================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                              --------------------

                                  FORM 10-KSB/A

                                 Amendment No. 2


                     ANNUAL REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                              --------------------

                   For the fiscal year ended December 31, 2002

                         Commission File Number 0-303000


                                       ZAP
                 ----------------------------------------------
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)


         CALIFORNIA                                             94-3210624
(STATE OR OTHER JURISDICTION OF                              (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                              IDENTIFICATION NO.)

                                501 FOURTH STREET
                              SANTA ROSA, CA 95401
                                 (707) 525-8658
          -------------------------------------------------------------
          (Address, including zip code, and telephone number, including
             area code, of Registrant's principal executive offices)

         SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:
                                      None

         SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
                                  Common Shares


Indicate by check mark whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes [X]   No [_]

Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year: $4,413,000

The aggregate market value of the Company's voting common stock held by
non-affiliates as of March 28, 2003, based on the average Bid and Ask price on
that date was $20,790,890.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date 13,327,493 shares of common stock as
of March 28, 2003.
================================================================================
<PAGE>
                                EXPLANATORY NOTE

This Amendment No.2 to our Annual Report on Form-10KSB/A amends our Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2002 that was filed
on March 31, 2003, in order to add the following information :

     1)   In Part I under Management's Discussion and Analysis under Liquidity
          and Capital Resources the first paragraph was changed to include a
          sentence as to explain why cash increased by $1.8 million.

     2)   In Part II Item #7 -Financial Statements was revised to include a copy
          of ZAP's former auditor's opinion on the Financial Statement for the
          Form 10KSB for the fiscal year ended December 31, 2001.

     3)   In Part I, Item #3 and Part II Note N to the Financial statements a
          sentence was added wherein management has indicated that no material
          loss will result due to the current litigation.

     4)   In Part II Note B to the Financial Statements -Summary of Significant
          Accounting Policies the Revenue Recognition policy was clarified to
          explain why revenues would be recognized when products are shipped
          rather than when title passes to the ultimate customer upon delivery.
          Also in Note B the Goodwill policy was expanded to disclose the
          purchase price allocated to individual assets and liabilities for the
          acquisition of VV and the RAP Group on July1, 2002. In addition, the
          date was disclosed that the Company has chosen for annual goodwill
          impairment testing and also how the 2002 goodwill impairment arose.




                                    SIGNATURE

     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
                                 (Registrant)


                                 By  /s/ Steve Schneider
                                     ------------------------------------------
                                     (Steve Schneider, Chief Executive Officer)

                                 Date  September 15, 2003
                                       ----------------------------------------
<PAGE>
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                                TABLE OF CONTENTS




                                     Part I


Item 1.        Description of Business

Item 2.        Description of Property

Item 3.        Legal Proceedings

Item 4.        Submission of Matters to a Vote of Security Holders




                                     Part II


Item 5.        Market for Common Equity and Related Stockholder Matters

Item 6.        Management's Discussion and Analysis

Item 7.        Financial Statements

Item 8.        Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure




                                    Part III


Item 9.        Directors, Executive Officers, Promoters and Control Persons;
               Compliance with Section 16(a) of the Exchange Act

Item 10.       Executive Compensation

Item 11.       Security Ownership of Certain Beneficial Owners and Management

Item 12.       Certain Relationships and Related Transactions

Item 13.       Exhibits and Reports on Form 8-K
<PAGE>
                                     PART I

ITEM 1.    DESCRIPTION OF BUSINESS

THE INFORMATION ON FORM 10-KSB CONTAINS FORWARD-LOOKING STATEMENTS BASED ON
CURRENT EXPECTATIONS, ESTIMATES AND PROJECTIONS ABOUT THE COMPANY'S INDUSTRY,
MANAGEMENT'S BELIEFS AND CERTAIN ASSUMPTIONS MADE BY MANAGEMENT.

On June 20, 2002, the U.S. Bankruptcy Court confirmed ZAP's Second Amended Plan
of Reorganization (the "Plan"), which allowed the Company to emerge from Chapter
11 proceedings.

A.   BUSINESS DEVELOPMENT

ZAP (the "Company" or "ZAP") was incorporated under the laws of the State of
California, on September 23, 1994, as "ZAP Power Systems". The name of the
Company was changed to "ZAPWORLD.COM" on May 16, 1999 in order to increase our
visibility in the world of electronic commerce. We subsequently changed our name
to ZAP on June 18, 2001 in order to reflect our growth and entry into larger,
more traditional markets. The Company has grown from a single product line to a
full line of electric vehicle products. Most of the Company's domestic
manufacturing has been transferred to lower-cost overseas contract
manufacturers.

The Company's business strategy has been to develop, acquire and commercialize
advanced transportation including electric vehicles and electric vehicle power
systems, which have fundamental practical and environmental advantages over
available internal combustion modes of transportation that can be produced
commercially on an economically competitive basis. In 2002, the Company
continued to enhance and broaden its electric vehicle product line. The Company
intends to further expand its technological expertise through an aggressive plan
of acquisitions of companies with exciting new products in the electrical
vehicle industry and strategic alliances with certain manufacturers,
distributors and sales organizations.


B.   BUSINESS OF ISSUER

The Company's business goal is to become the largest and most complete
distribution portal for advanced transportation and electric vehicles. In 2002,
the Company continued to accelerate its market positioning in the electric
vehicle industry. The Company is now focused on creating a distribution channel
for its vehicles, with special emphasis on entrepreneurs in the power-sport and
independent auto industry.

PRODUCT SUMMARY- ZAP markets many forms of advanced transportation, including
electric automobiles, motorcycles, bicycles, scooters, personal watercraft,
hovercraft, neighborhood electric vehicles, commercial vehicles and more.
Additionally, the Company produces the electric scooter, known as the ZAPPY(R),
which is manufactured by the Company, using parts manufactured by various
subcontractors.

ELECTRIC VEHICLE RENTAL PROGRAM- ZAP established ZAP Rental Outlet in 2002 to
rent neighborhood electric vehicles throughout California. ZAP plans to solicit
the participation of rental agencies and other locations for the program.
Neighborhood electric cars are a new category of 25 MPH automobiles designed for
short trips in urban areas, planned communities, commercial zones or tourist
districts. The smaller, low-speed electric cars are a new alternative in places
concerned with air and noise pollution, high fuel prices, traffic congestion or
parking shortages.

ACQUISITION OF NEW BUSINESSES-The Company completed its acquisition of Voltage
Vehicles and RAP Group on July 1, 2002. Voltage Vehicles is a Sonoma
County-based Nevada Corporation with exclusive distribution contracts for
advanced transportation in the independent auto dealer network, including rights
to one of the only full-performance electric cars certified under federal safety
standards. The RAP Group owns an auto dealership focused on the independent
automotive and advanced technology vehicle markets. A Voltage Vehicle authorized
dealer, RAP showcases an array of advanced transportation at its dealership in
Fulton, California. While Voltage Vehicles, which began, business in February
2001, is a relatively new enterprise. As noted in ZAP's approved Plan of
Reorganization, the mergers are expected to enhance ZAP's financial base by
providing access to the two companies' services and relationships. The move is
<PAGE>
expected to advance ZAP's goal of becoming a leading full-service brand in the
electric and alternate fuel transportation industry. Since the acquisition ZAP
plans to step-up its role in building a national distribution network to support
its contract manufacturing for its growing line of products. The merger will
also enable ZAP to immediately cut overhead and other costs, and increase
revenues. These Companies became wholly owned subsidiaries of ZAP through the
purchase from the equity Shareholders of Voltage Vehicles and RAP Group, Inc.
all of the shares of these businesses in exchange for 4,500,000 (post-split)
500,000 to Voltage Vehicles and 4,000,000 to RAP Group, Inc. The equity
shareholders' will also receive one Warrant in Series B, C, D and K to purchase
common stock in the Reorganized ZAP for each common share issued to Voltage
Vehicles and RAP Group, Inc. In connection with the acquisition of Rap and VV
the company recorded goodwill or the excess of the purchase price over the net
assets acquired of approximately $800,000. The Goodwill recorded is primarily
for RAP and Voltage Vehicles and is based upon an independent appraisal of the
fair value of the tangible and intangible assets acquired in order to record and
allocate the purchase price in accordance with Financial Accounting Standards
Board 141, " Business Combinations".

ZAP and certain of its Directors have been named as a co-defendant in a lawsuit
with respect to the acquisitions of both the RAP Group, Inc. and Voltage
Vehicles. See further description in Part I - Item 3 - Legal Proceedings.

ENVIRONMENTAL INITIATIVES AND LEGISLATION

Federal legislation was enacted to promote the use of alternative fuel vehicles,
including electric vehicles. Qualified electric vehicles are entitled to a 10%
federal tax credit. Several states have also adopted legislation that sets
mandates for the introduction of electric vehicles. However, there is strong
political opposition to this mandate. Foreign countries have also initiated
either mandates or incentives for electric vehicles or are planning such
programs in the future. As ZAP commercializes new transportation technology, it
has been required to expend Company resources in educating legislators of the
benefits of these vehicles. In November 2002, President Bush signed into law
legislation, which transfers regulation of electric bikes from the National
Highway Traffic Safety Administration to the Consumer Product Safety Commission.
This effectively changes the regulating standards from motor vehicles to
consumer standards such as bicycles.

Although many government agencies are concerned about rising global air
pollution, it is expected that the Company will need to continue to expend
considerable resources in the future in the governmental process, and there
cannot be assurance that the current favorable governmental climate for these
zero emission vehicles will remain in the future.

RESEARCH AND PRODUCT DEVELOPMENT

The nature of the Company's business has required and will continue to require
expenditures for research and product development. The development and
introduction of new products are essential to establishing and maintaining our
competitive advantage. The Company has primarily become a marketer and
distributor of products and is only involved in the manufacturing of the ZAPPY
Scooters and Powerbikes.

The Company's existing product line, which includes new and planned
introductions, is as follows:

ZAP LIGHT UTILITY VEHICLE (LUV) -This vehicle is a new kind of automobile called
a Neighborhood Electric Vehicle (NEV). A new category of automobile was created
for the many car trips people take for inter-city transportation, planned
communities, commercial zones and tourist areas. The LUV sports a European
design that comes from Italy. The vehicle has speeds up to 25 mph, has room for
two and plugs into any normal household electric outlet. The LUV was selected as
a finalist for Tech-TV's Best of the Consumer Electronic Show held in Las Vegas
in January 2003.

NEW LITHIUM-ION BATTERY- The Company announced the introduction of a new battery
technology for electric cars, which has a lithium-ion chemistry with the
potential to greatly increase the performance of today's conventional electric
vehicle batteries. The energy density of the lithium -ion battery has a 4-1
ratio compared to lead-acid batteries, meaning it could extend the range of
today's electric car from 60 to 240 miles per charge. At present the Company is
conducting further testing on the battery.
<PAGE>
ZAPPY(R)- This electric scooter is a stand-up, portable, lightweight scooter
featuring a 12-volt battery with a built-in charger and a collapsible frame. Its
patented design includes a unique folding mechanism and proprietary circuitry,
which increases the efficiency and range of the vehicle. In the fourth quarter
last year, we introduced a new 2002 ZAPPY(R) Scooter which offered significant
upgrades over the previous design from its performance and construction to its
look.

ZAPPY TURBO(TM) - The new ZAPPY TURBO is an improved version of the Company's
ZAPPY folding electric scooter. The ZAPPY TURBO's new electric propulsion system
offers improved acceleration and hill climbing, and has a "hi-performance" mode
that allows the scooter to reach speeds of 19.5 MPH. We started shipping this
item in March of 2002.

SEA-DOO(R) SEASCOOTER(TM) -The Sea-Doo SeaScooter (TM) is a revolutionary
affordable underwater propulsion device designed to pull swimmers and snorkelers
through the water. It can run at speeds up to 2 mph at a depth of 60 feet and
has built in buoyancy regulation for maximum comfort.

ZAPLIGHT-This product is a perpetual flashlight that has no need for batteries
or bulbs. With just 30 seconds of shaking the Faraday flashlight can generate
enough power for up to five minutes of light.

ZAP VIENTO MOTORBIKE-The Viento is a two seater electric moped-class motorbike.
It has a top speed of up to 30 MPH and a range up to 50 miles per charge. The
Viento also has new technology like belt-driven transmission and a GPS
-controlled navigation system.

POWERBIKE(R) - The Powerbike is primarily a mountain bike with a new and
improved electric motor attached. It was designed to appeal to the low cost mass
merchant.

OTHER ELECTRIC VEHICLES- Commercial road and highway. Under various distribution
agreements, the Company has the rights to a wide spectrum of personal and
industrial electric vehicles.

MICROPROCESSOR DRIVE CONTROLLERS- The Company is working to develop a series of
low cost proprietary motor controller microprocessors for all of its electric
vehicles, which is believed to increase efficiency and lower costs of operation.

Company funded research and development expense charged to operations in fiscal
years 2002 and 2001 was $30,000 and $500,000 respectively. The Company believes
that it is moving into the commercialized phase of its electric vehicles.


SOURCES AND AVAILABILITY OF RAW MATERIALS

Materials, parts, supplies and services used in the Company's business are
generally available from a variety of sources. However, interruptions in
production or delivery of these goods could have an adverse impact on the
Company's manufacturing operations.

LICENSES, PATENTS AND TRADEMARKS

The Company has a number of patents and trademarks covering its electric
vehicles. The Company was issued its first United States Patent on February 13,
1996 on its electric motor power system for bicycles, tricycles, and scooters
(Patent #5,491,390). On September 30, 1997, the Company was issued its second
United States Patent on its electric motor system (Patent #5,671,821). On
December 15, 1998, the Company was issued a third United States Patent for its
ZAPPY scooter (Patent #5,848,660). On November 14, 2000, The Company was issued
a design patent on its ZAPPY(R) scooter (Des. No. 433,718).

