Attached files
| file | filename |
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| 8-K/A - FORM 8K DATED JANUARY 21, 2011 - ZAP | form8-ka_17092.htm |
| EX-99.1 - AUDITED FINANCIAL STATEMENTS AND REPORT THEREON LISTED IN ITEM 9.01(A) - ZAP | exh99-1_17092.htm |
EXHIBIT 99.2
ZAP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On January 21, 2011, the Company completed the acquisition of 51% of the equity shares of Jonway (the “Acquisition”) for a total purchase price of $30,580,000 of which $29,030,000 in cash and 4 million shares of stock valued at $1 million have been paid. Currently, Jonway Group and ZAP are discussing the form of payment of the remaining $550,000 owed to Jonway Group and the interpretation of a provision regarding an adjustment due to currency fluctuations in the exchange rate of the U.S. dollar to Chinese Yuan between ZAP’s payment dates. The Company funded a portion of the purchase price of the Transaction through a Senior Secured Convertible Note and Warrant Purchase Agreement (the “Agreement”) with China Electric Vehicle Corporation (“CEVC”), a British Virgin Island company whose sole shareholder is Cathaya Capital, L.P. Pursuant to the Agreement, (i) CEVC purchased from the Company an 8% Senior Secured Convertible Note (the “Note”) in the principal amount of US$19 million and (ii) the Company issued to CEVC a warrant (the “Warrant”) exercisable for two years for the purchase up to 20,000,000 shares of the Company’s common stock at $0.50 per share, subject to adjustments as set forth therein.
As prescribed by Securities and Exchange Commission guidelines, the following unaudited pro forma condensed combined consolidated financial statements are based on the historical financial statements of ZAP and Jonway after giving effect to the Acquisition, and the assumptions, and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The historical financial information has been adjusted in the unaudited pro forma condensed combined financial data to give effect to pro forma events that are, based upon available information and certain assumptions, (i) directly attributable to the Acquisition, (ii) factually supportable and reasonable under the circumstances, and (iii) with respect to the statement of operations, expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined balance sheet as of December 31, 2010 is presented as if the Acquisition had occurred on December 31, 2010. The unaudited pro forma combined statements of operations for the year ended December 31, 2010 is presented as if the Acquisition had occurred on January 1, 2010 with recurring acquisition-related adjustments reflected in the year.
The Acquisition will be accounted for under the acquisition method of accounting in accordance with the Financial Accounting Standard Board (“FASB”), Accounting Standard Codification (“ASC”) or ASC 805-10 topic for “Business Combinations” (formerly referred to as FASB Statement of Financial Accounting Standards No. 141R). Management has estimated the fair value of tangible and intangible assets acquired and liabilities assumed based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the purchase price measurement period. Any change could result in material variances between our future financial results and the amounts presented in these unaudited combined financial statements, including variances in fair values recorded, as well as expenses associated with these items.
The following unaudited pro forma condensed combined financial statements are prepared for illustrative purposes only and are not necessarily indicative of or intended to represent the results that would have been achieved had the Acquisition been consummated as of the dates indicated or that may be achieved in the future. The unaudited pro forma condensed combined financial statements do not reflect any operating efficiencies, associated cost savings or additional costs that we may achieve with respect to the combined companies.
The unaudited pro forma condensed combined financial statements should be read in conjunction with ZAPs’ historical consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2010 and the historical financial statements of Jonway for the year ended December 31, 2010 (Exhibit 99.1 to this Form 8-K/A), and other information pertaining to ZAP and Jonway contained in this Form 8-K/A.
ZAP and Subsidiaries
Pro Forma Condensed Combined Balance Sheet
As of December 31, 2010
(Unaudited)
(Amounts in thousands)
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As reported
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Pro Forma
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Pro Forma
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|||||||||||||||
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ZAP
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Jonway
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Adjustments
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Notes |
Combined
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|||||||||||||
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Assets:
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Current Assets:
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|||||||||||||||||
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Cash and cash equivalents
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$ | 1,503 | $ | 5,509 | $ | 19,000 | (a) | $ | 6,982 | ||||||||
| (19,030 | ) | (b) | |||||||||||||||
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Investment in related party
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1,888 | - | - | 1,888 | |||||||||||||
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Accounts receivable, net
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294 | 2,380 | - | 2,674 | |||||||||||||
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Due from related parties
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- | 1,730 | - | 1,730 | |||||||||||||
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Notes receivables
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- | 2,618 | - | 2,618 | |||||||||||||
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Inventories, net
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1,822 | 12,828 | 236 | (b) | 14,886 | ||||||||||||
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Prepaid expenses and other current assets
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266 | 2,064 | - | 2,330 | |||||||||||||
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Deferred tax assets
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- | 339 | - | 339 | |||||||||||||
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Total current assets
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5,773 | 27,468 | 206 | 33,447 | |||||||||||||
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Property and equipment, net
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173 | 45,561 | 662 | (c) | 46,396 | ||||||||||||
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Investment in non-consolidated joint venture
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808 | - | - | 808 | |||||||||||||
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Distribution fees for Jonway Products and
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|||||||||||||||||
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Better World Products, net
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15,599 | - | - | 15,599 | |||||||||||||
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Deposit on Jonway acquisition
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11,000 | - | (11,000 | ) | (b) | - | |||||||||||
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Goodwill and intangible assets
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- | - | 19,455 | (c)(d) | 19,455 | ||||||||||||
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Deposits and other assets, net
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159 | - | - | 159 | |||||||||||||
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Total assets
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$ | 33,512 | $ | 73,029 | $ | 9,323 | $ | 115,864 | |||||||||
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Liabilities and shareholder’s equity
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Current liabilities:
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Accounts payable
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$ | 328 | $ | 13,729 | $ | - | $ | 14,057 | |||||||||
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Accrued expenses and other current liabilities
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2,197 | 9,507 | - | 11,704 | |||||||||||||
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Current portion of long-term debt
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668 | - | - | 668 | |||||||||||||
