ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The Company's directors and executive officers and their ages as of March 21,
2007 are as follows:
Name Age Position
------------------------ --- ------------------------------------
Steven M. Schneider 46 Chief Executive Officer and Director
Gary Starr 51 Chairman of the Board of Directors
William Hartman 59 Chief Financial Officer
Renay Cude 30 Secretary and Director
Amos Kazzaz 55 Chief Operating Officer
Peter H. Scholl 60 Director
Raymond F. Byrne 59 Director
Steven M. Schneider. Mr. Schneider has been director and Chief Executive Officer
of ZAP since October 26, 2002. Schneider has a 30-year career in the automotive
industry and a long-time interest in fun, fuel-efficient cars. He has served as
ZAP's CEO since 2002, when the company acquired Auto Distributors, Inc. and
Voltage Vehicles, businesses he founded which specialized in the distribution of
electric and alternative fuel vehicles including automobiles, motorcycles and
bicycles. Schneider also founded the RAP Group, an automotive liquidator and
reseller, which ZAP also acquired. He serves on the board of directors of Apollo
Energy Systems, a developer of fuel cells and advanced batteries. He also serves
as a director of Rotoblock Corporation, a public company focused on the
continued development of the oscillating piston engine. He is an active member
with various industry groups, including the Electric Drive Transportation
Association in Washington, DC. , and is a member of the Bay Area Alliance of
CEOs. He lectures frequently on industry topics at universities and other
organizations.
68
Gary Starr. Mr. Starr co-founded ZAP in 1994, has been a director since the
Company's inception and served as Chief Executive Officer from 2000 to 2002. He
became chairman of the Board of Directors in October 2002. Mr. Starr founded US
Electricar's electric vehicle operation in 1983. 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 shows including Larry King Live, The Today
Show, Inside Edition, CNN Headline News, Prime Time Live, the CBS Evening News
and the McNeil Lehrer News Hour as an authority in the field of electric
vehicles. Mr. Starr has a Bachelor of Science Degree from the University of
California, Davis in Environmental Consulting and Advocacy. He is a frequent
lecturer on electric cars and has developed several industry inventions.
William Hartman. Mr. Hartman was appointed Chief Financial Officer in March
2001. He was engaged with the Company as a financial consultant starting in
January 2001. Prior to his engagement at ZAP, Mr. Hartman provided financial and
accounting consulting services to various Internet start up companies in the San
Francisco Bay Area from 1999 to 2001. Mr. Hartman is a Certified Public
Accountant in the State of California with a Masters in Accounting Degree from
the State University of New York. He also had previous public accounting
experience as an audit manager with Price Waterhouse Coopers in San Francisco.
Mr. Amos Kazzaz. Mr. Kazzaz was appointed Chief Operating Officer on March 26,
2007. Prior to joining ZAP, Mr. Kazzaz served as Vice President of Cost
Management at United Airlines, Inc. where he oversaw United Airline's
operations, process improvement, and cost management. From 2003 to 2006, Mr.
Kazzaz served as United Airline's Vice President of Financial Planning and
Analysis during which time he accounted for United Airline's planning and
analysis function and capital budget. From 2002 to 2004, Mr. Kazzaz served as
United Airline's Vice President of the Business Transformation Office, the
company's first enterprise project management office, during which time he was
responsible for identifying areas of revenue and cost improvements;
concurrently, Mr. Kazzaz served as the Chief Operating Officer at Avolar, a
subsidiary of United Airlines. He currently sits on the Boards of Directors of
Alliant Credit Union, SkyTech Solutions in India, and Integres. Mr. Kazzaz holds
a bachelors degree in International Affairs from the University of Colorado and
a Masters in Business Administration from the University of Denver.
Renay Cude. Ms. Cude was appointed Corporate Secretary in August 2002, and has
been a director of the Company since October 26, 2002. Ms. Cude is the President
of our subsidiary, Voltage Vehicles, where she works closely with corporate
counsel in obtaining all the required licensing in the 50 states for the proper
distribution of advanced technology vehicles. Ms. Cude is also the President of
ZAP Manufacturing and ZAP Rentals. Prior to joining ZAP, from 1997 to 2002, Ms.
Cude worked as a legal secretary for various law firms. Ms. Cude has over five
years experience working in the bankruptcy field where she helped companies
through the reorganization process. Ms. Cude also currently serves as Secretary
and a director of Rotoblock Corporation, a public company focused on the
continued development of the oscillating piston engine. Ms. Cude holds an
Associates Degree in General Education from Santa Rosa Junior College.
Raymond F. Byrne. Mr. Byrne is currently the President of North Coast Bank, a
division of American River Bank. Prior to that he was SeniorVice President and
Senior Lender of North Coast Bank from 2001 to 2003. From 2000 to 2001 he was
Vice President and Manager of Bank of the West.
Peter H. Scholl. Mr. Scholl is currently an independent engineering consultant.
From 2003 to 2005, Mr. Scholl served as President of Rotoblock Inc. in Canada
and Rotoblock Corporation, a Nevada corporation, in the development of
Oscillating Piston Engine technology. He served as President of Unimont Inc., a
real estate development firm, in Penticton, Canada from 2001 to 2003. From 1996
to 2000, Mr. Scholl worked on the development of water purification systems in
Arizona. Mr. Scholl has a Bachelor's of Science degree in Mechanical Engineering
from the Institute of Technology in Biel, Switzerland.