ZAP also holds several trademarks: the trademark ZAP(R)was assigned to the
Company on September 23, 1994, (Reg. No. 1,794,866); the ELECTRICRUIZER(R)mark
was registered on April 2, 1999 (Reg. No. 2,248,753); the ZAPPY(R)mark was
registered on March 21, 2000 (Reg No. 2,330,894); the POWERBIKE(R)mark was
<PAGE>
registered on June 1, 1999 trademark ZAPWORLD.COM(R)was registered on July 25,
2000 (Reg.No. 2,371,240); the trademark ZAP Electric Vehicle Outlet(R)was
registered on March 28, 2000 ( Reg. No. 2,335,090) and the mark Zero Air
Pollution(R)was registered on February 28, 2000 (Reg No. 2,320,346).

The Company also acquired two patents as the result of the emPower acquisition
in December 1999. One patent was for the powered roller skates (Patent
#6,059,062) and another for the powered skateboard (Patent #6,050,357). The
Company acquired all of the assets of Electric Vehicles Systems Inc, including
the PowerSki(R), trademark (registration #2,224,640) and two U.S. Patents,
(Patent #5,735,361) and (Patent #5,913,373). The Company also has a patent for
the Powered Scooter (Patent #115,434). With the purchase of Aquatic Propulsion
Technology Inc., on July 1, 2000, the Company acquired the following five
patents: submersible marine vessel issued June 13, 1995 (Patent #5,423,278),
personal submersible marine vehicle issued June 3, 1997 (Patent # 5,634,423),
submersible marine vessel issued on April 19, 1994 (Patent # 5,303,666) scuba
scooter issued on May 31, 1994 (Patent Des 347,418), and scuba scooter issued
June 6, 1995 (Patent Des 359,022) and submersible marine vehicle issued February
19, 2002 (Patent # US D453,726 S). The Company also has several copyright
registrations for various advertisements that it uses to promote its products.

BACKLOG

The Company has a $2.1 million backlog of orders and purchase contracts in hand
for various products and electric vehicles as of March 28, 2003. The Company
expects to fill its entire backlog within the current fiscal year.

COMPETITIVE CONDITIONS

The competition to develop and market electric vehicles has increased during the
last year and is expected to continue to increase. The electric bicycle industry
has four (4) major manufacturers and a large group of small companies. The major
manufacturers are Honda, Suzuki, Sanyo and Yamaha. They mainly sell products to
Japan and Europe. The other group of manufacturers is much smaller in size and
sales volume. These manufacturers have products that sell into the U.S.,
European, and Asian markets.

There are also other manufacturers, both large and small, of personal electric
vehicles. The principal competitive advantages of the Company are its ownership
of fundamental technology, its trade name and its potential ability to be a low
cost manufacturer through domestic and international connections, and its
distribution network. In order to reduce costs the Company's production
activities have been transferred to lower cost off shore outside contract
manufacturers. This move also enables the Company to concentrate on its
marketing and sales efforts. The Company also currently benefits from its high
name recognition in the electric vehicle industry coupled with a rapidly
developing business on its Internet website ZAPWORLD.COM. The Company offers one
of the broadest lines of personal electric vehicles currently available.
According to published reports, the Company believes it currently holds a
leading electric vehicle market position in the United States.


EMPLOYEES

As of March 28, 2003, the Company had a total of 37 employees. This is an
increase of 14 employees from 2002, which is primarily due to the acquisition of
RAP Group and Voltage Vehicles on July 1, 2002. The Company's performance is
substantially dependent upon the services of its executive officers and other
key employees, as well as on its ability to recruit, retain and motivate other
officers and key employees. Competition for qualified personnel is intense and
there are a limited number of people with knowledge of and experience in the
electric vehicle industry. The loss of services of any of its officers or key
employees, or its inability to hire and retain a sufficient number of qualified
employees, will harm the Company's business.
<PAGE>
ITEM 2.    DESCRIPTION OF PROPERTY.

The chart below contains a summary of our principal facilities.

Location                       Use                                 Square Feet
--------                       ---                                 -----------
117 Morris Street              Office, Repairs, and R&D             8,200
6784 Sebastopol Avenue         Distribution Center                  9,800
3362 Fulton Road               Office, Auto Lot                    10,000
501 Fourth Street              Retail Store                         4,000

The first two buildings are located in Sebastopol, California, while the third
and fourth are in Santa Rosa, California. The Company leases all of these
facilities. All of the leases are term leases and none include options to
purchase. The Company's property consists primarily of repair and prototyping
equipment and office computer systems. It is management's opinion that the
Company's insurance policies cover all insurance requirements of the landlords.
The Company owns the basic tools, machinery and equipment necessary for the
conduct of its repairs, research and development, and vehicle prototyping
activities. During 2001, the Company closed five rental locations as a cost
savings measure. Management believes that the above facilities are generally
adequate for present operations. On March 25, 2003, the Company purchased a
three-story office building in downtown Santa Rosa, California at 300 B Street
with approximately 20,000 square feet of space. The new facility will be the
corporate headquarters of ZAP and has space for a retail Company store. The
Company is planning to move from its Morris Street location in April 2003. See
subsequent event Note: Q to the financial statements.


ITEM 3.    LEGAL PROCEEDINGS

From time to time, the Company is subject to legal proceedings and claims in the
ordinary course of business, including employment-related and trade related
claims.

On September 9, 2002, ZAP and certain of its Directors were named as a
co-defendant in a lawsuit filed in the Superior Court of the State of California
by shareholders of Advanced Wireless Systems, Inc. The suit alleges that ZAP
improperly acquired both the RAP Group, Inc and Voltage Vehicles. Plaintiffs
seek to rescind both acquisitions and have alleged monetary damages in an amount
not specified in their complaint. The plaintiff has requested that the lawsuit
be dismissed. A motion will be filed in April 2003 to dismiss the action.
Management believes that the ultimate resolution of this claim will not have a
material adverse effect on the Company's financial position or results of
operations.

The Company recently became aware that the California Department of Motor
Vehicles (DMV)-Investigations Division is conducting an inquiry into the
activities of certain employees of the RAP Group. If any adverse findings did
result, the Auto Dealer's License for the RAP Group could be jeopardized since
RAP is currently on probation by the California Department of Motor Vehicles for
a period of two years ending June 12, 2004. The probationary action was
primarily due to the RAP Group's untimely transfers of sale vehicles and lack of
compliance with Motor Vehicle Pollution Control guidelines on certain automobile
sales. As part of ZAP's original business plan, management is considering
converting, depending upon the sales volume, and the dealership into a wholesale
distributor for its electric cars.


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of the year-ended December 31, 2002.
<PAGE>
                                     PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

On July 1, 2002, ZAP's stock began trading on the Over-the-Counter (OTC)
Bulletin Board under the new stock symbol of ZAPZ. According to the OTC Bulletin
Board, the symbol change is to indicate that ZAP is no longer in Chapter 11
Reorganization, and that the stock has undergone a reverse split effective July
1, 2002. ZAP's common stock of 6,693,643 shares was converted to 2,231,214
shares of common stock in the Reorganized ZAP, which was then reversed split on
a 2:1 basis. The final result of the conversion and the reverse split equates to
6:1 or in other words for every six shares a common stockholder held on June 20,
2002 (ZAP's Plan of Reorganization Date) the individual received one share of
common stock in the Reorganized ZAP. The resulting shares of common stock after
the split were 1,115,607. All shares and per share data have been restated to
reflect the stock splits. The Common Shareholders' also received one Warrant in
Series B, C and D to purchase common stock in the Reorganized ZAP for each
common share issued to the claimant

As of March 28, 2003, there were 13,327,493 shares of Common Stock outstanding
held by 2,003 shareholders (not including those held in street names). The
following table sets forth the high and low prices of the Common Stock as
reported on the NASDQ Small Cap Stock exchange for 2001 through May 14, 2002 and
from OTC Bulletin Board through March 28,2003.

                        2003                 2002                 2001
                    High     Low         High     Low         High     Low
                  (through
                 3/28/2003)
                   -----    -----       -----    -----       -----    -----
First Quarter      $2.59    $1.25       $0.33    $0.09(1)    $3.06    $1.12
Second Quarter      --       --          0.21     0.01        2.55     0.90
Third Quarter       --       --          1.98     0.30(2)     1.75     0.51
Fourth Quarter      --       --          1.80     1.09        0.43     0.17


(1)  During this quarter, the stock was briefly halted from trading on NASDAQ as
     the result of ZAP's filing for Chapter 11 Bankruptcy protection

(2)  Reflects a 6:1 reverse stock split on July 1, 2002.


Dividend Policy

The Company has not declared or paid any cash dividends on its Common Stock and
presently intends to retain its future earnings, if any, to fund the development
of its business and, therefore does not anticipate paying any cash dividends in
the future

Recent Sales of Unregistered Securities.

Since inception in 1994, the Company has issued or sold unregistered securities
in the amounts, at the times, for the consideration and pursuant to the
exemptions from registration provided by the Securities Act of 1933, as amended
(the "Act"), as follows:

On June 28, 2002, pursuant to an exemption under Section 4(2) of the Act, the
company issued 110,000 shares of common stock to outside consultants. On July 1,
2002, pursuant to an exemption under Section 4(2) of the Act and in connection
with the acquisition of the RAP Group, Inc and Voltage Vehicles the Company
issued 4 million and 500,000 shares of common stock, respectively to the
shareholders of the RAP Group, Inc and Voltage Vehicles.

On July 5, 2002, pursuant to an exemption under Section 4(2) of the Act, the
company granted options to purchase 1.5 million shares of common stock to
employees. At the same time, the Company granted options to purchase 200,000
shares of common stock to outside consultants.
<PAGE>
On August 15, 2002, pursuant to ZAP's Amended and Confirmed Plan of
Reorganization of June 20, 2002, the Company issued 630,000shares of common
stock to the preferred shareholders for conversion of their shares into common
stock.

On August 16, 2002, pursuant to ZAP's Amended and Confirmed Plan of
Reorganization of June 20, 2002 pursuant to an exemption under Section 4(2) of
the Act, the Company issued 74,286 shares of common stock to an individual for
the purchase of equipment.

On August 30, 2002, pursuant to ZAP's Amended and Confirmed Plan of
Reorganization of June 20, 2002
The Company issued 262,780 shares of common stock to unsecured creditors that
elected to receive equity rather than cash.

On September 17, 2002, pursuant to an exemption under Section 4(2) of the Act,
the Company issued 1,225,719 shares to Daka Development Ltd for the conversion
of their note payable to equity. On the same date 37,500 options to purchase
common stock were granted to employees.

On September 18, 2002, pursuant to ZAP's Amended and Confirmed Plan of
Reorganization of June 20, 2002 the Company issued 50,000 shares of common stock
for legal services during ZAP's reorganization. Also on the same date 4,037
shares of common stock were issued to unsecured creditors that elected to
receive equity under The Amended and Confirmed Plan of Reorganization. In
addition, pursuant to an exemption under Section 4(2) of the Act, the company
issued 71,000 shares to individuals who constructed leasehold improvements at
the RAP Group, Inc.

On October 14, 2002, pursuant to an exemption under Section 4(2) of the Act, the
Company issued 15,750 shares of common stock in lieu of rent payments to one of
ZAP's landlords.

On October 26 and 31, and November 5, 2002, pursuant to ZAP's Amended and
Confirmed Plan of Reorganization of June 20, 2002, the Company issued 32,529
shares of common stock for conversion of warrants into stock.

On December 31, 2002, pursuant to an exemption under Section 4(2) of the Act,
the Company issued 2,841,176 of common stock for collateral on a working capital
loan. Since the lender did not perform on funding, these shares will be returned
to the Company in early April 2003.


ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS.

OVERVIEW

FORWARD-LOOKING STATEMENTS IN THIS RELEASE ARE MADE PURSUANT TO THE "SAFE
HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT
LIMITATION, CONTINUED ACCEPTANCE OF THE COMPANY'S PRODUCTS, INCREASED LEVELS OF
COMPETITION FOR THE PRODUCTS AND TECHNOLOGICAL CHANGES, THE COMPANY'S DEPENDENCE
UPON THIRD PARTY SUPPLIERS, INTELLECTUAL PROPERTY RIGHTS, AND OTHER RISKS
DETAILED FROM TIME TO TIME IN THE COMPANY'S PERIODIC REPORTS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.

Our company, ZAP, was incorporated in California in 1994 under the name "ZAP
Power Systems." We design, assemble, manufacture and distribute electric
vehicles, including electric scooters, electric bicycle power kits, electric
bicycles, electric motorcycles, electric wheelchairs, and electric water
scooters, and other personal electric and non-electric transportation vehicles.

The Company sells its electric vehicles to retail customers, international
distributors, law enforcement agencies, electric utility companies, bicycle
dealerships, motorsport dealers, its dealers and mail order catalogs. Products
are also available for purchase on the Company's Internet site, which is
ZAPWORLD.COM. The Company sells to mail order catalogs and selected customers on
various credit terms. Many of the smaller dealerships are sold on a cash-on
-delivery basis. The Internet and retail sales are primarily paid for with a
credit card or personal check before shipment of the product.
<PAGE>
The Company's overall goal is to dominate the personal electric vehicle industry
market. The Company's primary growth strategy is to increase net sales by
augmenting its marketing and sales force, by increasing distribution channels
through mass retail organizations and wholesale distributors both domestically
and overseas, by setting up retail outlet stores that specialize in electric
vehicle transportation as well as franchise stores to assist in the retail
arena. Through the acquisition of RAP Group, Inc., the Company has a proof of
concept and showcase successful retailer of electric vehicles. Strategic
alliances with leaders in the industry are also of equal importance, and these
alliances will be broadened throughout the coming year. The Company intends to
function as a sales and marketing organization with any manufacturing of its
products done by overeas contract manufacturers. Product improvements, new
product introductions, and the expansion of the ZAP electric outlet network will
continue to enlarge ZAP's presence in the electric vehicle industry. Furthermore
through the acquisitions and mergers with RAP Group, Inc. and Voltage Vehicles,
the Company will be able to drastically cut overhead by combining resources, and
management.

