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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
Form 10-QSB
QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
-----------------------------
For the quarterly period ended September 30, 2000
Commission File Number 0-303000
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 theExchange Act:
Common Shares
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 X
No
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
5,749,592 shares of common stock as of November 12, 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
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(In thousands)
<CAPTION>
September 30,
2000
-----------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 3,536
Accounts receivable, net of allowance for doubtful accounts of $53 1,286
Inventories 1,708
Notes receivable 35
Prepaid expenses and other assets 1,236
------------
Total current assets 7,801
------------
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $489 507
OTHER ASSETS
Patents, Trademarks & Copyrights,
net of accumulated amortization of $128 1,440
Goodwill, net of amortization of $14 1,197
Advances to retail stores & technology companies 63
Deposits 53
------------
Total other assets 2,753
------------
TOTAL ASSETS $11,061
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 612
Accrued liabilities and other expenses 697
Current maturities of long-term debt 41
Current maturities of obligations under capital leases 4
------------
Total current liabilities 1,354
------------
OTHER LIABILITIES
Obligations under capital leases, less current maturities 35
Long-Term Debt, less current maturities 390
------------
Total other liabilities 425
------------
TOTAL LIABILITIES 1,779
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STOCKHOLDERS' EQUITY
Preferred stock, authorized 10,000,000 shares;
issued and outstanding 2,372 2,768
Common stock, authorized 20,000,000 shares of
no par value; issued and outstanding 5,557,100 13,809
Accumulated deficit (7032)
Unearned compensation (55)
------------
9,490
Less: notes receivable from shareholders (208)
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Total stockholders' equity 9,282
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Total liabilities and stockholders' equity $ 11,061
============
<FN>
The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>
2
<PAGE>
<TABLE>
ZAPWORLD.COM
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Thousands, except share and per share amounts)
<CAPTION>
Quarter ended September 30, Nine Months ended September 30,
--------------------------- -------------------------------
2000 1999 2000 1999
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $3,948 $1,767 $8,128 $4,444
COST OF GOODS SOLD 2,532 1,379 5,190 2,978
--------- --------- --------- ---------
GROSS PROFIT 1,416 388 2,938 1,466
--------- --------- --------- ---------
OPERATING EXPENSES
Selling 579 280 1,327 729
General and administrative 774 364 2,269 878
Research and development 153 82 464 205
--------- --------- --------- ---------
1,506 726 4,060 1,812
--------- --------- --------- ---------
LOSS FROM OPERATIONS (90) (338) (1,122) (346)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest income 58 18 135 41
Other income (expense) (22) (3) (27) (86)
--------- --------- --------- ---------
36 15 108 45
--------- --------- --------- ---------
NET LOSS $ (54) $ (323) $ (1,014) $ (391)
========= ========= ========= =========
NET LOSS ATTRIBUTABLE TO
COMMON SHARES
Net Loss $ (54) $ (323) $ (1,014) $ (391)
Preferred Dividend (900) - (900) -
--------- --------- --------- ---------
$ (954) $ (323) $ (1,914) $ (391)
========= ========= ========= =========
NET LOSS PERCOMMON SHARE
BASIC AND DILUTED $(0.18) $ (0.07) $ (0.37) $ (0.11)
========= ========= ========= =========
WEIGHTED AVERAGE OF
COMMON SHARES OUTSTANDING 5,265,100 4,416,200 5,213,000 3,668,000
========= ========= ========= =========
<FN>
The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>
3
<PAGE>
<TABLE>
ZAPWORLD.COM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<CAPTION>
Nine months ended September 30,
2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($1,014) ($391)
Adjustments to reconcile net loss to net cash
(used for) operating activities
Depreciation and amortization 250 79
Allowance for doubtful accounts 18 -
Issuance of common stock for services rendered 63 805