Family Relationships
There are no family relationships among any of our officers or directors.
Board of Directors
Corporate Governance Principles and Board Matters
ZAP is committed to having sound corporate governance principles and practices.
ZAP's primary corporate governance documents, including our Code of Ethics and
Committee Charters, are available to the public on our website at
http://www.zapworld.com. The following is a discussion of our current governance
principles and practices.
69
Board Meetings
During 2006, our Board met or conferred by telephone 26 times. During 2006, all
directors attended at least 75% of the aggregate of (i) the total number of
meetings of the Board during 2006 and (ii) the total number of meetings held by
all committees of the Board on which such director served in 2006. The Company
does not have a policy with regard to attendance of directors at annual
meetings, but encourages attendance of all meetings.
Committees of the Board
Audit Committee
The Board's Audit Committee is comprised of Raymond Byrne, Peter Scholl, and
Gary Starr. During 2006, the Audit Committee met 4 times. All current members of
the Audit Committee are financially literate and are able to read and understand
fundamental financial statements, including a balance sheet, income statement
and cash flow statement. The Board has determined that Mr. Byrne qualifies as an
audit committee financial expert as defined within Item 401 of Regulation S-B.
The Board has determined that Mr. Byrne qualifies as an audit committee
financial expert by means of being President of a bank.
The Audit Committee assists the Board of Directors in its oversight of the
quality and integrity of the accounting, auditing, and reporting practices of
the Company. The Audit Committee's role includes overseeing the work of the
Company's internal accounting and financial reporting and internal auditing
processes and discussing with management the Company's processes to manage
business and financial risk, and for compliance with significant applicable
legal, ethical, and regulatory requirements. The Audit Committee is responsible
for the appointment, compensation, retention, and oversight of the independent
auditor engaged to prepare or issue audit reports on the financial statements
and internal control over financial reporting of the Company. The Audit
Committee relies on the expertise and knowledge of management and the
independent auditor in carrying out its oversight responsibilities. The
Committee's specific responsibilities are delineated in the Audit Committee
Charter. The Audit Committee Charter is available on the ZAP website at
http://www.zapworld.com.
Compensation Committee
The Board's Compensation Committee is comprised of Gary Starr and Peter Scholl.
During 2006, the Compensation Committee met 3 times. A copy of the Compensation
Committee Charter is available on the ZAP website at http://www.zapworld.com.
The Compensation Committee, among other things, advises the Board on all matters
pertaining to compensation programs and policies, approves the compensation
payable to each of the officers of the Company, reviews proposed compensation of
executives as provided in the Company's executive compensation plan and
administers the Company's stock option plans.
Corporate Governance and Nominating Committee
The Board's Corporate Governance and Nominating Committee (the "Governance
Committee") is comprised of Peter Scholl and Raymond Byrne. During 2006, the
Governance Committee met 3 times. The Governance Committee has adopted a
charter, which has been ratified and approved by the Board. A copy of the
committee's charter is available on the ZAP website at http://www.zapworld.com.
The Governance Committee, among other things, identifies, evaluates and
recommends individuals qualified to be directors of the Company. Members of the
Board of Directors should have the highest professional and personal ethics and
values. They should have broad experience at the policy-making level in
business, government, education, technology or public interest. They should be
able to provide insights and practical wisdom based on their experience and
expertise. They should be committed to enhancing shareholder value and should
have sufficient time to effectively carry out their duties. Their service on
other Boards of public companies should be limited to a reasonable number.
The Governance Committee annually reviews the appropriate skills and
characteristics required of Board members in the context of the current
composition of the Board, the operating requirements of the Company and the
long-term interests of the shareholders. In conducting this assessment, the
committee considers diversity, age, skills, and such other factors as it deems
appropriate given the current needs of the Board and the Company, to maintain a
balance of knowledge, experience and capability.
70
Code of Ethics
The Board has adopted a Code of Ethics to provide guidance on maintaining the
Company's commitment to being honest and ethical in its business endeavors. The
Code of Ethics covers a wide range of business practices, procedures and basic
principles regarding corporate and personal conduct and applies to all
directors, executives, officers and employees. A copy of the Code of Ethics is
available by written request submitted to the Corporate Secretary at ZAP, 501
Fourth Street, Santa Rosa, CA 95401. The Company intends to satisfy any
disclosure requirements regarding amendments to, or waivers from, any provision
of the Code of Ethics by disclosing on the Company's website, by press release
and/or on a current report on Form 8-K.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons beneficially owning more than 10% of the
outstanding common stock of the Company to file reports of beneficial ownership
and changes in beneficial ownership with the Securities and Exchange Commission
("SEC"). Officers, directors, and greater than 10% beneficial owners of common
stock are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file. The Company believes that during the fiscal year
ended December 31, 2006, all officers and directors timely filed the initial
statement of beneficial ownership of securities on Form 3. The Company also
believes that during the fiscal year ended December 31, 2006, all officers and
directors timely reported certain transactions on Form 4s.
ITEM 10. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
The following executive compensation disclosure reflects all compensation
awarded to, earned by or paid to the executive officers below for the fiscal
year ended December 31, 2006. The following table summarizes all compensation
for fiscal year 2006 received by our Chief Executive Officer, and the Company's
two most highly compensated executive officers who earned more than $100,000 in
fiscal year 2006.