SUMMARY COMMENTS REGARDING RESULTS FOR 2002. Our overall performance for the
year ended December 31, 2002 was adversely affected by the following key
factors: the Company experienced a drastic decline in orders of its products ZAP
attributes this to the current world-wide economic situation. The decrease in
sales is primarily attributable to less sales and greater sales returns from
customers due to the poor worldwide economy. The Company's filing of Chapter 11
Reorganization in March also adversely affected sales volume.

SUMMARY OF KEY ACCOMPLISHMENTS DURING 2002

The Company completed the following transactions, acquisitions and strategic
alliances during the period of this report:

A subsidiary of ZAP, Voltage Vehicles, signed an exclusive agreement with a
European-based group of companies involved in the design and manufacturing of
electric automobiles. The group started production on several different types of
light electric utility vehicles for urban transportation and commercial use,
including a 25 MPH neighborhood Electric car that is now available. The ZAP
LIGHT UTILITY VEHICLE (LUV)(TM) is a new kind of automobile called a
Neighborhood Electric Vehicle (NEV). This new category of automobile was created
for the many car trips people take for inter-city transportation, planned
communities, commercial zones and tourist areas. The LUV sports a European
design that comes from Italy. The vehicle has speeds up to 25 mph, has room for
two and plugs into any normal household electric outlet. The LUV was selected as
a finalist for Tech-TV's best of the Consumer Electronic Show held in Las Vegas
in January 2003. ZAP is working to launch a ZAP "L.U.V.-Line" of electric
automobiles, which includes freeway-capable vehicles as well as vans, pickups
and tractors.

The Company introduced a new Lithium-Ion Battery that could greatly increase the
range of electric cars. The battery could extend the range of today's electric
car from 60 miles to 240 miles per charge. ZAP sees these batteries as the
potential battery solution for the industry. While many experts point to
hydrogen cells as a clean way to power automobiles that technology requires an
infrastructure while batteries can be recharged by plugging into any normal
electrical outlet.

The Company signed an exclusive distribution agreement with The Electric Cycle
Company for the ZAP Viento motorbike to sell to auto dealers The Viento is a two
seater electric moped-class motorbike. It has a top speed of up to 30 MPH and a
range up to 50 miles per charge. The Viento also has new technology like
belt-driven transmission and a GPS -controlled navigation system.

On March 25, 2003, the Company purchased a three-story office building in
downtown Santa Rosa, California at 300 B Street with approximately 20,000 square
feet of space. The new facility will be the corporate headquarters of ZAP and
has space for a retail Company store. The Company is planning to move from its
Morris Street location in April 2003. See subsequent event Note: Q to the
financial statements.

The Company entered into an agreement in March 2003 with an investment banker to
provide additional working capital funds. An initial $300,000 is scheduled to be
funded to the Company in early April 2003.
<PAGE>
The Company has also reached an agreement in principle with another investment
banker in late March 2003 to provide ZAP with $1 million in funds to purchase
inventory plus $250,000 for working capital.

On July 1, 2002, ZAP completed its acquisition of Voltage Vehicles and RAP
Group, Inc. pursuant to ZAP's Second Amended Plan of Reorganization, see
previous discussion -Acquisition of New Businesses.

On June 20, 2002, The United States Bankruptcy Court entered an order
("Confirmation Order") approving the Debtor's Second Amended Plan of
Reorganization (the "Plan"). Which cleared the way for ZAP to emerge immediately
from bankruptcy The Company had previously filed a voluntary petition for relief
under Chapter 11 (the "Chapter 11 Filing") of the United States Bankruptcy Code
(the "Code") in the United States Bankruptcy Court for the Northern District of
California (the "Bankruptcy Court") on March 1, 2002.

In 2002, ZAP signed an exclusive agreement with Daka Development Ltd, for the
design, manufacturing and marketing of a full line of advanced transportation
and alternative energy products. On June 17, 2002, Daka granted ZAP a $500,000
loan for inventory financing of Daka's items. On September 17, 2002, Daka
exercised its option to convert the entire amount of the note to ZAP common
stock. Daka is supplying the Company with SEA-DOO(R) SEASCOOTER(TM) and the
Faraday Star Flashlight. In March of 2003, Daka has provided the Company with
approximately $650,000 of additional inventory financing for future shipments.
The terms of the agreement are 50% cash and the other 50% in ZAP's common stock.

In March, ZAP announced the first shipments of a new electric scooter called the
ZAPPY(R) Turbo. The new ZAPPY(R) Turbo includes several upgrades, including a
"turbo" performance mode that powers it to speeds of up to 18 MPH. The new
scooter is similar to the classic design but has incorporated innovations in
power-control electronics to respond to the increasing demand for
hi-performance, portable transportation.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

Note: The results for 2002 include two quarter's activity for the newly acquired
companies of RAP Group Inc., and Voltage Vehicles as of July 1, 2002. Since
Voltage Vehicles is still in the development stage the majority of the results
of the combined ZAP are affected by RAP.

NET SALES for the year ended December 31, 2002 were $4.4 million compared with
$5 million in the prior year. RAP's net sales for the period accounted for $2.6
million. The net sales for ZAP were $1.8 million versus $4.9 million. The
decrease in sales is primarily attributable to less sales and greater sales
returns from customers due to the poor worldwide economy. The Company's filing
of bankruptcy in March also adversely affected sales volume.

GROSS PROFIT dollars increased from an $852,000 loss to a profit of $254,000 for
the year-ended 2002. The RAP Group accounted for $125,000. ZAP increased from an
$852,000 loss to profit of $129,000. The primary reasons for the increase were
product mix and fewer sales to liquidators at a low profit.

SELLING expenses in 2002 were $541,000 as compared to $1,098,000 in 2001. RAP's
expenses were $192,000. ZAP was $349,000 versus $1,098,000. This was a decrease
of $749,000 or 68% from 2001 to 2002. As a percentage of sales, selling expenses
decreased from 22% of sales to 12% of sales. The decrease was primarily due to
fewer salaries and commissions for sales personnel, and less marketing and
promotion expenses.

GENERAL AND ADMINISTRATIVE expenses for 2002 were $2.3 million as compared to
$4.1 million in 2001. RAP's portion of the expenses was $274,000. For ZAP the
expenses decreased from $4.1 million to $2 million. This is a decrease of $2.1
million or 51% from 2001. Expenses were less in all categories of spending due
to fewer employees and facilities. The Company's expenses were significantly
less in legal and consulting costs.

RESEARCH AND DEVELOPMENT expenses decreased $470,000 to $30,000 or 94% for 2002.
All of the expenses were for ZAP. As a percentage of net sales, research and
development decreased to 1% of sales in 2002 as compared to 10% of sales in
2001. Since ZAP has transitioned from manufacturing to a sales marketing
organization, R&D expenses have decreased.
<PAGE>
IMPAIRMENT OF INTANGIBLES was $50,000 in 2002 versus $2.6 million in 2001. The
decrease was due to less Valuation issues in the current year. In 2001, the
intangibles resulting from many of the prior years acquisitions were
significantly reduced.

INTEREST INCOME (EXPENSE) Interest expense net, decreased $1,000 in 2002 as
compared to 2001 due to less investment income which offsets interest expense.

OTHER INCOME (EXPENSE) increased from an expense of $44,000 to an income of
$39,000 for the year-ended 2002 as compared to 2001. The increase was due to
receipt of funds from two government grants from projects completed in the year.

REORGANIZATION expenses in 2002 represent primarily the professional fees for
ZAP's 2002 reorganization.


RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

Net sales for the year ended December 31, 2001 were $5 million compared to $12.4
million in the prior year, a decrease of $7.4 million or 60%. Due to multiple
intellectual property rights violations by off- shore manufacturers, sales
dropped due to low cost "knock offs". The poor worldwide economy has negatively
affected our sales volume for both domestic and foreign distributors. Sales
prices were also pressured downward by liquidation sales (at 50% to 75% of their
costs) to one of the Company's largest competitors who have discontinued
business. Internet sales were $526,000 and $602,000 in 2001 and 2000
respectively. This represented a 13 % decrease for 2001. A total of $957,000 in
products was sold to one customer during the year ended December 31, 2001,
representing 18% of sales. In the year ended December 31, 2000, $1.1 million, or
9 % of net sales, was sold to one customer. Due to their financial difficulties,
this customer is no longer buying products from us.

GROSS PROFIT. Gross profit decreased as a percentage of net sales from 37% in
2000 to a gross loss of 17 % in 2001. The decline in the gross margin percentage
resulted from lower sales prices, which were reduced to move product. Also the
inventory carrying value was adjusted to reflect lower realization values for
certain items.

SELLING. Selling expenses in 2001 were $1.1 million. This was a decrease of
$1.1million or 50% from $2.2 million in 2000. As a percentage of sales, selling
expenses increased from 18% to 22%. Overall selling expenses decreased due to
less salaries, marketing and promotion costs.

GENERAL AND ADMINISTRATIVE EXPENSES for 2001 were $4.1 million as compared to
$3.8 million in 2000, which represents an increase of $300,000 over the prior
year. Due to staffing reductions and the consolidation of Company facilities
expenses such as salaries and benefits, rents and general office expenses were
less. However, expenses were greater in some of the following areas: higher
amortization of patents and goodwill, increase in bad debt expense, greater
professional fees due to financial fund raising costs and higher general
insurance liability expenses.

RESEARCH AND DEVELOPMENT was $500,000 in 2001 as compared to $699,000 in 2000,
which represents a $199,000 or 28% decrease. As a percentage of net sales,
Research and Development increased to 10% of sales compared to 6% for year-ended
2000. Expense cost decreases were the result of less spending on research and
development. Also, due to cash conservation measures some new product
development projects have been rescheduled.

IMPAIRMENT OF INTANGIBLES The major factor contributing to the expense of $2.6
million was the write-off of certain goodwill, trademarks and patents. In
accordance with generally accepted accounting principles, that requires a review
all of intangible items like goodwill and patents for impairment, the Company
conducted an extensive valuation at year-end 2001. Thus, the current carrying
value of certain items were adjusted to reflect a lower recoverability of future
cash generation from those patents and goodwill.
<PAGE>
OTHER INCOME (EXPENSE) decreased $313,000 from income of $269,000 in 2000 to an
expense of $44,000 in 2001. This decrease can be attributed to less interest
income on investments due to lower outstanding bank balances. Also the Company
received a $67,000 grant during 2000 from a state agency for a Neighborhood
Electric Vehicle demonstration in 2000.


LIQUIDITY AND CAPITAL RESOURCES

The Company used cash from operations of $ 307,000 and $2.4 million during the
years ended December 31, 2002 and 2001 respectively. Cash used in operations in
2002 was the result of the net loss incurred for the year of $2.8 million,
offset by net non-cash income of $492,000 and the net change in operating assets
and liabilities resulting in a cash increase of $1.8 million. The increase in
cash was due to a decrease in accounts receivable of $903,000 and a decrease in
inventory of $875,000. Cash used in operations in 2001 was the result of the net
loss incurred for the year of $9.2 million, which was offset by net non-cash
expenses of $3.4 million, and the net change in assets and liabilities resulting
in a further use of cash of $3.4 million.

Investing activities used cash of $204,000 during the year ended 2002. Investing
activities used cash for the purchase of fixed assets. In the year ended
December 31, 2001, investing activities used cash of $242,000, which was also
for the purchase of fixed assets.

Financing activities provided cash of $19,000 for the year ended December 31,
2002 and used cash of $55,000 during the year ended December 31, 2001. For 2001,
cash was provided by the extinguishments of notes due from shareholders.

In 2001, the Company accrued a stock dividend for the Preferred Stock at the
rate of 6% per annum. The dividend was payable in common stock or cash at the
discretion of the Company on June 30 or when the preferred stock is converted
into common shares. However as a result of ZAP's Second Amended Plan of
Reorganization of June 20, 2002,all of the preferred stock with accrued
dividends was converted into common stock.

At December 31, 2002 the Company had cash of $ 350,000 as compared to $842,000
at December 31, 2001. The Company's working capital (deficit) at December 31,
2002 was $1,554,000 compared to ($134,000) at December 31, 2001. The decrease in
cash and working capital is primarily due to funding of ongoing corporate
operations.

In ZAP's Amended and Confirmed Plan of Reorganization of June 20, 2002, the
Company was authorized to issue 10 million each of Series A, B, C, D and K,
warrants for a total of 50 million. Each warrant can be converted into one Share
of ZAP common stock. They range in exercise price from $1.05 to $10.00 with a
time period from 12 months To 36 months. As of March 28, 2003 there were a total
of 35.5 million warrants issued.

The Company received a significant increase to liquidity through the Plan of
Reorganization where approximately $3 million in long-term debt due to Ridgewood
ZAP, LLC was converted to common stock. Thus in accordance with the conversion
formula specified in the plan, Ridgewood received approximately 994,000 shares
of common stock in the Reorganized ZAP. This transaction also resulted in the
Company recognizing an extraordinary gain of approximately $2.9 million.

In conjunction with the distribution agreement signed with Daka Development on
June 17, 2002 to market, sell and distribute their products in North America,
ZAP signed a secured convertible promissory note for up to $500,000 to finance
inventory purchases. The terms of the note require interest at the rate of 6%
per annum. The note matured on September 17, 2002. Daka exercised its right to
convert to equity and received approx 1.1 million shares of common stock, which
was approximately 15% of the shares outstanding of the Company on the maturity
date. Daka also has the right to purchase one warrant in series B, C, and D for
each common share that Daka receives. The Company was granted authority to issue
the $500,000 convertible debenture through the Approved Plan of Reorganization.
In March of 2003, Daka has provided the Company with approx $650,000 of
additional inventory financing for future shipments. Where the terms of the
agreement are 50% cash and the other 50% in ZAP's common stock. As of March 28,
2003, ZAP has issued 216,667 shares of common stock and the cash payments will
be made in accordance with the sales of the products by ZAP.
<PAGE>
On March 25, 2003, the Company purchased a three-story office building in
downtown Santa Rosa, California at 300 B Street with approximately 20,000 square
feet of space. The new facility will be the corporate headquarters of ZAP and
has space for a retail Company store. The Company is planning to move from its
Morris Street location in April 2003. The purchase price consisted of a
convertible promissory note for $2 Million and shares of ZAP common stock and
warrants to purchase stock. See subsequent event Note: Q to the financial
statements.