Amortization of unearned compensation 41 -
Changes in:
Receivables (966) (489)
Inventories 17 (653)
Prepaid expenses (933) (314)
Deposits (29) (88)
Other assets (211) (59)
Accounts payable (130) 74
Accrued liabilities and other expenses 329 303
--------- --------
Net cash (used for) operating activities (2,565) (733)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment (285) (158)
Investment in Technology Companies 167 (127)
Purchase of Aquatic Propulsion Technologies (981) -
Purchase of Patents from EVS (162) -
Purchase of ASCR - Barbary Coast 132 (19)
--------- --------
Net cash (used for) investing activities (1,129) (304)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes and loans payable 409 27
Sale of common stock, net of stock offering costs 1,589 3,750
Sale of Preferred stock, net of Preferred stock offering costs 1,972 -
Principal repayments on long-term debt (11) -
Increase in capital leases 26 22
Payments on obligations under capital leases (10) (7)
Principal repayments on note payable (6) (889)
Advances on Notes Receivable to shareholders 77 -
--------- --------
Net cash provided by financing activities 4,046 2,903
--------- --------
NET INCREASE IN CASH 352 1,866
CASH, beginning of period 3,184 475
--------- --------
CASH, end of period $3,536 $2,341
========= ========
<FN>
The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>
4
<PAGE>
<TABLE>
ZAPWORLD.COM
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(In thousands)
<CAPTION>
Unearned Note
Common Stock Preferred Stock Accumulated Compensation Receiveable
Shares Amount Shares Amount Deficit & Services from Shareholder Total
------ ------ ------ ------ ------- ---------- ---------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,1999 5,109 $12,503 0 $0 ($5,118) ($96) ($285) $6,554
Issuance of Common Stock:
Cash 3 14 14
Cashless Conversion
of Warrants 59 -
Employee Stock
Purchase Plan 1 9 9
Services 11 60 60
Acquisitions 120 726 726
Issuance of Preferred Stock:
Cash 3 2,600 2,600
Beneficial Conversion Feature
on Preferred Stock 900 (900) -
Conversion of Preferred Stock
to Common Stock 156 735 (1) (732) 3
Exercise of employee stock
options 74 86 86
Exercise of non-employee
stock options 24 126 126
Amortization of Unearned
compensation 41 41
Note receivable from
shareholders 77 77
Net Loss (1,014) (1,014)
-------------------------------------------------------------------------------------------------
Balance, September 30, 2000 5,557 $13,809 2 $2,768 ($7,032) ($55) ($208) $9,282
=================================================================================================
<FN>
The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>
5
<PAGE>
ZAPWORLD.COM
NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED 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 as of September 30, 2000, and for the
three months and nine months ended September 30, 2000 and September 30, 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. Potentially dilutive securities of 1,289,900
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) Description of Securities
On May 22, 2000, ZAPWORLD.COM's Common Stock qualified for listing on the NASDAQ
SmallCap stock exchange under the stock symbo1 "ZAPP". On July 19,2000, ZAP
received funding for the purchase of $3.0 million in a Preferred Stock offering
from Union Atlantic L.C.. The Union Atlantic Capital L.C. investors purchased
$3.0 million of Series A-1 Convertible Preferred Stock at a price of $1,000 per
share. Additionally, by October 24, 2000, the Company received additional
funding totaling $2.0 million from Union Atlantic Capital L.C. for Series A-2
Convertible Preferred Stock at a price of $1,000 per share. This $2.0 million
preferred stock financing was received in two parts: $1,333,333.33 on October 6,
2000, and the remaining $666,666.67 on October 24, 2000. In the third quarter of
2000, the Company (1) realized $2,238 on the sale of stock to employees through
a stock purchase plan and issued 257 shares; (2) realized $4,000 in proceeds
from the exercise of stock options and issued 1,000 shares of common stock; (3)
sold 2,600 shares of common stock and realized gross proceeds of $13,000; and
(4) issued 10,446 shares of common stock in payment for current and future
services.
During the 3rd Quarter, Union Atlantic Capital L.C. converted 628 shares of
Preferred Stock for 155,989 shares of Common Stock at an average conversion
price of $4.35 per share.