SUMMARY COMPENSATION TABLE
Non- Non-
Equity qualified
Incentive Deferred All
Plan Compen- Other
Stock Option Compen- sation Compen-
Awards Awards sation Earnings sation
Name and principal position Year Salary ($) Bonus ($) ($) (1) ($)(1) ($) ($) ($) Total ($)
--------------------------- ---- ---------- --------- ------- ------ --- --- --- ---------
Steven Schneider, CEO 2006 120,000 - 17,800 419,756 - - - 557,556
Gary Starr, Chairman 2006 120,000 - 17,800 419,756 - - - 557,556
Renay Cude, Secretary 2006 78,000 - 17,800 419,756 - - - 512,556
(1) Stock awards are based on the stock price on the date of issue. Options/warrant awards were calculated using the following
assumptions: dividend of 0, rate of 5.12% for warrants and 4.91% for options, expected life of 5 months for warrants and 6.75
years for options, strike price of $1.00 for warrants and $0.91 for options, stock price of $0.91 and volatility of 149.75%.
All option and warrant issuances were fully vested at time of issue.
71
Employment Agreements
We currently have employment agreements with three of our Named Executive
Officers as described below.
Steve Schneider, Chief Executive Officer
We entered into an employment agreement with Steve Schneider on October 1, 2003.
The agreement provides that Mr. Schneider will serve as our Chief Executive
Officer through October 1, 2008 and receive a salary, benefits and options equal
to the highest paid employee of ZAP, but in no event less than $75,000 per year.
Mr. Schneider's current salary is set at $120,000. In addition, the agreement
provides that should ZAP become profitable, Mr. Schneider's salary will
automatically be increased by 10% for every $100,000 in profits calculated on a
quarterly basis. Mr. Schneider annually receives a grant of stock options or
warrants equal to 1% of the outstanding common stock of ZAP at an exercise price
equal to 110% of the market price on the date of grant. Mr. Schneider also
receives all other benefits as are afforded to our employees and a Company car,
or a car allowance of $5,000 per year in lieu of a Company car. In the event ZAP
terminates his employment without cause, Mr. Schneider is entitled to his full
salary for the remainder of the term of the agreement. Should ZAP elect to
terminate Mr. Schneider's employment in the case of a merger or reclassify Mr.
Schneider without cause prior to the expiration of the employment agreement, the
Company must retain Mr. Schneider as an employee or consultant for a period of
five years for an aggregate salary of $500,000, payable bi-monthly, or make a
lump sum payment of $300,000. The agreement automatically renews for successive
five year periods unless terminated by either party upon proper notice. On March
30, 2007, The Board of Directors of ZAP did approve the extension of the
employment agreement with Mr. Schneider through October 1, 2013.
Gary Starr, Chairman of the Board
We entered into an employment agreement with Gary Starr on October 1, 2003. The
agreement provides that Mr. Starr will serve as Chairman of the Board of
Directors of ZAP through October 1, 2008 and receive a salary, benefits and
options equal to the highest paid employee of ZAP, but in no event less than
$75,000 per year. Mr. Starr's current salary is set at $120,000. In addition,
the agreement provides that should ZAP become profitable, Mr. Starr's salary
will automatically be increased by 10% for every $100,000 in profits, calculated
on a quarterly basis. Mr. Starr annually receives a grant of stock options or
warrants equal to 1% of the outstanding common stock of ZAP at an exercise price
equal to 110% of the market price on the date of grant. Mr. Starr also receives
all other benefits as are afforded to our employees and a Company car, or a car
allowance of $5,000 per year in lieu of a Company car. In the event ZAP
terminates his employment without cause, Mr. Starr is entitled to his full
salary for the remainder of the term of the agreement. Should ZAP elect to
terminate Mr. Starr's employment in the case of a merger or reclassify Mr. Starr
without cause prior to the expiration of the employment agreement, the Company
must retain Mr. Starr as an employee or consultant for a period of five years
for an aggregate salary of $500,000, payable bi-monthly, or make a lump sum
payment of $300,000. The agreement automatically renews for successive five year
periods unless terminated by either party upon proper notice. On March 30, 2007,
On March 30, 2007,The Board of Directors of ZAP did approve the extension of the
employment agreement with Mr. Starr through October 1, 2013.
Renay Cude, Corporate Secretary
We entered into an employment agreement with Renay Cude on October 1, 2003. The
agreement provides that Ms. Cude will serve as Corporate Secretary of ZAP
through October 1, 2008 and receive a salary, benefits and options equal to the
highest paid non corporate officer-employee of ZAP, but in no event less than
$36,000 per year. Ms. Cude's current salary is set at $78,000. In addition, the
agreement provides that should ZAP become profitable, Ms. Cude's salary will
automatically be increased by 10% for every $100,000 in profits, calculated on a
quarterly basis. Ms. Cude annually receives a grant of stock options or warrants
equal to 1% of the outstanding common stock of ZAP at an exercise price equal to
110% of the market price on the date of grant. Ms. Cude also receives all other
benefits as are afforded to our employees and a Company car, or a car allowance
of $5,000 per year in lieu of a Company car. In the event ZAP terminates her
employment without cause, Ms. Cude is entitled to her full salary for the
remainder of the term of the agreement. Should ZAP elect to terminate Ms. Cude's
employment in the case of a merger or reclassify Ms. Cude without cause prior to
the expiration of the employment agreement, the Company must retain Ms. Cude as
an employee or consultant for a period of five years for an aggregate salary of
$250,000, payable bi-monthly, or make a lump sum payment of $150,000. The
agreement automatically renews for successive five year periods unless
terminated by either party upon proper notice. On March 30, 2007,The Board of
Directors of ZAP did approve the extension of the employment agreement with Ms.