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Notes payable
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- | 4,239 | - | 4,239 | |||||||||||||
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Due to related parties
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- | 2,698 | - | 2,698 | |||||||||||||
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Advances from customers
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- | 2,016 | - | 2,016 | |||||||||||||
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Total current liabilities
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3,193 | 32,189 | - | 35,382 | |||||||||||||
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Derivative liability
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5,539 | - | - | 5,539 | |||||||||||||
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Other long term liabilities
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- | 343 | - | 343 | |||||||||||||
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Deferred tax liability
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- | - | 166 | (c) | 166 | ||||||||||||
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Convertible note
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- | - | 8,624 | (a) | 8,624 | ||||||||||||
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Total Long term Liabilities
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5,539 | 343 | 8,790 | 14,672 | |||||||||||||
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Total Liabilities
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8,732 | 32,532 | 8,790 | 50,054 | |||||||||||||
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Shareholders’ equity
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Common stock
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179,775 | - | 2,000 | (b) | 181,775 | ||||||||||||
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Registered capital
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- | 11,480 | (11,480 | ) | (e) | - | |||||||||||
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Additional paid-in capital
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- | 42,164 | (42,164 | ) | (e) | - | |||||||||||
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Warrants
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- | - | 10,376 | (a) | 10,376 | ||||||||||||
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Accumulated deficit
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(154,883 | ) | (13,113 | ) | 13,113 | (e) | (154,883 | ) | |||||||||
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Accumulated other comprehensive income (loss)
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(112 | ) | (34 | ) | 34 | (e) | (112 | ) | |||||||||
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Shareholders’ equity attributable to ZAP
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24,780 | 40,497 | (28,121 | ) | 37,156 | ||||||||||||
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Non-controlling interest
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- | - | 28,654 | (e) | 28,654 | ||||||||||||
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Total shareholders’ equity
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24,780 | 40,497 | 533 | 65,810 | |||||||||||||
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Total liabilities and shareholders’ equity
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$ | 33,512 | $ | 73,029 | $ | 9,323 | $ | 115,864 | |||||||||
2
ZAP and Subsidiaries
Pro Forma Condensed Statement of Operations
For the year ended December 31, 2010
(Unaudited)
(Amounts in thousands, except net loss per share amounts)
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As reported
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Pro Forma
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Pro Forma
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ZAP
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Jonway
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Adjustments
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Notes |
Combined
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Net sales
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$ | 3,816 | $ | 74,142 | $ | - | $ | 77,958 | |||||||||
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Cost of goods sold
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3,387 | 64,792 | 236 | (f) | 68,528 | ||||||||||||
| 113 | (g) | ||||||||||||||||
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Gross profit
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429 | 9,350 | (349 | ) | 9,430 | ||||||||||||
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Operating expenses:
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Sales and marketing
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2,013 | 6,869 | 12 | (g) | 8,894 | ||||||||||||
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General and administrative
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11,458 | 3,872 | (600 | ) | (h) | 14,737 | |||||||||||
| 7 | (g) | ||||||||||||||||
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Research and development
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1,054 | 888 | - | 1,942 | |||||||||||||
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Amortization of intangible assets
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- | - | 3,858 | (i) | 3,858 | ||||||||||||
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Loss from operations
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(14,096 | ) | (2,279 | ) | (3,626 | ) | (20,001 | ) | |||||||||
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Other (expense) income, net:
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Interest expense
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(1,322 | ) | (84 | ) | (1,520 | ) | (j) | (12,504 | ) | ||||||||
| (9,578 | ) | (k) | |||||||||||||||
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Loss on financial instruments
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(4,094 | ) | - | - | (4,094 | ) | |||||||||||
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Gain on extinguishment of debt
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817 | - | - | 817 | |||||||||||||
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Interest and other (expense) income, net
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(319 | ) | 1,813 | - | 1,494 | ||||||||||||
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Loss before income taxes
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(19,014 | ) | (550 | ) | (14,724 | ) | (34,288 | ) | |||||||||
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Provision (benefit) for income taxes
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4 | (105 | ) | - | (101 | ) | |||||||||||
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Loss after income taxes
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(19,018 | ) | (445 | ) | (14,724 | ) | (34,187 | ) | |||||||||
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Loss attributable to non-controlling interest
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- | - | (2,289 | ) | (l) | (2,289 | ) | ||||||||||
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Net income (loss) after non-controlling interest
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$ | (19,018 | ) | $ | (445 | ) | $ | (12,435 | ) | $ | (31,898 | ) | |||||
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Net loss per common share
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Basic and diluted
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$ | (0.16 | ) | $ | - | $ | - | $ | (0.27 | ) | |||||||
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Weighted average shares of common shares outstanding
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|||||||||||||||||
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Basic and diluted
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118,387 | - | - | 118,387 | |||||||||||||
3
ZAP AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Note 1 Basis of Presentation
The unaudited pro forma condensed combined financial information has been compiled from underlying financial statements prepared in accordance with U.S. GAAP and reflects the acquisition of Jonway by ZAP and Subsidiaries (“ZAP” or the “Company”) (the “Acquisition”). The underlying financial information of ZAP has been derived from the audited financial statements of ZAP included in its Annual Report on Form 10-K filed with the SEC on April 8, 2011. The underlying financial information for Jonway has been derived from the audited financial statements of Jonway as of and for the year ended December 31, 2010 contained in this Form 8-K/A.
