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


                                   Form 10-QSB


(Mark One)

[X]      QUARTERLY  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934

         For the quarterly period ended March 31, 1998


[ ]      TRANSITION  REPORT  PURSUANT TO 13 OR 15(d) OF THE SECURITIES  EXCHANGE
         ACT OF 1934

            For the transition period from ___________ to __________

                       Commission file number 333-05744-LA


                                ZAP POWER SYSTEMS
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


        CALIFORNIA                                         94-3210624
-------------------------------                        -------------------
(State or other jurisdiction of                         (I.R.S. Employer 
 incorporation or organization)                        Identification No.)

                 117 Morris Street, Sebastopol, California 95472
--------------------------------------------------------------------------------
                    (Address of principal executive offices)


     (707) 824-4150
---------------------------
(Issuer's telephone number)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  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
                                                                       --   --

                     (APPLICABLE ONLY TO CORPORATE ISSUERS)

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.  2,583,270 shares of common
stock as of April 24, 1998


          Transitional Small Business Disclosure Format Yes [ ] No [x]
<PAGE>

Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

ZAP POWER SYSTEMS
CONDENSED BALANCE SHEET

                                                                     March 31,
                                                                       1998
--------------------------------------------------------------------------------
                                     ASSETS
CURRENT ASSETS
     Cash                                                           $   370,036
     Receivables                                                        159,123
     Inventories                                                        313,878
     Prepaid expenses and other assets                                  101,859
                                                                    -----------
         Total current assets                                           944,896

PROPERTY AND EQUIPMENT                                                  190,206

OTHER ASSETS
     Intangibles, net of accumulated amortization of $4,161              19,660
     Deposits                                                            13,503
                                                                    -----------
          Total other assets                                             33,163
                                                                    -----------
          Total assets                                              $ 1,168,265
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable                                               $    78,799
     Accrued liabilities and other expenses                              23,694
     Customer deposits                                                   32,401
     Current maturities of notes payable                                 34,363
     Current maturities of long-term debt                                 3,661
     Current maturities of obligations under capital leases              12,283
                                                                    -----------
          Total current liabilities                                     185,201

OTHER LIABILITIES
     Obligations under capital leases, less current maturities           10,910
     Long-Term Debt, less current maturities                             16,225
     Notes Payable, less current maturities                              60,000
                                                                    -----------
                Total other liabilities                                  87,135
                                                                    -----------

STOCKHOLDERS' EQUITY
     Common stock, no par value; 10,000,000 shares
             authorized, 2,566,695 shares issued and
             outstanding                                              3,373,276
     Accumulated deficit                                             (2,477,347)
                                                                    -----------
                Total stockholders' equity                              895,929
                                                                    -----------

Total liabilities and stockholders' equity                          $ 1,168,265
                                                                    ===========


The accompanying notes are an integral part of these financial statements

                                       2
<PAGE>

ZAP POWER SYSTEMS
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

                                                    Three months ended March 31,
                                                       1998             1997
                                                    -----------     -----------

NET SALES                                           $   461,200     $   257,900

COST OF GOODS SOLD                                      269,600         221,800
                                                    -----------     -----------
GROSS PROFIT                                            191,600          36,100
                                                    -----------     -----------

OPERATING EXPENSES
     Selling                                            159,000          92,800
     General and administrative                         162,500         176,200
     Research and development                            32,300          49,000
                                                    -----------     -----------
                                                        353,800         318,000
                                                    -----------     -----------

LOSS FROM OPERATIONS                                   (162,200)       (281,900)
                                                    -----------     -----------

OTHER INCOME (EXPENSE)
     Interest expense                                    (2,700)         (8,900)
     Other                                                4,500          (2,600)
                                                    -----------     -----------
                                                          1,800         (11,500)
                                                    -----------     -----------

NET LOSS                                            $  (160,400)    $  (293,400)
                                                    ===========     ===========

NET LOSS PER COMMON SHARE, BASIC AND DILUTED        $     (0.06)    $     (0.14)
                                                    ===========     ===========

WEIGHTED AVERAGE OF COMMON
      SHARES OUTSTANDING                              2,558,000       2,146,500
                                                    ===========     ===========

