------------------------------
(Registrant)
Date
---------------- ----------------------------------------
Gary Starr - President and Director
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ZAPWORLD.COM FOR THE THREE MONTHS ENDED MARCH 31, 2000,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
AMOUNTS IN THOUSANDS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,660
<SECURITIES> 0
<RECEIVABLES> 514
<ALLOWANCES> (53)
<INVENTORY> 1,357
<CURRENT-ASSETS> 4,866
<PP&E> 795
<DEPRECIATION> (400)
<TOTAL-ASSETS> 6,980
<CURRENT-LIABILITIES> 654
<BONDS> 0
0
0
<COMMON> 12,257
<OTHER-SE> (5,601)
<TOTAL-LIABILITY-AND-EQUITY> 6,980
<SALES> 1,897
<TOTAL-REVENUES> 1,934
<CGS> 1,183
<TOTAL-COSTS> 1,226
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (53)
<INTEREST-EXPENSE> (8)
<INCOME-PRETAX> (483)
<INCOME-TAX> 0
<INCOME-CONTINUING> (483)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (483)
<EPS-BASIC> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