The Company entered into an agreement in March 2003 with an investment banker to
provide additional working capital funds. An initial $300,000 is scheduled to be
funded to the Company in early April 2003.

The Company has also reached an agreement in principle with another investment
banker in late March 2003 to provide ZAP with $1 million in funds to purchase
inventory plus $250,000 for working capital.

In order to finance our working capital requirements we are currently seeking
both debt and equity investments with several investors, but there can be no
assurances that we will obtain this capital or that it will be obtained on terms
favorable to us. We do not have a bank line of credit and there can be no
assurance that any required or desired financing will be available through bank
borrowings, debt, or equity offerings, or otherwise, on acceptable terms. If
future financing requirements are satisfied through the issuance of equity
securities, investors may experience significant dilution in the net book value
per share of common stock and there is no guarantee that a market will exist for
the sale of the Company's shares.

In addition to the above working capital needs, our other capital needs are to
fund our growth strategy, which includes increasing our shopping mall presence,
improving and increasing distribution channels, establishing company owned and
franchised ZAP stores, introducing new products, improving existing product
lines, and developing a strong corporate infrastructure.

SEASONALITY AND QUARTERLY RESULTS

Our business is subject to seasonal influences. Sales volumes in the bicycle
industry typically slow down during the winter months, November to March, in the
U.S. As we are marketing worldwide, we are not impacted 100% by U.S.
seasonality.

INFLATION

Our raw materials are sourced from stable, cost-competitive industries. As such,
we do not foresee any material inflationary trends for our raw material sources.

GOODWILL

Goodwill consists of the excess consideration paid over net assets acquired.
Impairment of goodwill is evaluated whenever a triggering event is encountered.
The impaired value is determined by reference to cash flows anticipated from
estimated proceeds from selling the related technology and/or sales of products
directly linked to the technology and assets that gave rise to the goodwill.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management of the
Company to make estimates and assumptions affecting the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, as well as revenues and expenses during
the reporting period. The amounts estimated could differ from actual results.
<PAGE>
Risks Related to Our Business

Other risks include, but are not limited to, the following:

We face intense competition, which could cause us to lose market share. Changes
in the market for electric vehicles could cause our products to become obsolete
or lose popularity. We cannot assure you that growth in the electric vehicle
industry will continue and our business may suffer if growth in the electric
vehicle industry ceases or if we are unable to maintain the pace of industry
demands. We may be unable to keep up with changes in electric vehicle technology
and, as a result, may suffer a decline in our competitive position. The failure
of certain key suppliers to provide us with components could have a severe and
negative impact upon our business. Product liability or other claims could have
a material adverse effect on our business. We may not be able to protect our
Internet address. Our success is heavily dependent on protecting our
intellectual property rights


ITEM 7.  FINANCIAL STATEMENTS

         A)  Report of ZAP's former accountant for the previous Year ended
             December 31, 2001


               Report of Independent Certified Public Accountants
               --------------------------------------------------

Board of Directors
ZAP

We have audited the accompanying consolidated balance sheet of ZAP (formerly
Zapworld.com) and Subsidiaries as of December 31, 2001, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the two years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ZAP and
Subsidiaries as of December 31, 2001, and the consolidated results of their
operations and their consolidated cash flows for the two years then ended in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note B, on March 1,
2002 the Company filed a voluntary petition for reorganization under Chapter 11
of the U. S. Bankruptcy Code with the U.S. Bankruptcy Court. The Company
experienced a dramatic reduction in sales volume and incurred a significant net
loss during the year ended December 31, 2001. These factors, among others, as
discussed in Note B to the financial statements, raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans
regarding these matters are also described in Note B. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

/s/ Grant Thornton, LLP

San Francisco, California
March 15, 2002
<PAGE>
         B) FINANCIAL STATEMENTS

                                    CONTENTS
                                                                         Page

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.....................   F-1


FINANCIAL STATEMENTS

     Consolidated Balance Sheet........................................   F-2

     Consolidated Statements of Operations.............................   F-3

     Consolidated Statement of Shareholders' Equity....................   F-4

     Consolidated Statements of Cash Flows.............................   F-5

     Notes to Consolidated Financial Statements........................   F-6

<PAGE>



To the Board of Directors
  and Shareholders of ZAP




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

         In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, shareholders' equity and cash
flows present fairly, in all material respects, the financial position of ZAP
and its subsidiaries as of December 31, 2002, and the results of their
operations and their cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above. The
consolidated financial statements of ZAP and its subsidiaries for the year ended
December 31, 2001 were audited by other auditors whose report dated March 15,
2002 expressed an unqualified opinion with a going concern paragraph on those
statements.



/s/ Odenberg, Ullakko, Muranishi & Co. LLP

San Francisco, California
March 28, 2003




                                       F-1
<PAGE>
                              ZAP AND SUBSIDIARIES
                              --------------------
                           CONSOLIDATED BALANCE SHEET
                           --------------------------
                                DECEMBER 31, 2002
                                -----------------
                        (In thousands, except share data)



<TABLE><CAPTION>
<S>                                                                <C>
                                     ASSETS
                                     ------
Current assets:
  Cash and cash equivalents                                        $    350
  Accounts receivable, net of allowance of $1,484                       404
  Inventories                                                         1,599
  Prepaid expenses and other current assets                             154
                                                                   --------
     Total current assets                                             2,507

Property and equipment, net                                             474

Other assets:
  Patents and trademarks, net                                           254
  Goodwill, net                                                         851
  Deposits and other                                                     21
                                                                   --------
                                                                   $  4,107
                                                                   ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------

Current liabilities:
  Current portion of long-term debt                                $    134
  Accounts payable                                                      498
  Accrued liabilities                                                   246
  Advances from related party                                            75
                                                                   --------
     Total current liabilities                                          953

Long-term debt, less current portion                                    142
                                                                   --------
     Total liabilities                                                1,095
                                                                   --------

Commitments and contingencies (Notes K, L & N)

Shareholders' equity:
  Preferred stock; 50 million shares authorized; no par value;
    no shares issued and outstanding                                     --
Common stock; 100 million shares authorized; no par value;
   8.99 million shares issued and outstanding                        20,889
Accumulated deficit                                                 (17,877)
                                                                   --------
     Total shareholders' equity                                       3,012
                                                                   --------
                                                                   $  4,107
                                                                   ========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-2
<PAGE>
                              ZAP AND SUBSIDIARIES
                              --------------------
                      CONSOLIDATED STATEMENT OF OPERATIONS
                      ------------------------------------
                      (In thousands; except per share data)

<TABLE><CAPTION>
                                                            Year ended December 31
                                                          --------------------------
                                                             2002            2001
                                                          ----------      ----------
<S>                                                       <C>             <C>
Net sales                                                 $    4,413      $    4,998
Cost of goods sold                                             4,159           5,850
                                                          ----------      ----------
Gross profit (loss)                                              254            (852)
                                                          ----------      ----------

Operating expenses:
  Sales and marketing                                            541           1,098
  General and administrative                                   2,302           4,083
  Research and development                                        30             500
  Impairment write-off                                            50           2,610
                                                          ----------      ----------

Total operating expenses                                       2,923           8,291
                                                          ----------      ----------

Loss from operations                                          (2,669)         (9,143)
                                                          ----------      ----------

Other income (expense):
  Interest expense                                               (12)            (11)
  Other income (expense)                                          39             (44)
                                                          ----------      ----------
                                                                  27             (55)

Loss before reorganization fees,
 extraordinary gain and income taxes                          (2,642)         (9,198)

Reorganization fees                                             (170)             --
                                                          ----------      ----------

Loss before extraordinary gain and income taxes               (2,812)         (9,198)

Provision for income taxes                                         2               1
                                                          ----------      ----------

Loss before extraordinary gain                                (2,814)         (9,199)

Extraordinary gain                                             3,964              --
                                                          ----------      ----------

Net income (loss)                                         $    1,150      $   (9,199)
                                                          ==========      ==========

Loss per share before extraordinary gain:
  Basic                                                   $    (0.69)     $    (8.53)
  Diluted                                                 $    (0.69)     $    (8.53)

Earnings (loss) per share:
  Basic                                                   $     0.28      $    (8.53)
  Diluted                                                 $     0.17      $    (8.53)

Weighted average number of common shares outstanding:
  Basic                                                        4,051           1,079
  Diluted                                                      6,945           1,079
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-3
<PAGE>
                              ZAP AND SUBSIDIARIES
                              --------------------
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
            ---------------------------------------------------------
                                 (In thousands)

<TABLE><CAPTION>
                                    Convertible preferred stock    Common stock                 Compensation Receivable
                                        -------------------    -------------------   Accumulated    and         from
                                         Shares     Amount      Shares     Amount      Deficit    Services  Shareholders    Total
                                        --------   --------    --------   --------    --------    --------    --------    --------
<S>                                     <C>        <C>         <C>        <C>         <C>         <C>         <C>         <C>
Balance at December 31, 2000                   4   $  1,812         969   $ 19,117    $ (9,664)   $    (42)   $   (218)   $ 11,005

Issuance of preferred stock
  Deemed dividend conversions                          (559)                                                                  (559)

Issuance of common stock:
  Employee stock purchase plan                                        1          4                                               4
  Repurchase of employee options                                      8         10                                              10
  Cancellation of employee notes                                    (36)      (218)                                218          --
  EMB acquisition                                                     1          9                                               9
  Repurchase of Ridgewood stock                                    (104)    (1,500)                                         (1,500)
  Preferred stock conversion                  (2)      (120)        264        679                                             559
  Amortization of unearned
    compensation                                                                                        42                      42
  Dividend declared on preferred stock                                                    (138)                               (138)

Net loss                                      --         --          --         --      (9,199)         --          --      (9,199)
                                        --------   --------    --------   --------    --------    --------    --------    --------

Balance at December 31, 2001                   2      1,133       1,103     18,101     (19,001)         --          --         233

Issuance of common stock:
  Employee stock purchase plan                                       12         14                                              14
  Repurchase of Ridgewood stock                                    (104)    (1,500)                                         (1,500)
  Reverse accrued dividends                                                    267         (26)                                241
  Preferred stock conversion                  (2)    (1,133)        630      1,133                                              --
  Ridgewood stock note conversion                                   995        199                                             199
  RAP and Voltage Vehicles acquisition                            4,500      1,580                                           1,580
  Stock issued for Daka note                                      1,176        500                                             500
  Conversion of unsecured creditor's
    debt to stock                                                   295        236                                             236
  Stock issued for profesional services
    and equipment                                                   351        325                                             325
  Stock purchased with warrants                                      32         34                                              34

Net income                                    --         --          --         --       1,150          --          --       1,150
                                        --------   --------    --------   --------    --------    --------    --------    --------
Balance at December 31, 2002                  --   $     --       8,990   $ 20,889    $(17,877)   $     --    $     --    $  3,012
                                        ========   ========    ========   ========    ========    ========    ========    ========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-4
<PAGE>
                              ZAP AND SUBSIDIARIES
                              --------------------
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                      ------------------------------------
                                 (In thousands)


<TABLE><CAPTION>
                                                               Year ended December 31
                                                               ----------------------
                                                                 2002          2001
                                                               --------      --------
<S>                                                            <C>           <C>
Operating activities:
  Net income (loss)                                            $  1,150      $ (9,199)
  Items not requiring the current use of cash:
     Depreciation and amortization                                  260           685
     Loss on disposal of fixed asset                                 --            42
     Impairment of intangibles                                       50         2,610
     Gain on debt forgiveness                                    (3,964)           --
     Amortization of fair value of warrants                          --            42
     Stock issued for services                                      182            --
     Changes in other items affecting operations:
          Accounts receivable                                       903         1,027
          Inventories                                               875         1,495
          Prepaid expenses                                           36           506
          Other assets                                               83           (33)
          Accounts payable                                          238           421
          Accrued liabilities                                      (120)           --
                                                               --------      --------
          Cash used for operating activities                       (307)       (2,404)
                                                               --------      --------

Investing activities:
  Acquisition of property and equipment                            (204)         (242)
                                                               --------      --------
          Cash used for investing activities                       (204)         (242)
                                                               --------      --------

Financing activities:
  Issuance of common stock under employee purchase plan              14             4
  Exercise of warrants                                               34            --
  Payments on long-term debt                                        (29)          (59)
                                                               --------      --------
          Cash provided by (used for) financing activities           19           (55)
                                                               --------      --------

Decrease in cash and cash equivalents                              (492)       (2,701)

Cash and cash equivalents at beginning of year                      842         3,543
                                                               --------      --------
Cash and cash equivalents at end of year                       $    350      $    842
                                                               ========      ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>
                            ZAP AND ITS SUBSIDIARIES
                            ------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

NOTE A - ORGANIZATION AND OPERATIONS:

         ZAP ("The Company" or "ZAP"), formerly Zapworld.com, was incorporated
in California in September, 1994. ZAP markets many forms of advanced
transportation, including electric automobiles, motorcycles, bicycles, scooters,
personal watercraft, hovercraft, neighborhood electric vehicles, commercial
vehicles and more. Additionally, the Company produces an electric scooter, known
as the ZAPPY(R), using parts manufactured by various contractors. The Company
has also established a rental program to rent neighborhood electric cars,
primarily through agencies.

         The Company's business strategy has been to develop, acquire and
commercialize electric vehicles and electric vehicle power systems, which have
fundamental practical and environmental advantages over available internal
combustion modes of transportation that can be produced commercially on an
economically competitive basis. In 2002, the Company continued to enhance and
broaden its electric vehicle product line.

         On March 1, 2002 the Company filed a voluntary petition for
reorganization under Chapter 11 of the U. S. Bankruptcy Code with the U.S.
Bankruptcy Court. On June 20, 2002, the Company emerged from Chapter 11
proceedings (see Note C).

