x
|
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended March 31, 2016
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from ________ to _________
|
ZAP
|
|
(Exact name of registrant as specified in its charter)
|
|
California
|
94-3210624
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
2 West 3rd Street
Santa Rosa, California
|
95401
|
(Address of principal executive offices)
|
(Zip Code))
|
Registrant’s telephone number, including area code: (707) 525-8658
|
Large accelerated filer o
|
Accelerated filer o
|
Non-accelerated filer o
|
Smaller reporting company
x
|
Page
No.
|
||
PART I. Financial Information
|
||
Item 1.
|
Financial Statements (Unaudited)
|
|
Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015
|
3
|
|
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2016 and 2015
|
5
|
|
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015
|
6
|
|
Notes to Condensed Consolidated Financial Statements
|
8
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
21
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
30
|
Item 4.
|
Controls and Procedures
|
30
|
PART II. Other Information
|
||
Item 1.
|
Legal Proceedings
|
30
|
Item 1A.
|
Risk Factors
|
31
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
31
|
Item 3.
|
Defaults Upon Senior Securities
|
31
|
Item 4.
|
Mine Safety Disclosures
|
31
|
Item 5.
|
Other Information
|
31
|
Item 6.
|
Exhibits
|
32
|
SIGNATURES
|
33
|
March 31,
|
December 31,
|
|||||||
ASSETS
|
2016
|
2015
|
||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 251 | $ | 60 | ||||
Restricted cash
|
11,581 | 8,988 | ||||||
Accounts receivable, net
|
5,249 | 5,915 | ||||||
Inventories, net
|
7,124 | 7,743 | ||||||
Prepaid taxes
|
- | 147 | ||||||
Prepaid expenses and other current assets
|
575 | 574 | ||||||
Total current assets
|
24,780 | 23,427 | ||||||
Property, plant and equipment, net
|
34,766 | 35,893 | ||||||
Land use rights, net
|
8,935 | 8,930 | ||||||
Other assets:
|
||||||||
Distribution fees, net
|
6,599 | 6,959 | ||||||
Intangible assets, net
|
2,423 | 2,513 | ||||||
Goodwill
|
316 | 314 | ||||||
Due from related party
|
1,635 | 1,614 | ||||||
Total other assets
|
10,973 | 11,400 | ||||||
Total assets
|
$ | 79,454 | $ | 79,650 |
March 31,
|
December 31,
|
|||||||
2016
|
2015
|
|||||||
LIABILITIES AND DEFICIENCY
|
||||||||
Current liabilities:
|
||||||||
Short term loans
|
$ | 7,507 | $ | 7,702 | ||||
Accounts payable
|
21,500 | 21,486 | ||||||
Senior convertible debt
|
21,465 | 21,465 | ||||||
Accrued liabilities
|
3,820 | 4,000 | ||||||
Notes payable
|
17,249 | 14,366 | ||||||
Advances from customers
|
6,663 | 7,391 | ||||||
Taxes payable
|
1,295 | 1,638 | ||||||
Due to related party
|
15,760 | 13,978 | ||||||
Other payables
|
2,269 | 2,256 | ||||||
Total current liabilities
|
97,528 | 94,282 | ||||||
Long term liabilities:
|
||||||||
Accrued liabilities and others
|
152 | 152 | ||||||
Total long term liabilities
|
152 | 152 | ||||||
Total liabilities
|
97,680 | 94,434 | ||||||
Commitments and contingencies
|
||||||||
Deficiency
|
||||||||
Common stock, no par value; 800 million shares authorized;
|
||||||||
578,465,159 and 578,465,159 shares issued and outstanding
|
||||||||
at March 31, 2016 and December 31, 2015, respectively
|
251,707 | 251,689 | ||||||
Accumulated other comprehensive income
|
1,334 | 1,359 | ||||||
Accumulated deficit
|
(266,439 | ) | (264,144 | ) | ||||
Total ZAP shareholders' deficiency
|
(13,398 | ) | (11,096 | ) | ||||
Non-controlling interest
|
(4,828 | ) | (3,688 | ) | ||||
Total deficiency
|
(18,226 | ) | (14,784 | ) | ||||
Total liabilities and deficiency
|
$ | 79,454 | $ | 79,650 |
For the Three months Ended March 31
|
||||||||
2016
|
2015
|
|||||||
Net sales
|
$ | 3,382 | $ | 8,362 | ||||
Cost of goods sold
|
(3,316 | ) | (8,874 | ) | ||||
Gross profit (loss)
|
66 | (512 | ) | |||||
Operating expenses:
|
||||||||
Sales and marketing
|
585 | 992 | ||||||