During the third quarter of 2000, the company recorded a deemed dividend on
preferred stock of $900,000. This is the result of the conversion price of the
convertible preferred stock issued during the quarter being less than the market
price of the common stock on the date of the transaction. All deemed dividends
related to the transaction have been recognized during the third quarter as a
result of the preferred stock being immediately convertible at the discretion of
the holder.
On July 31, 2000, ZAP issued 120,000 shares of common stock and $95,000 in cash
for the acquisition by merger of Aquatic Propulsion Technology, Inc. (APT), a
Florida electric sea scooter company. ZAP acquired all technology, including
five patents on electric sea scooters, assets and current operations including
$465,700 in liabilities.
6
<PAGE>
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 scooters,
electric bicycle power kits, electric bicycles, aquatic propulsion, and other
personal electric transportation vehicles. The Company manufactures several
electric motor kits. The electric motor kit manufacturing and installation of
the motor systems to the bicycles and scooters is done at its Sebastopol
location. The aquatic propulsion vehicles are primarily assembled at its Florida
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 as of September 30, 2000 had a $3,660,000 sales backlog. The Company
expects to fill these orders within the next 75 days.
The Company's growth plan for the future combines a strategy of distribution and
acquisition while focusing on a program of "Five P's" which include Production,
Product, (Market) Penetration, Personnel, and Profitability. The intent is to
transform ZAP into a light electric transportation company with the standards of
measurement similar to the auto industry. The Company will continue to develop
products with the goal of being the low cost leader in the industry. Product
improvements, new product introductions, and the development of the ZAP electric
outlet franchise network are continuing to enlarge ZAP's presence in the
electric vehicle industry.
On July 1, 2000 ZAP completed its acquisition by merger of Aquatic Propulsion
Technology, Inc. (APT), a Florida electric sea scooter company. The merger
documents were filed with the California Secretary of State on August 8, 2000.
ZAP acquired all technology, including five patents on electric sea scooters,
assets, current operations from APT in exchange for 120,000 shares of ZAP common
stock, $95,000 in cash and the assumption of APT's liabilities to the extent of
$465,700.
On July 19, 2000, ZAP sold $3.0 million of a Preferred Stock offering to Union
Atlantic Capital L.C. The Union Atlantic Capital L.C. investors purchased $3.0
million of Series A-1 Convertible Preferred Stock at a price of $1,000 per
share. Additionally, by October 24, 2000, the Company sold an additional $2.0
million Series A-2 Convertible Preferred Stock at a price of $1,000 per share to
Union Atlantic Capital L.C.
7
<PAGE>
On August 14,2000, ZAP announced that it had signed an agreement to form a joint
venture with Ningbo Topp Industrial Co. Ltd. of China. The purpose of the joint
venture will be for manufacturing and distributing electric vehicles in China,
starting with the ZAPPY scooter. Under the terms of the joint venture, the joint
venture company will purchase key components from ZAP, assemble and distribute
the ZAPPY in China, and pay ZAP a royalty on each electric scooter sold in
China. Additionally, ZAP will receive a share of the profits from the joint
venture. As of September 30, 2000 the joint venture has not been formed.
On October 6, 2000, ZAP completed its purchase of Electric Motorbike Inc. The
Company issued 140,000 shares of its common stock and $135,000 in cash as the
final purchase price.
Results of Operations
<TABLE>
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:
<CAPTION>
Quarter ended September 30, Nine months ended September 30,
2000 1999 2000 1999
------------ ------------ --------------- --------------
<S> <C> <C> <C> <C>
Statements of Income Data:
Net sales........................................ 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................... 64.1 78.0 63.9 67.0
Gross profit..................................... 35.9 22.0 36.1 33.0
Operating expenses............................... 38.1 41.1 49.9 40.8
Loss from operations............................. (2.2) (19.1) (13.8) (7.8)
Other income (expense)........................... 0.9 0.8 1.3 (1.0)
Loss before income taxes......................... (1.3) (18.3) (12.5) (8.8)
Provision for income taxes....................... 0.0 0.0 0.0 0.0
Net Loss......................................... (1.3) (18.3) (12.5) (8.8)
</TABLE>
Quarter Ended September 30, 2000 Compared to Quarter Ended September 30, 1999
Net sales for the quarter ended September 30, 2000, were $3,948,000
compared to $1,767,000 in the prior year, an increase of $2,181,000 or 123 %.