         Acquisition of new businesses
         -----------------------------
         The Company completed an acquisition of Voltage Vehicles ("VV") and RAP
Group, Inc. ("RAP") on July 1, 2002. VV and RAP became wholly owned subsidiaries
of the Company through a purchase from the equity shareholders of Voltage
Vehicles and RAP Group, Inc. all of the shares of VV and RAP in exchange for
4,500,000 (post-split) shares of the Company, as follows: 500,000 shares of the
Company to the equity shareholders of VV and 4,000,000 shares to the
shareholders of RAP. The equity shareholders of VV and RAP also received, for
each common share of the Company issued to them, four warrants (one in Series B,
Series C, Series D, and Series K) to purchase common stock in Reorganized ZAP.

                                       F-6
<PAGE>
In connection with its acquisition of RAP and VV, the Company recorded goodwill
or the excess of the purchase price over the net assets acquired of
approximately $525,000 and $276,000 for RAP and VV, respectively. The Company
obtained an independent appraisal of the fair value of the tangible and
intangible assets acquired in order to record and allocate the purchase price in
accordance with Financial Accounting Standards Board 141, "Business
Combinations".

         ZAP and certain of its Directors have been named as co-defendants in a
lawsuit with respect to the acquisition of VV and RAP (see Note N).

         VV is a Sonoma County-based Nevada Corporation with exclusive
distribution contracts for advanced transportation in the independent auto
dealer network, including rights to one of the only full-performance electric
cars certified under federal safety standards. RAP owns an auto dealership
focused on the independent automotive and advanced technology vehicle markets.
As a Voltage Vehicle authorized dealer, RAP showcases an array of advanced
transportation at its dealership in Fulton, California. RAP began business in
1996 and has been a profitable entity for the past few years with average annual
sales in excess of $6 million. Voltage Vehicles, which began business in
February, 2001, is a relatively new enterprise. As noted in ZAP's confirmed plan
of reorganization (see Note C), the acquisition is expected to enhance ZAP's
financial base by providing access to the services and relationships already
established by VV and RAP. The move is expected to advance ZAP's goal of
becoming a leading full-service brand in the electric and alternate fuel
transportation industry. ZAP plans to step-up its role in building a national
distribution network to support the contract manufacturers for its growing line
of products.

         The results of operations of RAP and Voltage Vehicles are included in
the accompanying financial statements from the date of acquisition, July 01,
2002. The following summarized unaudited pro forma financial information assumes
the acquisition occurred on January 1 of each year:

                                                      ----------------------
                                                        2002          2001
                                                      --------      --------
         Net sales                                    $  8,397      $ 11,363
         Loss before extraordinary gain                 (2,627)       (9,148)
         Loss per share before extraordinary gain        (0.65)        (8.48)

         The pro forma results do not necessarily represent results which would
have occurred if the acquisition had taken place on the basis assumed above, nor
are they indicative of the results of future combined operations.

         Neighborhood electric vehicle rental program
         --------------------------------------------
         ZAP established ZAP Rentals in 2002 to rent neighborhood electric
vehicles throughout California. ZAP plans to solicit the participation of rental
agencies and other locations for the program. Neighborhood electric cars are a
new category of 25 MPH automobiles designed for short trips in urban areas,
planned communities, commercial zones or tourist districts. The smaller,
low-speed electric cars are a new alternative in places concerned with air and
noise pollution, high fuel prices, traffic congestion or parking shortages.

                                       F-7
<PAGE>
         Basis of presentation
         ---------------------
         The Company's financial statements have been prepared on the going
concern basis. Although the Company has losses from operations and negative cash
flows from operating activities, management believes the Company will be able to
raise sufficient working capital to fund its operating plan at least through
January 1, 2004.

         In March 2003, the Company entered into an agreement with Daka
Development Ltd. ("Daka"), a major supplier of inventory for the Company, to
provide the Company with approximately $650,000 in additional inventory
financing for future shipments. The terms of the agreement are 50% cash and 50%
in ZAP common stock.

         The Company entered into an agreement in March, 2003 with an investment
banker to provide ZAP with additional working capital funds. An initial $300,000
is scheduled to be funded to the Company in early April 2003.

         The Company has also entered into an agreement in principle in late
March 2003 with an investment banker to provide ZAP with a $1 million in funds
to purchase inventory plus $250,000 for working capital.

         The Company did not meet the requirements to utilize fresh start
reporting under Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7"). Therefore, in accordance
with SOP 90-7, liabilities compromised by the confirmed plan of reorganization
have been stated at the present value of the amounts to be paid, reorganization
expenses have been separately disclosed and the forgiveness of debt has been
reported as an extraordinary gain in the consolidated financial statements.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Principles of consolidation
         ---------------------------
         The accompanying consolidated financial statements include the accounts
of ZAP, RAP Group, Voltage Vehicles, ZAP Rentals and ZAP Stores for year ended
December 31, 2002; and ZAP, Zapworld Stores, Inc., for the year ended December
31, 2001. All subsidiaries are 100% owned by ZAP. All significant inter company
transactions and balances have been eliminated.

         Revenue recognition
         -------------------
         Product sales, net of promotional discounts, rebates, and return
allowances, are recorded when the products are shipped and title passes to
customers. Retail items sold to customers are made pursuant to a sales contract
that provides for transfer of both title and risk of loss upon our delivery to
the carrier, which is commonly referred to as "F.O.B. Shipping Point." For
consignment sales, revenue is recognized when sales are reported by the
consignee.




                                       F-8
<PAGE>
         Extraordinary gain on forgiveness of debt
         -----------------------------------------
         Under ZAP's confirmed plan of reorganization, a $3 million note payable
was converted to common stock (see Note C). This transaction resulted in the
Company recognizing an extraordinary gain of approximately $2.9 million. The
remainder of the extraordinary gain of $1.1 million was due to the cancellation
of indebtedness to unsecured creditors. Also, in accordance with ZAP's confirmed
plan of reorganization, certain unsecured creditors have elected to receive
common stock rather than cash for their claims. The confirmed plan of
reorganization also provides for a twelve-month period following June 20, 2002
for the unsecured creditors to still elect to receive equity. Those unsecured
creditors that elected to receive cash will share in a fund of $300,000 which is
payable over three years, with each creditor receiving their pro-rata share (see
Note G).

         Concentration of risk
         ---------------------
         The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its customers.
The Company records an allowance for doubtful accounts receivable for credit
losses at the end of each period based on an analysis of individual aged
accounts receivable balances. As a result of this analysis, the Company believes
that its allowance for doubtful accounts is adequate at December 31, 2002.

         Cash and cash equivalents
         -------------------------
         The Company considers all highly liquid debt instruments with an
original maturity of three months or less to be cash equivalents. The Company
maintains the majority of its cash balances with two major financial
institutions. At times the balances may exceed federally insured limits. The
Company has not experienced any losses in such accounts and believes it is not
exposed to any significant credit risk on cash and cash equivalents.

         Inventories
         -----------
         Inventories consist primarily of raw materials and finished goods and
are carried at the lower of cost (first-in, first-out method) or market.

         Property and equipment
         ----------------------
         Property and equipment consists of machinery and equipment, equipment
under capital leases, office furniture and equipment, Vehicles, and leasehold
improvements. Machinery and equipment includes molds and tools that are owned by
the Company but held and used by suppliers at locations outside the United
States. Property and equipment is stated at cost and is depreciated or amortized
using straight-line and accelerated methods over the asset's estimated useful
life. Costs of maintenance and repairs are charged to expense as incurred;
significant renewals and betterments are capitalized. Estimated useful lives are
as follows:

         Machinery and equipment                 3-7 years
         Equipment under capital leases          3-5 years
         Office furniture and equipment          3-7 years
         Vehicles                                5 years
         Leasehold improvements                  15 years or life of lease,
                                                    whichever is shorter

                                       F-9
<PAGE>
         Patents and trademarks
         ----------------------
         Patents and trademarks consist of costs expended to perfect certain
patents and trademarks acquired and are amortized over ten years. Amortization
expense for the years ended December 31, 2002 and 2001 was approximately $38,000
and $60,000, respectively.

         Goodwill
         --------
         Goodwill consists of the excess consideration paid over net assets or
technology acquired. Impairment of goodwill is evaluated whenever a triggering
event is encountered. The impaired value is determined by reference to cash
flows anticipated from estimated proceeds from sales of the related technology
and/or sales of products directly linked to the technology and assets giving
rise to the goodwill.

         On July 1, 2002, the Company purchased all assets of the RAP Group Inc,
and of Voltage vehicles for common stock valued at $1.4 million and $175,000
respectively.

         The purchase price of the RAP Group, Inc. was allocated as
follows(thousands):

         Accounts receivable                           $     630
         Inventory                                           442
         Property and equipment                               24
         Goodwill                                            525
         Liabilities assumed                                (221)
                                                       ---------
                                                       $   1,400
                                                       =========
         Consideration paid (thousands):

         Common stock                                  $   1,400
                                                       ---------
                                                       $   1,400
                                                       =========

         The purchase price of the Voltage Vehicles was allocated as
follows(thousands):

         Accounts receivable                           $       5
         Inventory                                           129
         Goodwill                                            276
         Liabilities assumed                                (235)
                                                       ---------
                                                       $     175
                                                       =========
         Consideration paid (thousands):

         Common stock                                  $     175
                                                       ---------
                                                       $     175
                                                       =========


         Effective May 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets. Statements of Financial Accounting Standards ("SFAS")
No. 142, Goodwill and Other Intangible Assets, prescribes a two-phase process
for impairment testing of goodwill, which is performed once annually, absent
indicators of impairment. The first phase screens for impairment, while the
second phase (if necessary) measures the impairment. We have elected to perform
our annual analysis during the fourth calendar quarter of each year.

         In connection with the Company's adoption of SFAS No. 142, the Company
completed a valuation of Rap, Voltage and EMB. The valuation was based on the
Company's discounted projected cash flows. This valuation indicated that the
fair value of EMB was less than its carrying value. Accordingly, the Company
recorded a goodwill impairment charge of $50,000 in the financial statements as
the cumulative effect of adopting SFAS No. 142. Impairment of goodwill during
2002 and 2001 was $50,000 and $2,610,000, respectively. The amortization of
goodwill during 2001 was $344,000.

         Goodwill consists of the following (in thousands):

                                                      December 31,
                                                          2002
                                                       ---------
         EMB                                           $      50
         RAP                                           $     525
         Voltage Vehicles                              $     276
                                                       ---------
                                                       $     851
                                                       =========

         Advertising
         -----------
         The cost of advertising is expensed as incurred. Advertising and
marketing expenses amounted to $162,000 and $266,000 in the years ended December
31, 2002 and 2001, respectively.

         Warranty
         --------
         The Company provides 30- to 90-day warranties on its products and
records the estimated cost of the product warranties at the date of sale. The
estimated cost of warranties has not been significant to date.

         Shipping and handling costs
         ---------------------------
         Shipping and handling costs have been included in cost of goods sold.

         Research and development
         ------------------------
         Research and product development costs are expensed as incurred.

         Income taxes
         ------------
         The Company accounts for income taxes using an asset and liability
method for financial accounting and reporting purposes. Deferred income tax
assets and liabilities are determined based on differences between the financial
reporting and tax bases of assets and liabilities and are measured using the
currently enacted tax rates and laws. The Company has made no provision for
income taxes except for the minimum state tax due in any period presented in the
accompanying consolidated financial statements because it incurred operating
losses in each of these periods. In addition, the Company made no provision for
income taxes on the extraordinary gain resulting from the extinguishment of debt
in 2002 (Note C) due to the relevant tax regulations governing the treatment of
debt extinguishment income in Chapter 11 bankruptcy proceedings.

                                      F-10
<PAGE>
         Use of estimates
         ----------------
         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions affecting the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, as well as revenues and expenses during
the reporting period. The amounts estimated could differ from actual results.

         Fair value of financial instruments
         -----------------------------------
         The Company measures its financial assets and liabilities in accordance
with accounting principles generally accepted in the United States of America.
The fair value of a financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing parties. For certain
of the Company's financial instruments, including cash, accounts receivable
accounts payable and accrued liabilities, the carrying amount approximates fair
value because of the short maturities. The fair value of debt is not
determinable due to the terms of the debt and the lack of a comparable market
for such the debt.

         Earnings (loss) per share
         -------------------------
         Basic and diluted losses per common share are calculated by dividing
net loss for the year by the weighted average number of common shares
outstanding during the year. The net loss per common share excludes the effect
of convertible preferred stock, stock options and warrants due to their
antidilutive effect. The effect of potential dilutive securities of 3,386,589 in
2001 has been excluded from the diluted computations.

         Basic earnings per common share ("EPS") is computed by dividing net
income available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted to common stock.

         Stock-based compensation
         ------------------------
         The Company accounts for stock-based employee compensation arrangements
in accordance with the provisions of Accounting Principles Board ("APB") No. 25,
"Accounting for Stock Issued to Employees", and complies with disclosure
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation". Under APB No. 25, compensation cost
is recognized over the vesting period based on the difference, if any, on the
date of grant between the quoted market price of the Company's stock and the
amount an employee must pay to acquire the stock.

                                      F-11
<PAGE>
         Reclassifications
         -----------------
         Certain reclassifications have been made to the financial statements
for the year ended December 31, 2001 to conform to the classifications used in
the financial statements for the year ended December 31, 2002.

         Recent accounting pronouncements
         --------------------------------
         In July 2001, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 142. "Goodwill and Other Intangible Assets." SFAS No. 142
requires that goodwill and other intangibles with an indefinite useful life not
be amortized, but be tested for impairment at least annually. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001; however, for new
business combinations that occur after June 30, 2001, SFAS No. 142 is effective.
In accordance with SFAS No. 142, goodwill resulting from the Company's recent
acquisition of RAP and VV (see Note A) in July 2002 is not amortized. The
Company adopted SFAS No. 142 during 2002. Impairment of goodwill during 2002 and
2001 was $50,000 and $2,610,000, respectively. The amortization of goodwill
during 2001 was $344,000.