General and administrative
|
2,261 | 1,879 | ||||||
Research and development
|
119 | 613 | ||||||
Total operating expenses
|
2,965 | 3,484 | ||||||
Loss from operations
|
(2,899 | ) | (3,996 | ) | ||||
Other income (expense):
|
||||||||
Interest expense, net
|
(554 | ) | (761 | ) | ||||
Other income
|
64 | 81 | ||||||
Total expense
|
(490 | ) | (680 | ) | ||||
Loss before income taxes
|
(3,389 | ) | (4,676 | ) | ||||
Income tax expense
|
- | - | ||||||
Net loss
|
$ | (3,389 | ) | $ | (4,676 | ) | ||
Less: loss attributable to non-controlling interest
|
1,094 | 1,603 | ||||||
Net loss attributable to ZAP’s common shareholders
|
$ | (2,295 | ) | $ | (3,073 | ) | ||
Net loss
|
$ | (3,389 | ) | $ | (4,676 | ) | ||
Other comprehensive loss
|
||||||||
Foreign currency translation adjustments
|
(71 | ) | 46 | |||||
Total comprehensive loss
|
(3,460 | ) | (4,630 | ) | ||||
Less: Comprehensive loss attributable to non-controlling interest
|
1,140 | 1,581 | ||||||
Comprehensive loss attributable to ZAP
|
$ | (2,320 | ) | $ | (3,049 | ) | ||
Net loss per share attributable to common shareholders:
|
||||||||
Basic and diluted
|
$ | (0.00 | ) | $ | (0.01 | ) | ||
Weighted average number of common shares outstanding:
|
||||||||
Basic and diluted
|
578,465 | 460,673 |
For the Three months Ended March 31
|
||||||||
2016
|
2015
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net loss
|
$ | (3,389 | ) | $ | (4,676 | ) | ||
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
|
||||||||
(Gain) loss from disposal of equipment
|
- | (7 | ) | |||||
Stock-based employee compensation
|
18 | 19 | ||||||
Depreciation and amortization
|
1,561 | 2,092 | ||||||
Amortization of distribution agreement
|
361 | - | ||||||
Provision for doubtful accounts
|
417 | 6 | ||||||
Changes in inventory reserve
|
(38 | ) | 87 | |||||
Changes in assets and liabilities:
|
||||||||
Accounts receivable
|
279 | (152 | ) | |||||
Notes receivable
|
- | 81 | ||||||
Inventories
|
700 | 975 | ||||||
Prepaid expenses and other assets
|
151 | (486 | ) | |||||
Due from related parties
|
- | (70 | ) | |||||
Accounts payable
|
(116 | ) | (828 | ) | ||||
Accrued liabilities
|
(103 | ) | 62 | |||||
Taxes payable
|
(350 | ) | 360 | |||||
Advances from customers
|
(768 | ) | 2,310 | |||||
Due to related parties
|
1,607 | 2,382 | ||||||
Other payables
|
14 | (421 | ) | |||||
Net cash provided by operating activities
|
344 | 1,734 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Acquisition of property and equipment
|
(141 | ) | (33 | ) | ||||
Proceeds from disposal of equipment
|
37 | 11 | ||||||
Net cash used in investing activities
|
(104 | ) | (22 | ) |
For the Three months Ended March 31
|
||||||||
2016
|
2015
|
|||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Change in restricted cash
|
$ | (2,495 | ) | $ | 64 | |||
Proceeds from notes payable
|
3,601 | 6,189 | ||||||
Proceeds from short term loans
|
520 | 814 | ||||||
Repayment of convertible bond
|
- | (100 | ) | |||||
Repayments of notes payable
|
(856 | ) | (6,595 | ) | ||||
Repayments of short term loans
|
(795 | ) | (1,959 | ) | ||||
Net cash used in financing activities
|
(25 | ) | (1,587 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents
|
(24 | ) | 3 | |||||
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
191 | 128 | ||||||
CASH AND CASH EQUIVALENTS, beginning of period
|
60 | 238 | ||||||
CASH AND CASH EQUIVALENTS, end of period
|
$ | 251 | $ | 366 | ||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid during period for interest
|
$ | 315 | $ | 345 | ||||
Cash paid during period for income taxes
|
$ | - | $ | 2 | ||||
Non-cash transaction:
|
||||||||
Cancellation of 1,182,558 shares of common
stock issued to pay convertible bond
|
$ | - | $ | 100 |
|
·
|
Financial support and credit guarantee from related parties; and
|
|
·
|
Other available sources of financing from domestic banks and other financial institutions given our credit history.