The increase in sales in 2000 over the same period in 1999 was largely due to an
increased demand of the Company's products worldwide. The Company improved its
production flow and output to meet the greater demand for its products.
Additionally, the introduction of the new non-motorized scooter called the Kick
and acquisition of the electric seascooter company generated increased revenues.
Gross profit increased as a percentage of net sales to 36% in the second
quarter of 2000 from 22% in 1999. The total gross profit increased $ 1,028,000
or 265 %. The increase in gross margin dollars can be attributed to margins
generated from increased sales dollars from new and existing products for the
quarter. The increase in gross margin percentage can mainly be attributed to the
Company's improved efficiencies within production and distribution of all
products. In addition, the Company has increased its emphasis on margins as well
as sales.
Selling expenses in the third quarter ended September 30, 2000 were
$579,000 compared to the $280,000 for the third quarter ended September 30,
1999. This was an increase of $299,000 or 107% from 1999 to 2000. As a
percentage of sales, selling expenses remained constant at 16% of sales. The
increase in selling expenses can partially be attributed to the hiring of
personnel to handle the expanded sales volume. Additional promotional efforts to
introduce the Company's products to new markets have also added to the increase
in selling expenses.
General and administrative expenses for the quarter ended September 30,
2000 were $774,000. This was an increase of $410,000 or 113% from 1999. As a
percentage of sales, general and administrative expenses decreased to 20% from
21% of net sales. Expense increases during the third quarter of 2000 as compared
to the third quarter of 1999 can be partially attributed to the hiring and
retention of key management personnel to oversee and direct the Company's
expanding business. Additionally in the third quarter of 2000, the Company
incurred consulting and legal costs of $76,000 specifically associated with
prior period acquisitions. Also in the third quarter of 2000, the Company
amortized $40,000 towards patents, trademarks, and goodwill costs associated
with acquisitions from the fourth quarter of 1999.
8
<PAGE>
Research and development expenses increased $71,000 or 87% from the 3rd
quarter of 1999 as compared to the 3rd quarter of 2000. As a percentage of net
sales, expenses decreased to 4% of sales in the 3rd quarter of 2000 as compared
to 5% of sales in the 3rd quarter of 1999. Expense increases in the third
quarter of 2000 as compared to the third quarter of 1999 were the result of
increased personnel hired to assist in the development of new products.
Interest income increased $40,000 in the third quarter of 2000 as compared
to the third quarter of 1999. The increase is attributed primarily to interest
income derived from proceeds from financing.
Nine Months Ended September 30, 2000 Compared to Nine Months Ending September
30, 1999
Net sales for the nine months ended September 30, 2000 were $8,128,000
compared with $4,444,000 in the nine months ended September 30, 1999, an
increase of $3,684,000 or 83%. The increase in sales, both domestically and
overseas, is primarily attributable to increased production of the company's
products. Additionally, the Company has added new product lines to diversify its
core products available.
Gross profit dollars increased in the third quarter of 2000 to $2,938,000
from $1,466,000 in the third quarter of 1999 an increase of $1,472,000 or 100%.
The increase in gross profit dollars can be attributed to the increase in net
sales and greater cost controls. As a percentage of sales, gross profit
increased to 36% in the third quarter of 2000 compared with 33% in the third
quarter of 1999. The increase in gross margin percentage can be directly
attributed to the Company's increased efficiencies with its production
processes.
Selling expenses for the nine months ended September 30, 2000 were
$1,327,000 as compared to $729,000 for the nine months ended September 30, 1999.