         In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." Among other provisions, SFAS No. 145 rescinds SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt." Accordingly, gains or
losses from extinguishment of debt shall not be reported as extraordinary items
unless the extinguishment qualifies as an extraordinary item under the criteria
of APB No. 30. Gains or losses from extinguishment of debt that do not meet the
criteria of APB No. 30 should be reclassified to income from continuing
operations in all prior periods presented. SFAS No. 145 is effective for fiscal
years beginning after May 15, 2002. The Company will adopt SFAS No. 145
beginning in year 2003. The Company does not expect the adoption of SFAS No. 145
to have a material impact on our financial position or results of operations.

         In July 2002, the FASB issued Statement of SFAS No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities." SFAS No. 146 addresses
financial accounting and reporting for costs associated with exit or disposal
activities. SFAS No. 146 requires that a liability for a cost associated with an
exit or disposal activity be recognized when the liability is incurred. Previous
guidance, provided under EITF No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
certain costs incurred in a restructuring)," required an exit cost liability to
be recognized at the date of an entity's commitment to an exit plan. The
provisions of SFAS No. 146 are effective for exit or disposal activities that
are initiated by a company after December 31, 2002. The Company will adopt SFAS
No. 146 beginning in year 2003. The Company does not expect the adoption of SFAS
No. 146 to have a material impact on our financial position or results of
operations.

         In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions - an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9." The provisions of SFAS No. 147 relate to the application
of the purchase method of accounting for all acquisitions of financial
institutions, except transactions between two or more mutual enterprises. The
provisions of SFAS No. 147 also relate to certain long-term
customer-relationship intangible assets recognized in an acquisition of a
financial institution, including those acquired in transactions between mutual
enterprises. The provisions of SFAS No. 147 are effective on or after October 1,
2002. The Company has adopted SFAS No. 147 in 2002. The adoption of SFAS No. 147
will not have a material impact on our financial position or results of
operations.

                                      F-12
<PAGE>
         In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an amendment to FASB
Statement No. 123, Accounting for Stock-Based Compensation." SFAS No. 148
provides alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of Statement 123 to
require more prominent and more frequent disclosures in financial statements
about the effects of stock-based compensation. The transition guidance and
annual disclosure provisions of SFAS No. 148 are effective for fiscal years
ending after December 15, 2002. The interim disclosure provisions are effective
for financial reports containing financial statements for interim periods
beginning after December 15, 2002. The Company will adopt SFAS No. 148 beginning
in year 2003. The Company does not expect the adoption of SFAS No. 148 to have a
material impact on our financial position or results of operations.

         In November 2002, the FASB issued FASB Interpretation No. ("FIN") 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 expands on the accounting
guidance of SFAS Nos. 5, 57, and 107 and incorporates without change the
provisions of FIN 34, which is being superseded. FIN 45 will affect leasing
transactions involving residual guarantees, vendor and manufacturer guarantees,
and tax and environmental indemnities. All such guarantees will need to be
disclosed in the notes to the financial statements starting with fiscal years
ending after December 15, 2002. For guarantees issued after December 31, 2002,
the fair value of the obligation must be reported on the balance sheet. Existing
guarantees will be grandfathered and will not be recognized on the balance
sheet. The Company will adopt FIN 45 beginning in year 2003. The Company does
not expect the adoption of FIN 45 to have a material impact on our financial
position or results of operations.

         In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities." FIN 46 expands upon and
strengthens existing accounting guidances that address when a company should
include in its financial statements the assets, liabilities and activities of
another entity. A variable interest entity is a corporation, partnership, trust,
or any other legal structure used for business purposes that either (a) does not
have equity investors with voting rights or (b) has equity investors that do not
provide sufficient financial resources for the entity to support its activities.
FIN 46 requires a variable interest entity to be consolidated by a company if
that company is subject to a majority of the risk of loss from the variable
interest entity's activities or is entitled to receive a majority of the
entity's residual returns or both. The consolidation requirements of FIN 46
apply immediately to variable interest entities created after January 31, 2003.
The consolidation requirements apply to older entities in the first fiscal year
or interim period beginning after June 15, 2003. Disclosure requirements apply
to any financial statements issued after January 31, 2003. The Company will
adopt FIN 46 beginning in year 2003. The Company is currently evaluating the
impact of FIN 46 on our financial position and results of operations.

                                      F-13
<PAGE>
NOTE C - PLAN OF REORGANIZATION

         On March 1, 2002 the Company filed a voluntary petition for
reorganization under Chapter 11 of the U. S. Bankruptcy Code with the U.S.
Bankruptcy Court. The first impact of the Chapter 11 filing was to stay certain
legal proceedings that had been instituted against the Company. Management also
believed that the Chapter 11 filing would allow the Company to reorganize and
rethink its direction, and to seek debtor-in-possession financing.

         On June 20, 2002, the Bankruptcy Court entered an order confirming a
second amended plan of reorganization (the "confirmed plan of reorganization").

         The primary objectives of the confirmed plan of reorganization are to:
(a) alter the Company's equity and debt structures to permit the Company to
emerge from the reorganization proceedings with a viable capital structure; (b)
maximize the value of the ultimate recoveries to all creditor groups on a fair
and equitable basis; and (c) settle, compromise, or otherwise dispose of certain
claims and interests on terms that the Company believed to be fair and
reasonable and in the best interests of their respective estates, creditors, and
stakeholders. The confirmed plan of reorganization provides for, among other
things:

         o   the cancellation of certain indebtedness in exchange for cash,
         common stock, no par value, in Reorganized ZAP, and/or warrants to
         purchase shares of common stock. The warrants were issued to each
         claimant during 2002.

         o   payment of $50,000 to a claimant of secured pre-petition debt.
         $50,000 is the estimated value of the collateral, plus 5% interest on a
         declining balance, payable monthly over three years, commencing August
         20, 2002;

         o   conversion of 2,250 shares of ZAP preferred stock, originally
         valued at $1,000 per share, into 630,000 shares of common stock in
         Reorganized ZAP after all reverse stock splits. The preferred
         shareholders also received 2.5 million Series A warrants, to vest in
         accordance with a schedule outlined in the Plan and one warrant in
         Series B, C and D to purchase common stock in the Reorganized ZAP for
         each common share issued to the claimant;

         o   conversion of 6,693,643 shares of ZAP at June 20, 2002 into
         1,115,607 shares of common stock in the Reorganized ZAP, after all
         reverse stock splits. The common shareholders also received one
         warrant in Series B, C and D to purchase common stock in the
         Reorganized ZAP for each common share issued to the claimant;

         o   the assumption and assignment, or rejection of executory contract
         or unexpired leases to which the Company was a party;

         o   authorization to issue 100 million shares of common stock and 50
         million shares of preferred stock.

                                      F-14
<PAGE>
         o   authorization to issue 10 million common shares each for the
         following warrants: Series A, B, C, D and K for a total of 50 million
         warrants, with the expiration dates for the warrants ranging from 12 to
         36 months;

         o   the creation of an Incentive Stock Option Plan for employees within
         the meaning of Section 423 of the Internal Revenue of 1986, as amended,
         with an option by the Incentive Stock Option Plan to purchase 10
         million shares of ZAP common stock at an exercise price equal to the
         closing price on the date of issue (see Note I);

         o   authorization to execute a $500,000 convertible debenture for the
         purchase of inventory from a new supplier in exchange for a note with
         interest at 6% per annum; or shares of common stock at $0.50 per share
         or 15% of the outstanding shares of the Reorganized ZAP, whichever
         amount is greater. The supplier was also given to warrants in Series B,
         C and D for each common share owned (The entire debt was converted to
         common stock during 2002; see Note L).

         o   authorization to complete the acquisition of VV and RAP effective
         July 1, 2002 (see Note A).


NOTE D - INVENTORIES

         Inventories at December 31, 2002 are summarized as follows (thousands):

         Vehicles                                               $      586
         Raw materials                                                 903
         Finished goods                                                699
                                                                ----------
                                                                     2,188
         Less - inventory reserve                                      589
                                                                ----------
                                                                $    1,599
                                                                ==========


NOTE E - PROPERTY AND EQUIPMENT

         Property and equipment at December 31, 2002 are summarized as follows
         (thousands):

         Machinery and equipment                                $      632
         Computer equipment and software                               319
         Office furniture and equipment                                158
         Leasehold improvements                                        119
         Vehicles                                                      133
                                                                ----------
                                                                     1,361
         Less - accumulated depreciation and amortization              887
                                                                ----------
                                                                $      474
                                                                ==========

                                      F-15
<PAGE>
         Depreciation and amortization expense for the years ended December 31,
2002 and 2001 was approximately $222,000 and $231,000, respectively.


NOTE F - OTHER ACCRUED LIABILITIES

         Accrued liabilities at December 31, 2002 consisted of the following (in
thousands):

         Accrued payroll                                        $       34
         Accrued payables                                               63
         Professional fees                                              57
         Insurance premiums                                             22
         Sales and use tax                                              30
         Other expenses                                                 40
                                                                ----------
                                                                $      246
                                                                ==========


NOTE G - DEBT

         As of December 31, 2002, the Company's debt primarily consisted of
approximately $170,000 in notes payable to unsecured creditors as a result of
the confirmed plan of reorganization (see Note C). These notes bear interest at
5% and have an annual distribution on June 1 of approximately 1/3 the original
balance plus accrued interest. Long-term debt also consists of a note payable of
$44,000. This note bears interest at 5% with monthly payments of $1,400. The
Company's has an advance of approximately $62,000 from an unrelated party. This
advance bears interest at 6% per annum and is due on demand.

         Scheduled annual maturities for long-term debt for years ending after
December 31, 2002 are as follows: $134,000 - 2003; $72,000 - 2004; and $70,000 -
2005.


NOTE H - PROVISION FOR INCOME TAXES

         The provision for taxes on income is summarized as follows (thousands):

                                               Year ended December 31
                                               ----------------------
                                                 2002          2001
                                               --------      --------
         Current:
             Federal                           $     --      $     --
             State                                    2             1
                                               --------      --------
                                               $      2      $      1
                                               ========      ========

                                      F-16
<PAGE>
         The Company made no provision for income taxes on the extraordinary
gain resulting from the extinguishment of debt in 2002 (see Note C), due to the
relevant tax regulations governing the treatment of debt extinguishment income
in Chapter 11 bankruptcy proceedings.

         A reconciliation of the provision for income tax expense with the
expected income tax is computed by applying the federal statutory income tax
rate to income before provision for (benefit from) income taxes, as follows:

                                                       Year ended December 31
                                                       ----------------------
                                                         2002          2001
                                                       --------      --------
         Income tax provision (benefit) computed at:
             Federal statutory rate                      34.00%       (34.00%)
             State, net of federal benefit                5.84%        (5.84%)
             Other, net                                   0.30%         0.80%
             Net operating loss carryforward            (40.13%)       39.05%
                                                       --------      --------
         Effective tax rate                               0.01%         0.01%
                                                       ========      ========

         Significant components of the Company's deferred tax assets and
liabilities for income taxes at December 31, 2002 consist of the following
(thousands):

         Deferred tax asset:
             Net operating loss carryforwards          $  2,618
             Inventory capitalization                      (240)
             Depreciation and amortization                 (300)
             Other accruals and allowances                 (100)
                                                       --------
             Net deferred tax asset                       1,978
         Valuation allowance                             (1,978)
                                                       --------
                                                       $     --
                                                       ========

         The Company has available for carryforward approximately $9.8 million
and $7.9 million of federal and state net operating losses, respectively,
expiring through 2020 for federal purposes and 2010 for state purposes. The Tax
Reform Act of 1986 and the California Conformity Act of 1987 impose restrictions
on the utilization of net operating losses in the event of an "ownership change"
as defined by Section 382 of the Internal Revenue Code. There has been no
determination whether an ownership change, as defined, has taken place.
Therefore, the extent of any limitation has not been ascertained.

         A valuation allowance is required for those deferred tax assets that
are not likely to be realized. Realization is dependent upon future earnings
during the period that temporary differences and carryforwards are expected to
be available. Because of the uncertain nature of their ultimate utilization, a
full valuation allowance is recorded against these deferred tax assets.
Valuation allowance for the year ended December 31, 2002 decreased $1,435,000
and increased $1,616,000 for the years ended December 31, 2001.

         The Company's Federal and State net operating loss carryforwards were
reduced by approximately $4 million, as a result of the Company's bankruptcy
proceedings (Note B).

                                      F-17
<PAGE>
NOTE I - STOCK OPTIONS

         During 2002 as part of the confirmed plan of reorganization, ZAP
created a new Incentive Stock Option Plan ("2002 Plan").

         Options to purchase common stock are granted by the Board of Directors
under two Stock Option Plans, referred to as the 2002 and 1999 plans. Options
granted may be incentive stock options (as defined under Section 422 of the
Internal Revenue Code) or nonstatutory stock options. The numbers of shares
available for grant under the 2002 and 1999 Plans are 10,000,000 and 1,500,000
respectively. Options are granted at no less than fair market value on the date
of grant. Options granted in 2001 mostly become exercisable immediately, while
options granted in 2002 become exercisable as they vest over a three year
period, and expire ten years after the date of grant.

         On December 19, 2001, the Company cancelled all outstanding stock
options from certain prior plans against payment of a total stock bonus of
$10,000. On the same date, new stock options were issued to employees,
directors, and non-employees under the 1999 plan.

         The grant of these options resulted in an effective re-pricing of the
options. Accordingly, the Company is required to apply variable accounting to
these options and will need to mark the value of these options to market value
as and when the Company's stock price changes. At December 31, 2001 and 2002,
the impact of the application of variable accounting to these options was not
material to the financial statements.