Cude through October 1, 2013.
73
The following table sets forth certain information concerning stock option
awards granted to our named executive officers.
-------------------------------------------------------------------------------------- --------------------------------------------
OPTION AWARDS STOCK AWARDS
Equity
incentive Equity
plan incentive
awards: plan
number awards:
Number of Market or
Equity of unearned payout
Incentive shares shares, value of
Number of Plan Awards: or units Market units or unearned
Number of securities Number of of stock value of other shares,
securities underlying Securities that shares or rights units or
underlying unexercised underlying have units of that have other rights
unexercised options (#) unexercised Option Option not stock that not that have
options (#) Unexercis unearned exercise expiration vested have not vested not vested
Name Exercisable -able options (#) price ($) date (#) vested ($) (#) ($)
Steve Schneider (1) 1,690,786 - - 1.00 7/1/12
Steve Schneider (2) 200,000 - - 0.25 7/5/12
Steve Schneider (2) 486,111 13,889 - 1.26 6/23/14
Steve Schneider (2) 428,877 85,775 - 1.32 11/16/14
Steve Schneider (2) 211,265 105,633 - 0.93 6/7/15
Steve Schneider (1) 355,424 - - 0.91 8/11/16
Gary Starr (1) 1,470,671 - - 1.00 7/1/12
Gary Starr (2) 116,667 - - 1.20 12/19/11
Gary Starr (2) 150,000 - - 0.25 7/5/12
Gary Starr (2) 486,111 13,889 - 1.26 6/23/14
Gary Starr (2) 428,877 85,775 - 1.32 11/16/14
Gary Starr (2) 211,265 105,633 - 0.93 6/7/15
Gary Starr (1) 355,424 - - 0.91 8/11/16
Renay Cude (1) 1,525,786 - - 1.00 7/1/12
Renay Cude (1) 161,700 - - 0.50 12/2/13
Renay Cude (2) 48,611 1,389 - 1.26 6/23/14
Renay Cude (2) 428,877 85,775 - 1.32 11/16/14
Renay Cude (2) 211,265 105,633 - 0.93 6/7/15
Renay Cude (1) 355,424 - - 0.91 8/11/16
William Hartman (1) 687,500 - - 1.00 7/1/12
William Hartman (3) 41,667 8,333 - 1.32 11/16/14
William Hartman (3) 25,000 - - 1.20 12/19/11
William Hartman (3) 72,917 2,083 - 1.26 6/23/14
William Hartman (1) 100,000 - - 1.03 9/18/16
(1) The award represents warrants which are exercisable at the time of
issuance.
(2) The award vests equally over 36 months from date of grant. The option has a
ten year life. Issued per the employment agreements
(3) The award vests equally over 36 months from date of grant. The option has a
ten year life.
74
DIRECTOR COMPENSATION
The following director compensation disclosure reflects all compensation awarded
to, earned by or paid to the directors below for the fiscal year ended December
31, 2006.
Change in
Pension
Fees Value and
Earned Non-Equity Nonqualified
or Paid Stock Option Incentive Plan Deferred All Other
in Cash Awards Awards Compensation Compensation Compensation
Name ($) ($) ($) ($) Earnings ($) ($) Total ($)
Raymond F. Byrne (1) 3,000 20,800 23,800
Peter H. Scholl (1) 3,000 20,800 23,800
(1) Both independent directors received a stock award with value of $17,800 for
their service on the Board and $3,000 for attending Board meetings.
Compensation of Directors
Starting in April 2006, all directors received $500 and a grant of $500 of
common stock for attendance at each Board meeting and each committee meeting.
Directors are also reimbursed for out-of-pocket travel and other expenses
incurred in attending Board and/or committee meetings. Prior to April 2006, we
did not provide our directors with cash or other forms of compensation, although
we did reimburse their out-of-pocket expenses. Each Director also received
20,000 shares of common stock in December 2006 as an additional compensation
incentive .
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information, as of March 21, 2007, with
respect to the holdings of (1) each person who is the beneficial owner of more
than five percent of our common stock, (2) each of our directors, (3) the CEO
and each Named Executive Officer, and (4) all of our directors and executive
officers as a group.
Beneficial ownership of the common stock is determined in accordance with the
rules of the Securities and Exchange Commission and includes any shares of
common stock over which a person exercises sole or shared voting or investment
powers, or of which a person has a right to acquire ownership at any time within
60 days of March 21, 2007. Except as otherwise indicated, and subject to
applicable community property laws, the persons named in this table have sole
voting and investment power with respect to all shares of common stock held by
them. Applicable percentage ownership in the following table is based on
43,973,721 shares of common stock outstanding as of March 21, 2007, plus, for
each individual, any securities that individual has the right to acquire within
60 days of March 21, 2007.