The accompanying notes are an integral part of these financial statements

                                       3
<PAGE>
<TABLE>

ZAP POWER SYSTEMS
CONDENSED STATEMENTS OF CASH FLOWS
          (Unaudited)
<CAPTION>
                                                             Three months ended March 31,
                                                                 1998         1997
-----------------------------------------------------------------------------------------
<S>                                                           <C>          <C>       
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                                 $(160,400)   $(293,400)
     Adjustments to reconcile net loss to net cash
         used by operating activities
         Depreciation and amortization                           20,600       12,700
         Allowance for doubtful accounts                                       5,300
         Issuance of common stock for services rendered          74,100       15,700
     Changes in:
         Receivables                                            (37,400)     (57,300)
         Inventories                                            (46,200)      (2,800)
         Prepaid expenses                                       (36,300)       1,200
         Deposits                                               (74,100)      (7,600)
         Accounts payable                                       (84,200)     (32,600)
         Accrued liabilities and other expenses                 (54,500)     (42,200)
                                                              ---------    ---------
                  Net cash used by operating activities        (398,400)    (401,000)
                                                              ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchases of equipment                                     (47,400)     (30,400)
     Investment in subsidiaries                                               (5,000)
                                                              ---------    ---------
         Net cash used by investing activities                  (47,400)     (35,400)
                                                              ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from notes payable                                              30,000
     Increase in loans payable                                   20,000
     Increase in restricted cash                                             (40,000)
     Sale of common stock, net of stock offering costs          126,400      547,100
     Principal repayments on long-term debt                      (4,700)      (3,000)
     Payments on obligations under capital leases                (3,800)      (3,000)
     Principal repayments on note payable                       (12,500)     (87,000)
                                                              ---------    ---------
                  Net cash provided by financing activities     125,400      444,100
                                                              ---------    ---------

NET INCREASE/(DECREASE) IN CASH                                (320,400)       7,700

CASH, beginning of period                                       690,400      161,600
                                                              ---------    ---------

CASH, end of period                                           $ 370,000    $ 169,300
                                                              =========    =========
<FN>
The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>
                                       4

<PAGE>

ZAP POWER SYSTEMS
NOTES TO THE INTERIM UNAUDITED CONDENSED FINANCIAL STATEMENTS

(1)   Basis of Presentation

The financial  statements included in this Form 10-QSB have been prepared by the
Company,  without audit, pursuant to the rules and regulations of the Securities
and Exchange  Commission.  Certain information and footnote disclosures normally
included in financial  statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, pursuant to such rules and
regulations,  although  management believes the disclosures are adequate to make
the  information  presented not  misleading.  The results of operations  for any
interim period are not necessarily  indicative of results for a full year. These
statements  should be read in  conjunction  with the  financial  statements  and
related  notes  included in the  Company's  Annual Report on Form 10-KSB for the
year ended December 31, 1997.

The financial statements presented herein as of March 31, 1998 and for the three
months ended March 31, 1998 and 1997 reflect, in the opinion of management,  all
material adjustments  consisting only of normal recurring  adjustments necessary
for a fair  presentation  of the financial  position,  results of operations and
cash flow for the interim periods.

The net loss per common share is based on the weighted  average number of common
shares  outstanding in each period.  Common stock  equivalents  associated  with
stock options have been excluded from the weighted  average  shares  outstanding
since the effect of these securities would be anti-dilutive.

(2) -  RECEIVABLES

                                                                  March 31, 1998
                                                                  --------------
Trade accounts receivable                                         $    164,123
Less allowance for doubtful accounts                                    (5,000)
                                                                  --------------
                                                                  $    159,123
                                                                  ==============

(3) - INVENTORIES

                                                                  March 31, 1998
                                                                  --------------
Raw materials                                                     $    221,500
Work-in-process                                                         48,265
Finished goods                                                          44,112
                                                                  --------------
                                                                  $    313,877
                                                                  ==============

(4) - PROPERTY AND EQUIPMENT

                                                                  March 31, 1998
                                                                  --------------
Demonstration items                                               $     84,497
Machinery and equipment                                                 56,825
Equipment under capital leases                                          45,940
Office furniture and fixtures                                           37,985
Computers                                                               28,746
Leasehold improvements                                                  21,737
Vehicles                                                                56,231
                                                                  --------------
                                                                       331,961
Less accumulated depreciation and amortization                        (141,755)
                                                                  --------------
                                                                  $    190,206
                                                                  ==============
                                       5
<PAGE>

(5) - NOTES PAYABLE
                                                                  March 31, 1998
                                                                  --------------

Notes to  stockholders,  with  interest at 10%;  interest and
      principal  due when the notes mature in December  1999.
      The note holders have been issued warrants to purchase,
      in the  aggregate,  21,800  shares of  common  stock at
      $5.25 per share through October 1999.                        $    94,400
                                                                   ===========


(6) - COMMON STOCK

In November of 1996 the Company commenced a direct public offering of its Common
Stock,  offering for sale 500,000 shares at $5.25. During 1996, the Company sold
3,800 shares and  received  $19,900 in  proceeds.  In 1997,  the Company sold an
additional  415,100  shares in connection  with the direct  public  offering and
realized  net  proceeds  of  $1,990,900,  net of  offering  related  expenses of
$188,400.  In total,  the  Company  sold 84% of the shares  offered for sale and
realized net  proceeds of  $2,010,600.  The  offering was  completed in November
1997.

The Company has in process a second direct  public  offering of its Common stock
for sale 500,000 shares at $6.00 per share. The company  commenced this offering
in January  1998 and as of April 24,  1998 has sold 36,000  shares and  realized
gross  proceeds of $215,700.  On February 27, 1998,  the Company's  Common Stock
commenced trading on the OTC Bulletin Board under the stock symbol "ZAPP".

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.