This was an increase of $598,000 or 82% from 1999 to 2000. As a percentage of
sales, selling expenses remained constant at 16% of sales. Added personnel costs
incurred from the San Francisco location and increased promotional efforts
worldwide led to increased costs in the nine months ended September 30, 2000.
General and administrative expenses for the nine months ended September 30,
2000 were $2,269,000. This is an increase of $1,391,000 or 158% from 1999. As a
percentage of sales, general and administrative expense increased to 28% from
20% of net sales. Expense increases during the first nine months of 2000 as
compared to the first nine months of 1999 occurred due to overall salary
increases in all administrative areas due to the pressures of low unemployment.
Legal costs incurred from acquisitions and costs of options associated with
operational consulting contributed to $156,000 in increased expenses.
Additionally, the amortization of patents, trademarks, and goodwill accounted
for $110,000 in expenses during the first nine months of 2000 from acquisitions
completed during the fourth quarter of 1999. Furthermore, the costs incurred to
manage the San Francisco store accounted for $236,000 in expenses for the first
nine months of 2000 that were not incurred in the first nine months of 1999.
Research and development expenses increased $259,000 or 126% from the first
nine months of 1999 as compared to the first nine months of 2000. As a
percentage of net sales, research and development increased to 6 % of sales in
the first nine months of 2000 as compared to 5% of sales in the first nine
months of 1999. Increased personnel and facilities costs incurred to accommodate
new product development and improve existing products led to higher costs in the
first nine months of 2000.
Interest income increased $ 94,000 in the first nine months of 2000 as
compared to the first nine months of 1999. This increase is attributed primarily
to interest income derived from proceeds from financing.
Other expense decreased $ 59,000 from the first nine months of 1999 to the
first nine months of 2000. This decrease can be primarily 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 during 1999.
9
<PAGE>
Liquidity and Capital Resources
The Company used cash from operations of $2,565,000 and $733,000 during the
nine months ended September 30, 2000 and 1999 respectively. Cash used in
operations in the first nine months of 2000 was the result of the net loss
incurred for the period of $1,014,000, offset by net non-cash expenses of
$372,000, and the net change in operating assets and liabilities resulting in a
further use of cash of $1,923,000. Cash used in operations for the first nine
months of 1999 was the result of the net loss incurred for the first nine months
of $391,000, offset by net non-cash expenses of $884,000, and the net change in
operating assets and liabilities resulting in a use of cash of $1,226,000.
Investing activities used cash of $1,129,000 and $304,000 during the first
nine months ended September 30, 2000 and 1999 respectively. The uses of cash
were for the purchase of fixed assets and patents, and the acquisition of
additional technology.
Financing activities provided cash of $4,046,000 and $2,903,000 during
the first nine months ended September 30,2000 and 1999 respectively. In both
years, the cash provided by financing activities resulted from the sales of
common and preferred stock, $3,561,000 and $3,750,000 for the first nine months
ended September 30, 2000 and 1999 respectively, offset by principal payments on
outstanding debt.
At September 30, 2000, the Company had cash and cash equivalents of
$3,536,000 as compared to $2,341,000 at September 30, 1999. At September 30,
2000, the Company had working capital of $6,447,000 as compared to working
capital of $3,970,000 at September 30, 1999. The increases in both cash and
working capital in the first nine months of 2000 from the first nine months of
1999 are mostly due to the equity financing raised during the year. The Company,
at present, does not have a credit facility in place with a bank or other
financial institution. Additionally, by October 24, 2000, the Company sold an
additional $2.0 million in Preferred Stock financing to Union Atlantic Capital
L.C. The Company believes that the cash on hand at September 30, 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, improving and
increasing distribution channels, establishing ZAP franchised stores,
introducing new products, improving existing product lines and developing a
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, in the U.S. As the company is marketing worldwide, it is not impacted
100% by U.S. seasonality.
Inflation
A majority of 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.
10
<PAGE>
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 submissions of matters to a 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.
11
<PAGE>
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 - CEO
Date
------------------ ----------------------------------------------
John Dabels - President