Unless otherwise indicated below, the address of each of the principal
shareholders is c/o ZAP, 501 Fourth Street, Santa Rosa, California 95401.
75
Name and Address Shares Beneficially Owned Percentage of Class
------------------------------------------------ ------------------------- -------------------
Beneficial Owners of More than 5%:
Sunshine 511 Holdings (1) 3,300,000 6.98%
101 N. Clematis Street, Suite 511
West Palm Beach, Florida 33401
Daka Development Ltd. (2) 2,799,136 6.01%
8/F Leroy Plaza, Unit C
15 Cheung Shun Street
Chung Sha Wan Kin, Hong Kong
Fusion Capital Fund II, LLC (3) 2,750,000 5.89%
222 Merchandise Mart Plaza, Suite 9-112
Chicago, IL 60654
Jeffrey G. Banks (4) 6,828,373 13.94%
c/o The Banks Group, LLC
PO Box 10287
Oakland, CA 94610
Current Directors, Nominees and Named
Executive Officers:
Steven Schneider (5) 17,138,611 29.56%
Gary Starr (6) 8,396,775 16.36%
William Hartman (7) 1,050,042 2.34%
Renay Cude (8) 2,935,152 6.27%
Peter Scholl (9) 625,218 1.40%
Raymond Byrne 25,218 *
All Directors and Executive Officers as a group (6 persons) 30,171,015 43.24%
----------------------------------------------------------------------------------------------------
* Less than 1%.
(1) Represents 3,300,000 warrants to purchase common stock. The managing
partner is Andrew Schneider, a cousin of ZAP's CEO. The address for
Sunshine 511 Holdings is 101 N. Clematis Street, Suite 511, West Palm
Beach, FL 33401.
(2) Includes 2,587,262 warrants to purchase common stock. The managing
partner is Raymond Chow. The address for Daka Development is Unit C 8/F
Leroy Plaza, 15 Cheung Shun Street, Chung Sha Wan Kin, Hong Kong.
76
(3) Represents 2,750,000 warrants to purchase common stock. Pursuant to the
terms of the warrant, Fusion Capital is not entitled to exercise the
warrants to the extent such exercise would cause the aggregate number
of shares of common stock beneficially owned by Fusion Capital to
exceed 9.9% of the outstanding shares of the common stock following
such exercise. Steve Martin is the managing partner. The address for
Fusion Capital is 222 Merchandise Mart Plaza, Suite 9-112, Chicago, IL
60654.
(4) Includes 5,005,000 warrants to purchase common stock.
(5) Includes 12,159,266 shares of common stock issuable upon the exercise
of various warrants and 1,849,845 shares of stock issuable upon the
exercise of stock options.
(6) Includes 5,441,160 shares of common stock issuable upon the exercise of
various warrants and 1,923,179 shares of stock issuable upon the
exercise of stock options.
(7) Includes 709,500 shares of common stock issuable upon the exercise of
various warrants and 263,542 shares of stock issuable upon the exercise
of stock options.
(8) Includes 1,525,786 shares of common stock issuable upon the exercise of
various warrants and 1,326,465 shares of stock issuable upon the
exercise of stock options.
(9) Includes 600,000 shares of common stock issuable upon the exercise of
various warrants.
Equity Compensation Plan Information
We have adopted stock incentive plans to provide incentives to attract and
retain officers, directors, key employees and consultants. We currently have
reserved a total of 15,500,000 shares of our common stock for granting awards,
including 1,500,000 shares under our 1999 Incentive Stock Option Plan,
10,000,000 shares under our 2002 Incentive Stock Option Plan, and 4,000,000
shares under our 2006 Incentive Stock Option Plan. All plans were approved by
our shareholders. As of December 31, 2006, 643,870 shares of common stock had
been issued pursuant to options exercised out of the 2002 plan.
The following table sets forth a description of our equity compensation plans as
of December 31, 2006:
Number of securities
remaining available for
Number of Securities future issuance under
to be issued upon Weighted-average equity compensation
exercise of outstanding exercise price of plans, (excluding
options and other outstanding options and securities reflected in
Plan Category rights other rights column (a))
------------------------------------- --------------------------- --------------------------- ----------------------------
(a) (b) (c)
Equity compensation plans
approved by security holders 11,775,524 $1.08 1,103,859
Equity compensation plans not
approved by security holders 11,309,358 $1.65 232,873
Total 23,084,882 $1.36 1,336,732
----------------------------------------------------------------------------------------------------- -----------------------------
77
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
(8) RELATED PARTY TRANSACTIONS
Rental agreements
The Company rents office space, land and warehouse space from its CEO and major
shareholder. These properties are used to operate the car outlet and to store
inventory. Rental expense was approximately $96,500 and $196,000 for the years
ended December 31, 2006 and 2005, respectively.