|
|
-
|
Persuasive evidence of an arrangement exists. The Company generally relies upon sales contracts or agreements, and customer purchase orders to determine the existence of an arrangement.
|
|
-
|
Sales price is fixed or determinable. The Company assesses whether the sales price is fixed or determinable based on the payment terms and whether the sales price is subject to refund or adjustment.
|
|
-
|
Delivery has occurred. The Company uses shipping terms and related documents, or written evidence of customer acceptance, when applicable, to verify delivery or performance. The Company’s customary shipping terms are FOB shipping point.
|
|
-
|
Collectability is reasonably assured. The Company assesses collectability based on creditworthiness of customers as determined by our credit checks and their payment histories. The Company records accounts receivable net of allowance for doubtful accounts and estimated customer returns.
|
|
-
|
The Company has received a binding purchase order from the customer or distributor authorized by a representative empowered to commit the purchaser (evidence of a sale);
|
|
-
|
The purchase price has been fixed, based on the terms of the purchase order;
|
|
-
|
The Company has delivered the product from its factory to a common carrier acceptable to the customer; and
|
|
-
|
The Company deems the collection of the amount invoiced probable.
|
Level 1:
|
Observable inputs such as quoted prices in active markets;
|
Level 2:
|
Inputs other than quoted prices in active markets that is directly or indirectly observable. The carrying value of the senior convertible debt (see Note 7), which approximates fair value, is influenced by interest rates and our stock price, and is determined by prices for the convertible debts observed in market trading, which are Level 2 inputs.
|
Level 3:
|
Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions and methodologies that result in management’s best estimate of fair value.
|
March 31, 2016
|
March 31, 2015
|
December 31, 2015
|
|
Balance sheet items, except for share capital, additional
paid in capital and retained earnings
|
$ 1=RMB 6.4494
|
$ 1=RMB6.1206
|
$1=RMB6.4917
|
Amounts included in the statements of operations
and cash flows
|
$ 1=RMB 6.5402
|
$ 1=RMB 6.1444
|
$1=RMB 6.2288
|
March 31,
2016
|
December 31,
2015
|
|||||||
Accounts receivable – third parties
|
$ | 2,373 | $ | 2,274 | ||||
Accounts receivable – related parties
|
4,841 | 5,172 | ||||||
7,267 | 7,446 | |||||||
Less – Allowance for doubtful accounts
|
(1,965 | ) | (1,531 | ) | ||||
Total account receivable, net
|
$ | 5,249 | $ | 5,915 |
March 31,
2016
|
December 31,
2015
|
|||||||
Balance, beginning of period
|
$ | 1,531 | $ | 439 | ||||
Write-off
|
- | (76 | ) | |||||
Current provision (recovery)
|
434 | 1,168 | ||||||
Balance, end of period
|
$ | 1,965 | $ | 1,531 |
March 31,
2016
|
December 31,
2015
|
|||||||
Work in Process
|
$
|
3,607
|
$
|
2,237
|
||||
Parts and supplies
|
3,824
|
3,616
|
||||||
Finished goods
|
957
|
3,186
|
||||||
8,388
|
9,039
|
|||||||
Less - inventory reserve
|
(1,264
|
)
|
(1,296
|
)
|
||||
Inventories, net
|
$
|
7,124
|
$
|
7,743
|
March 31,
2016
|
December 31,
2015
|
|||||||
Balance, beginning of period
|
$ | 1,296 | $ | 1,380 | ||||
Current recovery for Jonway Auto
|
(32 | ) | (132 | ) | ||||
Current provision for inventory ZAP, net
|
- | 48 | ||||||
Balance, end of period
|
$ | 1,264 | $ | 1,296 |
March 31,
2016
|
December 31,
2015
|
|||||||
Better World Products - related party
|
$
|
2,160
|
$
|
2,160
|
||||
Jonway Products
|
14,400
|
14,400
|
||||||
16,560
|
16,560
|
|||||||
Less: amortization and impairment
|
(9,961
|
)
|
(9,601
|
)
|
||||
$
|
6,599
|
$
|
6,959
|
12 months ended March 31,
|
||||
2017
|
$
|
1,440
|
||
2018
|
1,440
|
|||
2019
|
1,440
|
|||
2020
|
1,440
|
|||
Thereafter
|
839
|
|||
Total
|
$
|
6,599
|
March 31,
2016
|
December 31,
2015
|
||||||||
Loan from CITIC bank
|
(a)
|
$
|
3,629
|
$
|
3,081
|
||||
Loan from ICBC
|
(b)
|
3,878
|
4,621
|
||||||
-
|
|||||||||
$
|
7,507
|
$
|
7,702
|
|
(a)
|
In October 2015, Jonway Auto borrowed a half year short-term loan of $3.1 million at annual interest rate of 5.9%. The loan is due on April 28, 2016. On March 25, 2016, Jonway Auto further borrowed a one year loan of $0.5 million at annual interest rate of 6.0%. The loan is due on March 25, 2017. All loans are secured by a Maximum Amount Mortgage Contract between Jonway Auto and CITIC dated November 3, 2014, in which a land use right and a building with a total carrying amount of $5.2 million as of March 31, 2016 has been pledged as security for these loans. The shareholder and CEO Alex Wang also personally guaranteed these loans. Subsequent to March 31, 2016, the Company renewed the loan of $3.1 million at annual interest of 5.9% with CITIC bank upon the loan’s maturity on April 28, 2016.