         Option activity under the 2002 and 1999 plans is as follows
(thousands):
<TABLE><CAPTION>
                                                    2002 Plan                  1999 Plan
                                             ---------------------      ---------------------
                                                          Weighted                   Weighted
                                                          Average                    Average
                                             Number of    Exercise      Number of    Exercise
                                               Shares      Price          Shares      Price
                                             ---------    --------      ---------    --------
         <S>                                 <C>          <C>           <C>          <C>
         Outstanding at January 1, 2001                                       183    $   5.71
         Granted                                                              397         .32
         Exercised                                                             --          --
         Canceled                                                            (220)       5.36
                                                                        ---------
         Outstanding at December 31, 2001                                     360        1.20
         Granted                                 1,928    $   0.32             --          --
         Exercised                                  --          --             --          --
         Canceled                                   --          --           (173)       1.20
                                             ---------                  ---------
         Outstanding at  December 31, 2002       1,928    $   0.32            187    $   1.20
                                             =========                  =========
</TABLE>

         The weighted average fair value of options granted during the years
ended December 31, 2002 and 2001 was $0.32 and $0.17, respectively.

                                      F-18
<PAGE>
         The following information applies to options outstanding at December
31, 2002:

                                                    2002 Plan       1999 Plan
                                                  -------------   -------------
         Range of exercise prices                 $0.30 - $1.10       $1.20
         Weighted average remaining life (years)        5               4
         Options exercisable                         309,000         182,500
         Weighted average exercise price              $0.32           $1.20


         The Company has adopted the disclosure only provision of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation
(SFAS 123)". Accordingly, no compensation expense has been recognized for stock
options issued during 2002 and 2001. Had compensation cost for the Company's
options been based on the fair value of the awards at the grant date consistent
with the provisions of SFAS No. 123, the Company's net loss and loss per share
would have approximated the following proforma amounts (thousands, except per
share amounts):
                                                              2002       2001
                                                            --------   --------
         Net income (loss) - as reported                    $  1,150   $ (9,199)
         Net income (loss) - pro forma                           846     (9,578)
         Basic earnings (loss) per share - as reported          0.28      (8.53)
         Basic earnings (loss) per share - pro forma            0.21      (9.00)
         Diluted earnings (loss) per share - as reported        0.17      (8.53)
         Diluted earnings (loss) per share - pro forma          0.10      (9.00)


         The fair value of each option and warrant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions:

                                                              2002       2001
                                                            --------   --------
         Dividends                                            None       None
         Expected volatility                                  200%       128%
         Risk free interest rate                              4.0%       4.5%
         Expected life                                      5 years    5 years


         At December 31, 2002, the Company has outstanding stock options for
employees to purchase 1,830,000 shares, for directors to purchase 75,000 shares,
and for non-employees to purchase 210,000 shares of common stock at exercise
prices ranging from $0.30 to $1.30.


NOTE J - MAJOR CUSTOMERS

         During 2002 and 2001, no single customer accounted for more than 10% of
the Company's net sales, nor receivables.


NOTE K - COMMITMENT

         The Company presently rents its warehouse under an operating lease that
expires in 2005. The monthly rent is adjusted annually to reflect the average
percentage increase in the Consumer Price Index. The Company's main office space
is currently being leased on a month to month basis, and the Company plans to
move into a new location in April 2003 (see Note Q). The Company leases the
location of its car outlet from the Company's CEO (see Note M). Rent expenses
under all leases were approximately $145,000 and $270,000 in 2002 and 2001,
respectively.

                                      F-19
<PAGE>
         Future minimum lease payments on the lease are as follows (thousands):

         Year ending
         December 31
         -----------
            2003                                            $      132
            2004                                                   132
            2005                                                   107
                                                            ----------
            Total                                           $      371
                                                            ==========


NOTE L - EQUITY

         Common stock
         ------------
         On July 1, 2002, ZAP's stock began trading on the Over-the-Counter
(OTC) Bulletin Board under the new stock symbol of ZAPZ. According to the OTC
Bulletin Board, the symbol change is to indicate that ZAP is no longer in
Chapter 11 Reorganization, and that the stock has undergone a reverse split
effective July 1, 2002. ZAP's 6,693,643 shares of common stock outstanding were
converted on a 3:1 basis to 2,231,214 shares of common stock in the Reorganized
ZAP, which was then reverse split on a 2:1 basis into 1,115,607 total shares
outstanding. The final result of the conversion and the reverse split equates to
a ratio of 6:1. Thus, for every six shares a common shareholder held on June 20,
2002 (date of court confirmation of plan of reorganization) the individual
received one share of common stock in the Reorganized ZAP. All shares and per
share data have been restated to reflect the stock splits. The common
shareholders also received, for each common share issued to the claimant, one
warrant in Series B, C and D to purchase common stock in the Reorganized ZAP.

         During 2002, the Company issued 4.5 million shares for the acquisition
of RAP and Voltage Vehicles (see Note A), and approximately 1.2 million shares
of common stock for a conversion by Daka of a note payable into equity (see Note
C). During 2002, ZAP also issued approximately 351,000 shares of common stock to
satisfy professional fees and the acquisition of equipment, and approximately
295,000 shares to satisfy $133,000 of unsecured debt holders claims and other
payables. In addition, the Company issued approximately 44,000 shares in
exchange for $48,000 in cash as a result from the exercise of warrants and stock
options.

         Preferred stock
         ---------------
         Under the confirmed plan of reorganization all outstanding preferred
shares were converted into common shares of ZAP stock. During 2002,
approximately 2,250 shares of preferred stock were converted into 630,000 shares
of common stock (post split).

                                      F-20
<PAGE>
         Warrants
         --------
         During 2002, the Company issued warrants for the acquisition of RAP and
Voltage Vehicles, to settle debt obligations and for equipment and services.
Total warrants outstanding at December 31, 2002 are summarized as follows (in
thousands):

            Series A                                        $     4,712
            Series B                                              9,464
            Series C                                              8,888
            Series D                                              8,789
            Series K                                              4,500
                                                            -----------
                                                            $    36,353
                                                            ===========


         The Company is authorized to issue 10 million shares each of Series A,
B, C, D and K. Series A warrants give the holder the option for a period of
1,095 days, from the issuance, to purchase ZAP's common stock at an exercise
price of $1.05 for the life of the warrant. Series B warrants give the holder
the right to purchase one share of ZAP stock for a period of 365 days, from the
date of issuance, at an exercise price of $1.50 for the first 180 days, $1.75
for the next 90 days, and $2.00 for the remaining life of the warrant. Series C
warrants give the holder the right to purchase one share of ZAP stock for a
period of 730 days, from the date of issuance, at an exercise price of $4.00 for
the first 547 days, $4.50 for the next 90 days, and $5.00 for the reaming life
of the warrant. Series D warrants give the holder the right to purchase one
share of ZAP stock for a period of 1,095 days, from the date of issuance, at an
exercise price of $8.00 for the first 730 days, $9.00 for the next 190 days, and
$10.00 for the remaining life of the warrant. Series K warrants give the holder
the right to purchase one share of ZAP stock for a period of 1,095 days, from
the date of issuance, at an exercise price of $1.00 for the life of the warrant.

         The Board of Directors of ZAP shall have the right to (i) decrease the
exercise price of the warrants, (ii) increase the life of the warrants in which
event the exercise price may be increased, or (iii) make such other changes as
the Board of Directors of ZAP deems necessary and appropriate under the
circumstances provided the changes contemplated do not violate any statutory or
common law.

         Warrants for all Series may be assigned, sold, or transferred by the
holder without restriction. The stock received from the exercise of a warrant
for any Series will be without restriction, and as a free trading stock exempt
from the Securities Act of 1993 pursuant to Section 1145 of the Bankruptcy Code.

         Series B, C, and D warrants not exercised may be redeemed by ZAP for a
price of $0.01 per warrant upon thirty (30) days' written notice to the holders
thereof; provided, however, that if not all unexercised warrants in a particular
series are redeemed, then the redemption shall be pro-rated equally among the
holders of unexercised warrants in the series. The Series A warrants may be
redeemed by ZAP for $0.01 per warrant only if the post-confirmation,
post-reverse split trading price of the ZAP stock is 200% or more than the
strike price of the affected warrant, (i) at the time written notice is issued,

                                      F-21
<PAGE>
and (ii) for at least 30 consecutive calendar days prior to that time.
Otherwise, the Series A warrants may be redeemed upon thirty day's written
notice for $0.75 per warrant. If not all unexercised warrants in Series A are
redeemed, then the redemption shall be pro rated equally among the holders of
unexercised warrants in Series A. The Board may not change the terms of the
Series A warrants without the consent of the holders of Series A warrants. In
February 2003, the Company redeemed 2.5 million of the outstanding Series A
warrants that were issued to the preferred shareholders in accordance with ZAP's
confirmed plan of reorganization. However, the warrant holders are currently
disputing the redemption.


NOTE M - RELATED PARTY

         The Company leases office space and land from its CEO and major
shareholder (See Note K). This property is used to operate the car outlet.
Rental expense under this lease was approximately $49,000 for the year ended
December 31, 2002.

         The Company has an advance of approximately $75,000 from its CEO. The
advance bears interest at 6% and is due on demand.


NOTE N - LITIGATION

         From time to time, the Company is subject to legal proceedings and
claims in the ordinary course of business, including employment-related and
trade related claims.

         The Company recently became aware that the California Department of
Motor Vehicles' Investigations Division is conducting an inquiry into the
activities of certain employees of the RAP Group. If any adverse findings
result, the Auto Dealer's License for the RAP Group could be jeopardized since
RAP is currently on probation by the California Department of Motor Vehicles for
a period of two years ending June 12, 2004. The probationary action was due to
the RAP Group's untimely transfers of pink slips for sales of vehicles and lack
of compliance with Motor Vehicle Pollution Control guidelines on certain
automobile sales. As part of ZAP's original business plan, management is
considering converting the dealership into a wholesale distributor for its
electric cars.

         On September 9, 2002, ZAP and certain of its Directors were named as a
co-defendant in a lawsuit filed in the Superior Court of the State of California
by Shareholders of Advanced Wireless Systems, Inc. The suit alleges that ZAP
improperly acquired both the RAP Group, Inc and Voltage Vehicles. Plaintiffs
seek to rescind the acquisitions and have alleged monetary damages in an amount
not specified in their complaint. The plaintiff has requested that the lawsuit
be dismissed.  A motion will be filed in April 2003 to dismiss the action.
Management believes that the ultimate resolution of this claim will not have a
material adverse effect on the Company's financial position or results of
operations.

NOTE O - SEGMENT REPORTING

         The Company has two reportable segments consisting of sales and
marketing of electric items and operations of a retail car outlet (see Note A).
These segments are strategic business units that offer different services. They
are managed separately because each business requires different resources and
strategies. The Company's chief operating decision making group, which is
comprised of the Chief Executive Officer and the senior executives of each of
the Company's segments, regularly evaluates financial information about these
segments in deciding how to allocate resources and in assessing performance. The
performance of each segment is measured based on its profit or loss from
operations before income taxes and extraordinary items (see Note B). The Company
operated in only one segment during 2001.

                                      F-22
<PAGE>
                                                  Electronic    Car
                                                     Items     Outlet    Year
                                                    -------   -------   -------
                                                           (In Thousands)
         Year ended December 31, 2002:
         Net sales                                  $ 1,811   $ 2,602   $ 4,413
         Gross profit                                   140       114       254
         Depreciation, amortization and impairment      295        15       310
         Net loss before extraordinary items         (2,466)     (348)   (2,814)
         Total assets                                 2,342     1,765     4,107


NOTE  P - SUPPLEMENTAL CASH FLOW INFORMATION

A summary of non-cash investing and financing information is as follows (in
thousands):
<TABLE><CAPTION>
                                                                       Year ended December 31
                                                                       ----------------------
                                                                         2002          2001
                                                                       --------      --------
         <S>                                                           <C>           <C>
         Cash paid during the year for:
            Income taxes                                               $      2      $     --
            Interest                                                          1            --

         Non-cash investing and financing activities:
            Debt issued to repurchase common stock                           --         1,500
            Cancellation of note receivable from shareholder                 --           139
            Issuance of common stock to repurchase
              employee stock options                                         --            10
            Common stock issued to pay off debt                             133            --

         Issuance of common stock and assets and liabilities
          recognized upon acquisition of RAP and Voltage Vehicles:
            Common stock                                                  1,575            --
            Accounts receivable                                             685            --
            Inventory                                                       571            --
            Property and equipment, net                                      24            --
            Goodwill                                                        801            --
            Accounts payable and accrued liabilities                       (506)           --
</TABLE>

                                      F-23
<PAGE>
NOTE  Q - SUBSEQUENT EVENTS

         On March 25, 2003, the Company purchased a three story 20,000 square
foot office building in downtown Santa Rosa for $3.25 million in convertible
debt, stock and warrants. The building will be used as ZAP's corporate
headquarters and for a company retail store. Terms of the transaction included a
convertible promissory note for $2 million for 22 years with interest only for
the first two years. No payments of interest are due until after two years. At
that time, the payee has the option to convert some or all of the unpaid
principal and accrued interest to shares of ZAP's common stock at an agreed upon
conversion price. The seller also received a certain amount of common stock and
warrants in connection with the transaction


ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE.

During 2002 our principal independent accountant was dismissed with a new firm
appointed.



                                    PART III

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
           COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.