Consulting services and other services
In November and December 2003, the Company entered into certain agreements with
two cousins of Steven M. Schneider, the CEO. One cousin received 25,000 B-2
Restricted warrants and 25 shares of preferred stock, which was later converted
into 50,000 shares of restricted common stock. The stock and warrants were
issued for website design services. The other cousin received 200,000 shares of
unrestricted common stock in January 2004. The shares were issued for consulting
services. In April 2004, the Company issued 2 million B-2 restricted warrants
and 1 million K-2 restricted warrants to Sunshine 511 Holdings for consulting
services. The managing partner of Sunshine 511 Holdings is the cousin of the CEO
of ZAP. In the fourth quarter of 2005 the Company expensed approximately $2.2
million, the carrying value of the prepaid services, since limited services had
been received and there were no assurances that future services would be
received. Also in 2004, certain leasehold improvements in the amount of $65,000
made by the Company on rental properties were abandoned in favor of the
landlord, who is the CEO of ZAP. In September of 2006, the Company canceled a
shareholder note of $56,000 due by the cousin of Steven Schneider in exchange
for consulting services.
Inventory Purchase
In December 2005, the Company purchased inventory from a related entity where
two of ZAP's officers and or Directors are also members of its Board of
Directors. The transaction resulted in a payable due to the related Company of
$204,000 at December 31, 2006 and 2005. During the second quarter of 2006 the
parties agreed that the payment will be offset against future outside
advertising services which will be provided to the related entity by the
Company.
Sales to a related entity
The Company also signed in the third quarter of 2006, a Distributor License
Agreement with a business entity that is wholly owned by the brother of
Maximilian Scheder- Bieschin, the former President of ZAP. The terms of the
agreement are the same as other distributor licenses signed with ZAP. The total
sales through December 31, 2006 were $21,000. In addition, Smart Concepts is
holding certain Xebra (TM) Vehicles on a consignment basis valued at $24,000.
DIRECTOR INDEPENDENCE
The following directors are independent directors as that term is defined under
NASDAQ Rule 4200(a)(15):
Raymond F. Byrne
Peter H. Scholl
78
ITEM 13. EXHIBITS.
EXHIBITS.
2.1 Approved Second Amended Plan of Reorganization, dated as June 20, 2002.
(5)
3.1 Amended and Restated Articles of Incorporation. (4)
3.2 Certificate of Determination of Series SA Convertible Preferred Stock.
(14)
4.1 Form of common share purchase warrant of the Company held by Fusion
Capital Fund II, L.P. (6)
4.2 Form of Series B common stock purchase warrant of the Company. (14)
4.3 Form of Series K common stock purchase warrant of the Company. (14)
10.1 Settlement Agreement Between ZAPWORLD.COM, Ridgewood ZAP, LLC, and the
Shareholders dated June 27, 2001. (3)
10.3 2004 Consultant Stock Plan. (7)
10.4 Convertible Promissory Note, dated April 26, 2004, issued to Banks
Living Trust. (1)
10.5 Purchase and Sale Agreement dated March 7, 2003 between ATOCHA Land LLC
and ZAP. (3)
10.6 Promissory Note $2,000,000 - Atocha Land LLC and ZAP. (3)
10.7 Warrant Agreement dated April 26, 2004, issued to Banks Living Trust.
(1)
10.8 Common Stock Purchase Agreement between ZAP and Fusion Capital Fund II,
LLC. (6)
10.9 Registration Rights Agreement between ZAP and Fusion Capital Fund II,
LLC. (6)
10.10 Form of Common Stock Purchase Warrant between ZAP and Fusion Capital
Fund II, LLC (6)
10.11 Agreement for Consulting Services with Evan Rapoport dated January 8,
2004. (1)
10.12 Asset Purchase Agreement dated April 12, 2004 with Jeffrey Banks for
purchase of various autos (1)
10.13 Agreement for Private Placement Investment received dated April 14,
2004 with Phi-Nest Fund LLP (1)
10.14 Consulting Agreement dated April 21, 2004 with Elexis International(1)
10.15 Consulting Agreement dated April 21, 2004 with Sunshine 511 Holdings
(1)
10.16 Definitive Stock Agreement dated October 25, 2004 with
Smart-Automobile, LLC (2)
10.17 Master Distribution Agreement between Apollo Energy Systems, Inc. and
Voltage Vehicles Corporation, a subsidiary of ZAP. (8)
10.18 ZAP Floor Line and Dealer Development Agreement with Clean Air Motors,
LLC for a $45 Million Floor Plan Line of Credit for Qualified ZAP
Dealers (9)
79
10.19 Exclusive Purchase, License and Supply Agreement between Smart
Automobile, LLC and ZAP. (10)
10.20 Amendment dated November 15, 2004 to previous consulting agreement with
Sunshine Holdings 511 (14)
10.21 Secured Promissory Note Payable dated December 30, 2004 with Phi-Nest
Fund, LLP. (14)
10.22 ZAP assignment of 2.9 million shares of Restricted Common Stock to
Phi-Nest Fund, LLP as collateral on note payable (14)
10.23 Promissory note receivable dated January 6, 2005 for $1 million loan
due from Smart Automobile, LLC and Thomas Heidemann (President Smart
Automobile, LLC) (14)
10.24 Security Agreement dated January 6, 2005 from Smart Automobile, LLC and
Thomas Heidemann (President Smart Automobile ,LLC) to secure loan
above. (14)
10.25 Common Stock Purchase Agreement between ZAP and Platinum Partners Value
Arbitrage Fund LP (14)
10.26 Form of Common Stock Purchase Warrant between ZAP and Platinum Partners
Value Arbitrage Fund LP (14)