|
(b)
|
In March 2015, the company borrowed a one year short-term loan of $0.8 million from ICBC at an annual interest of 5.4% and fully repaid the loan upon maturity in March 2016. In June 2015, the company borrowed a one year short-term loan of $0.3 million from ICBC at an annual interest rate of 5.92%. In July 2015, the Company borrowed a one year short-term loan of $1.1 million from ICBC at an annual interest rate of 6.7%. In October 2015, the Company borrowed a one year short-term loan of $1.4 million at an annual interest of 6.4%. In November 2015, the Company borrowed a one year short-term loan of $1.1 million at an annual interest rate of 6.1%. These loans were guaranteed by related parties including Jonway Group, the shareholder Wang Huaiyi and the shareholder and CEO Alex Wang. The Company also pledged buildings and a land use right with a carrying value of $1.4 million with ICBC.
|
March 31,
2016
|
December 31,
2015
|
||||||||
Bank acceptance notes payable to China Everbright Bank
|
(a)
|
$
|
7,135
|
$
|
7,086
|
||||
Bank acceptance notes payable to CITIC Bank
|
(b)
|
9,345
|
6,428
|
||||||
Bank acceptance notes payable to Shanghai Pudong
Development bank
|
(c)
|
769
|
852
|
||||||
$
|
17,249
|
$
|
14,366
|
(a)
|
Notes payable to China Everbright bank have various maturity dates in June 2016. The notes payable are guaranteed by a land use right and a building with a total carrying value of $2.0 million. The Company is also required to maintain cash deposits at 50% of the notes payable with the bank, in order to ensure future credit availability.
|
(b)
|
Notes payable to CITIC bank will be due in April to September 2016. Except for the note payable utilizing credit exposure of $2.1 million, the Company is required to maintain cash deposits at 100% of the notes payable with the bank, in order to ensure future credit availability.
|
|
(c)
|
Notes payable to Shanghai Pudong Development Bank will be due in May and June, 2016. The company is required to maintain cash deposits at 100% of the notes payable with the bank.
|
March 31,
2016
|
December 31,
2015
|
|||||||
Senior convertible debt – CEVC (a)
|
$
|
20,679
|
$
|
20,679
|
||||
Convertible debt – Mr. Luo Hua Liang (b)
|
786
|
786
|
||||||
$
|
21,465
|
$
|
21,465
|
|
(a)
|
Senior convertible debt - CEVC
|
|
(b)
|
convertible debt – Mr. Luo Hua Liang
|
For the three months ended March 31, 2016
|
Jonway
Auto
|
ZAP
|
ZAP Hong
Kong
|
Total
|
||||||||||||
Net sales
|
$
|
3,378
|
$
|
4
|
$
|
-
|
$
|
3,382
|
||||||||
Gross profit
|
$
|
65
|
$
|
1
|
$
|
-
|
$
|
66
|
||||||||
Depreciation and amortization
|
$
|
1,271
|
$
|
651
|
$
|
-
|
$
|
1,922
|
||||||||
Net loss
|
$
|
(2,230
|
)
|
$
|
(1,159
|
)
|
$
|
-
|
$
|
(3,389
|
)
|
|||||
Total assets
|
$
|
62,443
|
$
|
14,011
|
$
|
-
|
$
|
79,454
|
||||||||
For the three months ended March 31, 2015
|
||||||||||||||||
Net sales
|
$
|
8,186
|
$
|
176
|
$
|
-
|
$
|
8,362
|
||||||||
Gross profit (loss)
|
$
|
(587
|
)
|
$
|
75
|
$
|
-
|
$
|
(512
|
)
|
||||||
Depreciation and amortization
|
$
|
1,435
|
$
|
657
|
$
|
-
|
$
|
2,092
|
||||||||
Net profit (loss)
|
$
|
(3,272
|
)
|
$
|
(1,404
|
)
|
$
|
-
|
$
|
(4,676
|
)
|
|||||
Total assets
|
$
|
69,799
|
$
|
19,077
|
$
|
8
|
$
|
88,884
|
March 31,
2016
|
December 31,
2015
|
|||||||
Sanmen Branch of Zhejiang UFO Automobile
Manufacturing Co., Ltd
|
$
|
1,015
|
$
|
998
|
||||
Jonway Economy and Trade Co., Ltd.