The unaudited pro forma condensed combined financial information assumes that the Acquisition had been completed on January 1, 2010 for the unaudited pro forma condensed combined statement of operations and on December 31, 2010 for the unaudited pro forma condensed combined balance sheet.
This unaudited pro forma condensed combined financial information is not intended to reflect the financial position and results of operations which would have actually resulted had the Acquisition been effected on the dates indicated. Further, the pro forma results of operations are not necessarily indicative of the results of operations that may be obtained in the future.
Note 2 Summaries of Significant Accounting Policies
The unaudited pro forma condensed combined financial information has been prepared in a manner consistent with the accounting policies adopted by ZAP.
Note 3 Pro Forma Adjustments to the Balance Sheet as of December 31, 2010 resulting from the Acquisition:
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(a)
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Reflects the issuance of the Note in the principal amount of US$19.0 million in exchange for $19 million in cash and the issuance of the Warrant for the purchase of up to 20,000,000 shares of the Company’s common stock at $0.50 per share, subject to adjustments. The fair value of the Warrants and the Note are approximately $10.4 million and $8.6 million, respectively.
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(b)
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Reflects total payment consideration of approximately $32.0 million, which includes the payment of additional consideration in the form of shares to finalize the currency exchange relative to the purchase price.
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(c)
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Reflects the preliminary allocation of the purchase price to the Jonway assets acquired and liabilities assumed (000’s).
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Increase due to step-up in basis of inventory
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$ | 236 | ||
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Increase due to step-up in basis of property, plant and equipment
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662 | |||
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Recognition of goodwill and intangibles
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19,455 | |||
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Recognition of deferred tax liability
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(166 | ) | ||
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Elimination of registered capital of Jonway
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11,480 | |||
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Elimination of additional paid-in capital of Jonway
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42,164 | |||
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Elimination of accumulated deficit of Jonway
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(13,113 | ) | ||
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Elimination of accumulated other comprehensive loss of Jonway
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(34 | ) | ||
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Recognition of non-controlling interest
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(28,654 | ) |
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(d)
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Reflects the establishment of identifiable intangible assets of $19.5 million. For purposes of the pro forma condensed combined statement of operations, it was assumed that the full $19.5 million is related to an intangible asset with an assumed life of 5 years. Formal appraisals are in process for all of Jonway’s intangibles, which could result in a significantly different value being placed on the intangibles.
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4
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(e)
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Reflects an adjustment to eliminate registered capital of $11.5 million, additional paid-in capital of $42.2 million, accumulated deficit of $13.1 million and other comprehensive loss of $34,000 of Jonway and to reflect a non-controlling interest of $28.7 million in the pro forma condensed consolidated balance sheet at December 31, 2010.
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Note 4 Pro Forma Adjustments to the Statement of Operations for the year ended December 31, 2010 resulting from the Acquisition:
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(a)
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Reflects a charge to cost of goods sold for the step up in basis of inventory.
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(b)
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Reflects a charge for depreciation expense relative to the step up in basis of property, plant and equipment.
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(c)
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Reflects estimated acquisition-related costs of approximately $600,000. An adjustment has been made to the unaudited pro forma consolidated statement of operations for these costs as they are non-recurring.
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(d)
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Reflects amortization expense associated with the identifiable intangible assets estimated in Note (c) above.
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(e)
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Reflects an adjustment to record pro forma interest expense of $1.5 million for the year ended December 31, 2010. The interest charge is based on an interest rate of 8% on the $19.0 million Note and assumes such Note was issued as of January 1, 2010 and is outstanding at December 31, 2010.
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(f)
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Reflects an adjustment to record imputed interest on the Note, increasing its balance from $8.6 million as of January 1, 2010 to $18.2 million as of December 31, 2010.
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(g)
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Reflects the loss attributable to non-controlling interest.
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5