10.27 Common Stock Purchase Agreement between ZAP and Lazarus Investment
Partners LLP (14)
10.28 Form of Common Stock Purchase Warrant between ZAP and Lazarus
Investment Partners LLP (14)
10.29 Termination of Common Stock Purchase Agreement between ZAP and Fusion
Capital Fund II, LLC (11)
10.30 Financing Agreement between ZAP and Surge Capital II, LLC (12)
10.31 Exclusive Purchase, License, and Supply Agreement between ZAP and
Obvio! Automotoveiculos S.P.E. Ltda (13)
10.36 Agreement dated July 14, 2006 between ZAP, Thomas Heidemann and Smart
Automobile (15)
10.37 Amendment Agreement Dated August 30, 2006 between ZAP and Smart
Automobile LLC (16)
10.38 Exclusive Distribution Agreement dated May 1, 2005, as supplemented by
a letter dated June 9, 2006 (17)
10.39 ZAP Guarantee (18)
10.40 Shandong Jindalu Vehicle Co., Ltd. Guarantee (19)
10.41 Joint Venture Negotiations dated September 21, 2006 (20)
10.42 Security Purchase Agreement between ZAP and Certain Institutional
Investors (21)
10.43 Purchase and Amendment Agreement between ZAP and Certain Institutional
Investors (22)
21.1 List of subsidiaries. (3)
23.1 Consent of Independent Registered Public Accounting Firm (Odenberg,
Ullakko, Muranishi & Co. LLP). (14)
80
31.1 Certification of Principal Executive Officer pursuant to Rule
13a-14(a)/15d-14(a) of the Exchange Act, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002. (14)
31.2 Certification of Principal Financial Officer pursuant to Rule
13a-14(a)/15d-14(a) of the Exchange Act, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002. (14)
32.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (14)
32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (14)
(1) Previously Filed as an exhibit to the Registrants's Form 8-K for the
quarter ended March 31, 2004 and incorporated by reference.
(2) Previously filed as an exhibit to the Registrant's Form 8-K of November
6, 2004 and incorporated by reference.
(3) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-KSB for the year ended December 31, 2003 and incorporated by
reference.
(4) Previously filed with Pre-effective Amendment Number 3 to Form SB-2
registration statement filed with the Securities and Exchange Commission
on October 3, 2001.
(5) Previously filed as an exhibit to the Registrant's Form 8-K of October
20, 2002 and incorporated by reference.
(6) Previously filed as an exhibit to the Registrant's Current Report on Form
8-K dated July 22, 2004 and incorporated by reference.
(7) Previously filed as an exhibit to the Registrant's Registration Statement
on Form S-8 (File No. 333-117560) on July 22, 2004.
(8) Previously filed as an exhibit to the Registrant's Current Report on Form
8K filed with the Securities and Exchange Commission on October 6, 2004
and incorporated herein by reference.
(9) Previously filed as an exhibit to the Registrant's Quarterly Report on
Form 10QSB for the period ended June 30, 2004 and incorporated herein by
reference.
(10) Previously filed as an exhibit to the Registrant's Current Report on Form
8K filed with the Securities and Exchange Commission on April 21, 2004
and incorporated herein by reference.
(11) Previously filed as an exhibit to the Registrant's Current Report on Form
8K filed with the Securities and Exchange Commission on February 25, 2005
and incorporated herein by reference.
(12) Previously filed as an exhibit to the Registrant's Current Report on Form
8K filed with the Securities and Exchange Commission on September 16,
2005 and incorporated herein by reference.
(13) Previously filed as an exhibit to the Registrant's Current Report on Form
8K filed with the Securities and Exchange Commission on September 21,
2005 and incorporated herein by reference.
(14) Previously filed as an exhibit to the Registrant's Yearly Report on Form
10KSB for the period ended December 31, 2004 and incorporated herein by
reference.
(15) Previously filed as an exhibit to the Registrant's Current Report on Form
8K filed with the Securities and Exchange Commission on July 20, 2006 and
incorporated herein by reference.
(16) Previously filed as an exhibit to the Registrant's Current Report on Form
8K filed with the Securities and Exchange Commission on September 6, 2006
and incorporated herein by reference.
(17) Previously filed as an exhibit to the Registrant's Current Report on Form
8K filed with the Securities and Exchange Commission on November 6, 2006
and incorporated herein by reference.
(18) Previously filed as an exhibit to the Registrant's Current Report on Form
8K filed with the
81
Securities and Exchange Commission on November 6, 2006 and incorporated
herein by reference.
(19) Previously filed as an exhibit to the Registrant's Current Report on Form
8K filed with the Securities and Exchange Commission on November 6, 2006
and incorporated herein by reference.
(20) Previously filed as an exhibit to the Registrant's Current Report on Form
8K filed with the Securities and Exchange Commission on November 6, 2006
and incorporated herein by reference.
(21) Previously filed as an exhibit to the Registrant's Current Report on Form
8K filed with the Securities and Exchange Commission on December 11, 2006
and incorporated herein by reference.
(22) Previously filed as an exhibit to the Registrant's Current Report on Form
8K filed with the Securities and Exchange Commission on February 26, 2007
and incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUTANT FEES AND SERVICES.