|
620
|
616
|
||||||
$
|
1,635
|
$
|
1,614
|
March 31,
2016
|
December 31,
2015
|
|||||||
Jonway EV selling Ltd.
|
$
|
4,379
|
$
|
4,659
|
||||
Sanmen Branch of Zhejiang UFO Automobile Manufacturing Co., Ltd
|
160
|
212
|
||||||
Jonway Motorcycle
|
302
|
301
|
||||||
$
|
4,841
|
$
|
5,172
|
March 31,
2016
|
December 31,
2015
|
|||||||
Jonway Group
|
$
|
14,064
|
$
|
12,606
|
||||
Jonway Motor Cycle
|
64
|
64
|
||||||
Taizhou Huadu
|
1,096
|
846
|
||||||
Shanghai Zapple
|
35
|
35
|
||||||
Mr. Alex Wang
|
74
|
74
|
||||||
Mr. Huaiyi Wang
|
14
|
-
|
||||||
Betterworld
|
149
|
149
|
||||||
Zhejiang Jonway Painting Co., Ltd.
|
23
|
11
|
||||||
Cathaya Operations Management Ltd.
|
241
|
193
|
||||||
$
|
15,760
|
$
|
13,978
|
The first 3,000 vehicles
|
$44 per vehicle
|
Vehicles from 3,001 to 5,000
|
$30 per vehicle
|
Vehicles over 5,000
|
$22 per vehicle
|
|
·
|
our ability to establish, maintain and strengthen our brand;
|
|
·
|
our ability to successfully integrate acquired subsidiaries, particularly Jonway, into our company and business;
|
|
·
|
our ability to maintain effective disclosure controls and procedures;
|
|
·
|
our limited operating history, particularly of ZAP and Jonway on a consolidated basis;
|
|
·
|
whether the alternative energy and gas-efficient vehicle market for our electric products continues to grow and, if it does, the pace at which it may grow;
|
|
·
|
our ability to attract and retain the personnel qualified to implement our growth strategies;
|
|
·
|
our ability to obtain approval from government authorities for our products;
|
|
·
|
our ability to protect the patents on our proprietary technology;
|
|
·
|
our ability to fund our short-term and long-term financing needs;
|
|
·
|
our ability to compete against large competitors in a rapidly changing market for electric and conventional fuel vehicles;
|
|
·
|
changes in our business plan and corporate strategies; and
|
|
·
|
Other risks and uncertainties discussed in greater detail in various sections of this report, or set forth in part I, Item 1A of our Annual Report on Form 10-K under the heading “Risk Factors”.
|
Three Months
Ended March 31,
|
||||||||
Statements of Operations Data:
|
2016
|
2015 | ||||||
Net sales
|
100.0 | % | 100.0 | % | ||||
Cost of sales
|
-98.1 | % | -106.1 | % | ||||
Operating expenses
|
-87.7 | % | -41.7 | % | ||||
Loss from operations
|
-85.7 | % | -47.8 | % | ||||
Net loss attributable to ZAP
|
-67.9 | % | -36.7 | % |
|
·
|
Financial support and credit guarantee from related parties; and
|
|
·
|
Other available sources of financing from domestic banks and other financial institutions given our credit history.
|
Exhibit
Exhibit
Number
|
Description
|
|
31.1
|
Certification of Principal Executive Officer pursuant to Rule 13a-14/15d-14 of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification of Principal Financial Officer pursuant to 13a-14/15d-14 of the Exchange Act as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS
|
XBRL Instance Document
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
Dated: May 16, 2016
|
By: /s/ Alex Wang
|
||
Name: Alex Wang
|
|||
Title: Chief Executive Officer
|
|||
(Principal Executive Officer).
|
Dated: May 16, 2016
|
By: /s/ Michael Ringstad
|
||
Name: Michael Ringstad
|
|||
Title: Interim Chief Financial Officer
|
|||
(Interim Principal Financial Officer)
|