                                   MANAGEMENT
Directors and Management
------------------------
Name                           Age          Position
----                           ---          --------
Steven Schneider                42          Director, Chief Executive Officer
Gary Starr                      47          Director, Chairman of the Board
William R. Hartman              55          Chief Financial Officer
James Thomas                    55          Vice President of Sales Operations
Renay Cude                      26          Corporate Secretary
Louis Auletta                   52          Director
Michael G. Coder                54          Director
Lawrence W. McLaughlin          55          Director


STEVE SCHNEIDER - CHIEF EXECUTIVE OFFICER/DIRECTOR was the founder of Voltage
Vehicles, a full-service fuel vehicle distributor specializing in the full
spectrum of electric vehicles (EV) and full-performance alternative fuel
vehicles (AFV) including automobiles, motorcycles, bicycles, scooters,
hovercraft, neighborhood electric vehicles (NEV), commercial vehicles and
accessories. He also founded Auto Distributors, Inc., which is the promotion and
distribution arm of Voltage Vehicles dealership. He is also on the Advisory
Board of Directors to Apollo Energy Systems. Apollo is in the business of
<PAGE>
developing and manufacturing fuel cell technology and propulsion systems.He is
also active in legislative issues regarding alternative fuel vehicles. Mr.
Schneider recently lobbied at the nation's capital on behalf of the Clear Act
(S.760/H.R. 1864: "Clean Efficient Automobiles Resulting From Advanced Car
Technologies"). He also supported Representative Sherwood Boehlert (R-NY)
efforts to introduce new legislation called the "Alternative Fueled Acceleration
Act of 2001" along with actively supporting numerous other related state and
federal initiatives. He is an active member on the electrical low speed vehicle
subcommittee in Washington D.C. where his ideas have spawned new innovative
markets for low speed vehicles.

Mr. Schneider's automotive career spans more than 17 years experience in varying
roles including that of owner, partner, sales representative, business manager,
creditor, and adjustor. His successes also include the formation of two Northern
California automobile sales companies, as well as stints in the financial, real
estate, and electronics industries. He has also received extensive education and
training in sales and marketing, banking, insurance, and automotive training.

GARY STARR - DIRECTOR /CHAIRMAN OF THE BOARD was previously the Chief Executive
Officer of ZAP and has been a director since its inception in 1994. He was
previously the Chief Executive Officer of ZAP since September 1999. He has been
building, designing, and driving electric cars for more than 25 years. In
addition to overseeing the marketing of more than 80,000 electric vehicles, Mr.
Starr has invented several solar electric products and conservation devices. Mr.
Starr founded U.S. Electricar's electric vehicle operation in 1983. In 1993, Mr.
Starr earned a Private Industry Council Recognition Award for creating job
opportunities in the EV industry and was named as one of the ten most
influential electric car authorities by Automotive News. He has also received
recognition awards for his contributions toward clean air from the American Lung
Association of San Francisco, CALSTART and U.S. Senator Barbara Boxer. 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 talk and news shows (including
Larry King Live, The Today Show, Inside Edition, CNN Headline News, Prime Time
Live, and the CBS Evening News and the McNeil Lehrer News Hour) as a recognized
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.

WILLIAM HARTMAN - CFO was appointed Chief Financial Officer in March 2001. He
had been engaged as a financial consultant at our Company since January 2001. He
has over 15 years of CFO or Controller experience in various industries. While
in a previous position as Division Controller for Sega of America he obtained
extensive experience in the consumer products manufacturing and distribution
business. Prior to his engagement at ZAP, Mr. Hartman had been providing
financial and accounting consulting services to various Internet start-ups in
the SF Bay area. 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.

JAMES THOMAS-VICE PRESIDENT OF SALES OPERATIONS. Mr. Thomas has more than 25
years of automotive sales marketing and operations experience. He began his
career with General Motors and has held key management positions with BMW,
Volkswagen and Daewoo. In 1994, Mr. Thomas was one of the pioneers of the
neighborhood electric vehicle business as an officer of Trans 2 Corporation, the
first NEV available on the market. Later he became instrumental in the sales
launch of Global Electric Motorcar's (GEM) neighborhood electric vehicles.

RENAY CUDE was appointed Corporate Secretary in August 2002. Prior to joining
our company, Ms. Cude was working as a legal secretary for a law firm. Ms. Cude
has over five years experience working in the bankruptcy field with helping
companies through the reorganization process. Ms. Cude holds an Associates
Degree in Business Administration from Sonoma State University.

LOUIS AULETTA - DIRECTOR has been involved in various entrepreneurial business
ventures for the past 35 years. Currently, he is engaged in real estate
development. An avid environmentalist all his life, he has also served as the
executive director of the Earth Options Institute. Mr. Auletta holds a Bachelors
degree in Business from Wagner College, New York.

MICHAEL G. CODER - DIRECTOR was educated at the University of California, Davis
and received a Bachelors Degree in Psychology in 1970. He also received his law
<PAGE>
degree from the University of the Pacific-Mc George School of Law in 1974. Mr.
Coder was employed by the District Attorneys of Yolo and Sacramento Counties
from 1973 to 1974. He also served as a Supervising Staff Counsel for the
California Department of Motor Vehicles from 1974 to 1976. Additionally, Mr.
Coder was an Administrative Law Judge for the Educational (now Public)
Employment Relations Board from 1976 to 1977. For the past 25 years, Mr. Coder
has been a senior partner or sole law practitioner representing the members of
the automotive industry. Mr. Coder is the President of Auto Distributors, a
licensed distributor of alternative fuel powered motor vehicles.

LAWRENCE W. MCLAUGHLIN - DIRECTOR has practiced law in Sonoma County, California
since 1978, specializing in municipal and civil matters. He is presently legal
counsel to the boards of several corporations, primarily in the medical field,
and also represents several local Fire Districts as well as the City of
Sebastopol. In addition, Mr. Mc Laughlin's law firm (Dermott, Cutler & Mc
Laughlin) represents other business, collection, and family law clients. Mr. Mc
Laughlin is a graduate of the University of California, Berkeley, and received
his law degree from Empire College in Santa Rosa, California.


ITEM 10.   EXECUTIVE COMPENSATION.

The following tables set forth information concerning the compensation we paid
for services rendered during our fiscal years ended December 31, 2002, 2001 and
2000, by the Named Executive Officers. The Named Executive Officers are our
company's Chief Executive Officer, regardless of compensation level, for the
salary and bonus for the fiscal years ended December 31, 2002, 2001 and 2000.
Steve Schneider was elected the Chief Executive Officer on October 26, 2002 with
Gary Starr appointed Chairman of the Board on the same date.

                           SUMMARY COMPENSATION TABLE
<TABLE><CAPTION>
                                               Annual Compensation               Long -Term Compensation

                                                                                    Awards           Payouts
                                                                           ------------------------- ---------- ---------
                                                            Other          Restricted   Stock
                                                            Annual         Stock        Underlying              All Other
                                         Salary   Bonus     Compensation   Award        Options      LTIP       Compen-
                                                                                        /SARs        Payouts    sation
Name and Principal Position     Year     ($)      ($)       ($)            ($)          (#)          ($)        ($)
------------------------------- -------- -------- --------- -------------- ------------ ------------ ---------- ---------
<S>                             <C>      <C>      <C>       <C>            <C>          <C>          <C>        <C>
Steve Schneider                 2002     31,300                                         200,000
Chief Executive Officer
Effective 10/26/02

Gary Starr                      2000     59,600   700
Chairman of the Board           2001     66,700                                         116,667
Former Chief Executive officer  2002     61,600                                         200,000

John Dabels                     2000     69,000   700
Former President
</TABLE>


The following table shows all individual grants of stock options to the Named
Executive Officers (as defined above) for the fiscal year ended December 31,
2002.
<PAGE>
            OPTION/SAR GRANTS IN LAST FISCAL YEAR (INDIVIDUAL GRANTS)

<TABLE><CAPTION>
                          Year              Number of                    % of Total             Exercise or
                         Options       Securities Underlying       Options/SARs Granted to      Base Price      Expiration
Name                     Granted       Options/SARs Granted        Employees in Fiscal Year       ($/Sh)           Date
----                     -------       --------------------        ------------------------       ------          -------
<S>                      <C>           <C>                         <C>                            <C>             <C>
Steve Schneider           2002               200,000                         14%                   $0.30          07/5/12
Gary Starr                2002               200,000                         14%                   $0.30          07/5/12
</TABLE>


COMPENSATION OF DIRECTORS

Our directors do not receive any cash compensation for their service on our
Board of Directors, but they may be reimbursed for certain expenses in
connection with their attendance at board meetings. Three of ZAP's outside
directors were each granted 25,000 options to purchase common stock during the
year ended December 31, 2002.


ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table presents information with respect to beneficial ownership of
our Common Stock as of March 28, 2003 by:

o    Each person or entity who beneficially owns more than 5% of the Common
     Stock;

o    Each of our directors;

o    Each of our Named Executive Officers; and

o    All Executive Officers and directors as a group.

Unless otherwise indicated, the address for each person or entity named below is
c/o ZAP, 117 Morris Street, Sebastopol, California 95472. The table includes all
shares of Common Stock issuable upon the exercise of options and other rights
beneficially owned by the indicated stockholders on that date. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Except as indicated by footnote, and except for community
property laws where applicable, the persons named in the table below have sole
voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.

The applicable percentage of ownership is based on 48,136,370 shares of Common
Stock outstanding on a fully diluted basis as of March 28, 2003. The number of
shares of Common Stock outstanding on a fully diluted basis includes 33,853,765
shares of Common Stock issuable upon the exercise of certain warrants, and
955,110 shares of Common Stock issuable upon the exercise of certain options.
In February, 2003 the Company redeemed pproximately 2.5million warrants that
were issued to the preferred shareholders in accordance with ZAP's Plan of
Reorganization. However, the warrant holders are currently disputing the
redemption.
<PAGE>
                                               SHARES BENEFICIALLY OWNED
NAME OF BENEFICIAL OWNER                       NUMBER            PERCENT

Steve Schneider(1)                           12,961,110            26.9

Gary Starr (2)                                5,381,157            11.2

Ridgewood ZAP LLC (3)                         3,978,000             8.3
Ridgewood Power
947 Linwood Avenue
Ridgewood NJ

Mercatus & Partners (4)                       2,941,176             5.1
188 Green Lane
Northwood
Middlesex
United Kingdom

All Executive Officers and
directors as a group (5 persons)             18,442,267            38.3


(1)  Includes 10,000,000 shares of Common Stock issuable upon the exercise of
various warrants and 61,110 shares of stock upon the exercise of stock options.

(2)  Includes 4,152,535 shares of common stock issuable upon the exercise of
various warrants and 177,777 shares of stock upon the exercise of stock options.

(3)  Includes 2,983,500 shares of common stock issuable upon the exercise of
certain warrants.

(4)  Stock will be cancelled in early April 2003. It was provided as collateral
for a working capital loan, which did not fund.



ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Since our inception in 1994, we have not been a party to any transaction or
series of similar transactions in which the amount involved exceeded or will
exceed $60,000 and in which any director, executive officer or holder of more
than 5% of our Common Stock had or will have an interest, other than as
described under "Management" and the transactions described below.

Michael G. Coder, who became a member of our Board of Directors in October 2002,
is our principle outside counsel. During the year-ended December 31, 2002, Mr.
Coder received approximately $23,000 In cash and common stock for legal services
provided to us.

The RAP Group also paid approximately $30,000 in rent to Steve Schneider, ZAP's
CEO, during the year ended 2002.
<PAGE>
ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K.

EXHIBITS

Exhibit No.                      Description
-----------                      -----------

3.1    Articles of Incorporation of ZAP Power Systems, endorsed and filed on
       September 23, 1994. (1)

3.2    Certificate of Amendment to Articles of Incorporation of ZAP Power
       Systems, endorsed and filed on November 8, 1996. (2)

3.3    Certificate of Amendment of Articles of Incorporation of ZAP Power
       Systems, endorsed and filed on June 2, 1999. (3)

3.4    Certificate of Amendment of Articles of Incorporation of ZAPWORLD.COM,
       endorsed and filed June 28, 2000. (1)

3.5    Certificate of Amendment of Articles of Incorporation of ZAPWORLD.COM,
       endorsed and filed February 26,2001. (5)

3.6    Amended Bylaws of ZAPWORLD.COM dated June 24, 2000. (3)

3.7    Certificate of Determination of Rights and Preferences of the Series B
       Convertible Preferred Stock, Endorsed and filed June 26, 2001(5)

3.8    Amended and Restated Certificate of Determination of the rights,
       Preferences, Privileges of the Series B Convertible Preferred Stock,
       filed on October 2, 2001. (5)

10.1   Settlement Agreement Between ZAPWORLD.COM, Ridgewood ZAP, LLC, and the
       Shareholders dated June 27, 2001 (5)

10.2   ZAP's Approved Second Amended Plan of Reorganization of June 20, 2002 (6)

23.1   Consent of Odenberg, Ullakko, Muranishi & Co. LLP*

31.1   Certification of Chief Executive Officer.

31.2   Certification of Chief Financial Officer.


 *   Filed herewith.
(1)  Filed and endorsed on September 23, 1994. Included as an exhibit to the
     Registrant's Annual Report on Form 10-KSB for the year ended December
     31, 2000.
(2)  Previously filed as an exhibit to the Registrant's Annual Report on Form
     10-KSB for the year ended December 31, 1996.
(3)  Previously filed as an exhibit to the Registrant's Annual Report on Form
     10-KSB for the year ended December 31, 1999.
(4)  Previously filed as an exhibit to the Registrant's Annual Report on Form
     10-KSB for the year ended December 31, 2000.
(5)  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.
(6)  Previously filed as an exhibit to the Registrant's Form 8-K of October 20,
     2002.



REPORTS ON FORM 8-K.

We filed a Form 8-K on October 30, 2002 to report the elections of Steve
Schneider as ZAP's new Chief Executive Officer and Gary Starr as the Chairman of
the Board.
<PAGE>
                                   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
                                 (Registrant)

                                 By  /s/ Steve Schneider
                                     ------------------------------------------
                                     (Steve Schneider, Chief Executive Officer)

                                 Date  March 28, 2003
                                       ----------------------------------------




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.


Signature                      Title                              Date
---------                      -----                              ----


/s/  Steve Schneider           CEO                                March 28, 2003
---------------------------


/s/  William R. Hartman        CFO                                March 28, 2003
---------------------------


/s/  Gary Starr                Director / Chairman of the Board   March 28, 2003
---------------------------


/s/  Louis Auletta             Director                           March 28, 2003
---------------------------


/s/  Michael Coder             Director                           March 28, 2003
---------------------------


/s/  Lawrence W. McLaughlin    Director                           March 28, 2003
---------------------------