Audit and Non-Audit Fees
The following table presents fees for professional audit services
rendered by Odenberg, Ullakko, Muranishi & Co. LLP for the audit of the
Company's annual financial statements for the years ended December 31, 2006 and
December 31, 2005, and fees billed for other services rendered by Odenberg,
Ullakko, Muranishi & Co. LLP during those periods.
(1) Audit fees include fees invoiced for the audit of the Company's annual
financial statements and the quarterly reviews of these statements, as
well as fees for consultation regarding accounting issues and their
impact on or presentation in the Company's financial statements.
(2) This category includes fees billed for assurance and related services
that are reasonably related to the performance of the audits or reviews
of the financial statements and are not reported under "Audit Fees," and
generally consist of fees for due diligence in connection with
acquisitions, accounting consultation and audits of employee benefit
plans.
(3) This category includes fees billed for professional services rendered by
the independent auditors for tax compliance, tax planning and tax
advice. (4) The Company generally does not engage Odenberg, Ullakko,
Muranishi & Co. LLP for "other" services.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Public Accounting Firm
The Audit Committee's policy is to pre-approve all audit and permissible
non-audit services provided by the independent auditors. These services may
include audit services, audit-related services, tax services and other services.
Pre-approval is generally provided for up to one year and any pre-approval is
detailed as to the particular service or category of services and is generally
subject to a specific budget. The independent auditors and management are
required to periodically report to the Audit Committee regarding the extent of
services provided by the independent auditors in accordance with this
pre-approval, and the fees for the services performed to date. The Audit
Committee may also pre-approve particular services on a case-by-case basis.
82
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ZAP
By: /s/ Steven M. Schneider
-----------------------------
Steven M. Schneider
Chief Executive Officer
(principal executive officer)
Date: March 30, 2007
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Name Position Date
---- -------- ----
By: /S/ STEVEN M. SCHNEIDER Director and Chief March 30, 2007
----------------------- Executive Officer
Steven M. Schneider (principal executive officer)
By: /S/ GARY STARR Chairman of the Board March 30, 2007
----------------------- of Directors
Gary Starr
By: /S/ WILLIAM HARTMAN Chief Financial Officer March 30, 2007
----------------------- (principal financial and
William Hartman accounting officer)
By: /S/ RENAY CUDE Director and Secretary March 30, 2007
-----------------------
Renay Cude
By: /S/ Raymond Byrne Director March 30, 2007
-----------------------
Raymond Byrne
By: /S/ Peter Scholl Director March 30, 2007
-----------------------
Peter Scholl
83
EXHIBIT 23.1
CONSENT OF ODENBERG ULLAKKO MURANISHI & COMPANY, LLP
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in this Annual Report on Form 10-KSB of ZAP of our report
dated March 30, 2007, relating to the consolidated financial statements of ZAP
and Subsidiaries, which appear in such Annual Report. We also consent to the
reference to us under the heading "Experts" in such Annual Report.
/S/ ODENBERG, ULLAKKO, MURANISHI & CO. LLP
-------------------------------------------
ODENBERG, ULLAKKO, MURANISHI & CO. LLP
SAN FRANCISCO, CA
March 30, 2007
EXHIBIT 31.1
Certification pursuant to Exchange Act Rules13(a)-14(a) and 15(d)-14(a)
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Steve Schneider, certify that:
1. I have reviewed this annual report on Form 10-KSB of ZAP;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this anual report.
4. The registrant's other certifying officer and I am responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
upervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by thers within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: March 30, 2007 By: /s/ Steve Schneider
-------------------------------------
Steve Schneider
Director and Chief Executive Officer
EXHIBIT 31.2
Certification pursuant to Exchange Act Rules13(a)-14(a) and 15(d)-14(a)
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, William Hartman, certify that:
1. I have reviewed this annual report on Form 10-KSB of ZAP;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report.
4. The registrant's other certifying officer and I am responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: March 30,2007 By: /s/ William Hartman
--------------------------------------
William Hartman
Chief Financial Officer
EXHIBIT 32.1
Certification pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley act of 2002
In connection with the accompanying Form 10-KSB of ZAP for the year ended
December 31, 2006, Steven M. Schneider, Director and Chief Executive Officer of
ZAP, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
(1) such Form 10KSB of ZAP for the year ended December 31, 2006, fully
complies with the requirements of Section 13 (a) or 15 (d) of the
Securities Exchange of 1934; and
(2) the information contained in such Form 10-KSB of ZAP for the year
ended December 31, 2006, fairly presents, in all material respects,
the financial condition and results of operations of ZAP .
Date: March 30, 2007 By: /s/ Steve Schneider
--------------------------------------
Steve Schneider
Director and
Chief Executive Officer
EXHIBIT 32.2
Certification pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley act of 2002
In connection with the accompanying Form 10-KSB of ZAP for the year ended
December 31, 2006, William Hartman, Chief Financial Officer of ZAP, hereby
certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
(1) such Form 10KSB of ZAP for the year ended December 31, 2006, fully
complies with the requirements of Section 13 (a) or 15 (d) of the
Securities Exchange of 1934; and
(2) the information contained in such Form 10-KSB of ZAP for the year
ended December 31, 2006, fairly presents, in all material respects,
the financial condition and results of operations of ZAP .
Date: March 30, 2007 By: /s/ William Hartman
--------------------------------------
William Hartman
Chief Financial Officer
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