Special Note Regarding Forward-Looking Statements

     Certain  statements in this Form 10-QSB,  including  information  set forth
under this Item 2. "Management's  Discussion and Analysis of Financial Condition
and Results of Operations"  constitute  "forward-looking  statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "ACT"). ZAP
Power Systems (the  "Company")  desires to avail itself of certain "safe harbor"
provisions of the Act and is therefore including this special note to enable the
Company to do so.  Forward-looking  statements  included  in this Form 10-QSB or
hereafter  included  in  other  publicly  available  documents  filed  with  the
Securities and Exchange  Commission,  reports to the Company's  stockholders and
other publicly  available  statements  issued or released by the Company involve
known and unknown risks, uncertainties,  and other factors which could cause the
Company's actual results,  performance  (financial or operating) or achievements
to differ from the future  results,  performance  (financial  or  operating)  or
achievements  expressed  or implied by such  forward  looking  statements.  Such
future results are based upon  management's  best  estimates  based upon current
conditions and the most recent results of operations.

Overview

         The Company designs,  assembles,  manufactures and distributes electric
bicycle  power  kits,  electric  bicycles  and  tricycles,  and other  low-power
electric   transportation   vehicles.   Historically,   unit   sales  have  been
approximately  55% kits and 45%  electric  bicycles.  Dollar sales have been 50%
kits and 50% electric bicycles.

         The Company sells its electric  bicycles and kits to retail  customers,
international   distributors,   law  enforcement   agencies,   electric  utility
companies,  bicycle  dealerships and mail order catalogs.  Net revenue is net of
returns.  The Company sells to the mail order catalogs and selected customers on
credit with net 30-day terms.  Many of the bicycle  dealerships are sold cash on
delivery. The retail sales are primarily paid for with a credit card or personal
check before shipment of the product.

         The Company manufactures an electric motor system that is sold as a kit
to be installed by the customer on their own bicycle.  The Company also installs
the motor system on bicycles that the Company  buys.  The Company then sells the
complete  electric  bicycle to the  customer.  The  Company  purchases  complete
bicycles from various

                                       6
<PAGE>

bicycle  manufacturers  for use with the Company's  electric  motor system.  The
Company  manufactures the electric motor kit, which has  approximately 62 unique
parts.  The  manufacturing of the electric motor kit and the installation of the
motor systems to the bicycles are done at its Sebastopol location.  The electric
motors are purchased from an original  equipment  manufacturer (OEM) in the auto
and air-conditioning  industry.  The Company is using one vendor for its motors,
although there are other companies that could be used with slight  modifications
to the motor support brackets.  The batteries are standard batteries used in the
computer and security  industries for power  interrupt  systems.  The electronic
system uses standard electronic components. Additionally, the Company produces a
scooter,  known as the ZAPPY(TM),  which is manufactured  by the Company,  using
parts,  manufactured  by  various  subcontractors.  The  company is also a local
distributor of the Electricycle(TM) scooter that is imported from China.

         The electric motor kits, bicycles, and scooters sold by ZAP are shipped
by U.P.S. and Federal Express.  Larger quantity orders to wholesale distributors
are shipped by common carrier.  Overseas  shipments are shipped by ocean carrier
or airfreight.  The Company has developed long term purchase  arrangements  with
its key vendors.  The Company has no contractual  relationships  with any of its
vendors.

         The  Company as of March 31,  1998 had a $275,438  sales  backlog.  The
company expects to fill these orders within the next 45 days. Additionally,  the
Company received a contract to purchase one million dollars of ZAP products from
Central & Southwest Services, Inc. This order is to be fulfilled within the next
twelve  months with the first three months  totaling  $100,000 and the next nine
months  totaling  $900,000.  The products to be shipped will vary based upon the
requests of the customer during each month.

         The  Company's  growth  strategy is to increase net sales by augmenting
its marketing and sales force,  increasing  distribution channels through retail
organizations and wholesale distributors both domestically and overseas, as well
as setting up company and franchise  stores to assist in the retail sales arena.
The Company will  continue to increase  its  production  capability  to meet the
increasing demand for its product. The Company will continue to develop products
so that it is the low cost leader in the  industry.  Product  improvements  will
continue to enlarge ZAP's presence in the electric vehicle industry.

Results of Operations

         The following table sets forth,  as a percentage of net sales,  certain
items included in the Company's Income Statements (see Financial  Statements and
Notes) for the periods indicated:

                                                  Three months ended March 31,
                                                     1998             1997
                                                  ----------    ----------

     Statements of Income Data:
         Net sales............................      100.0%          100.0%
         Cost of sales........................       58.5            86.0
         Gross profit (Loss)..................       41.5            14.0
         Operating  expenses..................       76.7           123.0
         Loss from operations.................      (35.2)         (109.0)
         Other  income (expense)..............        0.4            (4.5)
         Loss before income taxes.............      (34.8)         (113.5)
         Provision for income taxes...........        0.0             0.0
         Net loss.............................      (34.8)         (113.5)

Quarter Ended March 31, 1998 Compared to Quarter Ended March 31, 1997

         Net sales for the quarter ended March 31, 1998, were $461,200  compared
to $257,900 in the prior year,  an increase of $203,300 or 79%.  The increase in
sales in 1998 over the same period in 1997 was due to greater  acceptance of the
company's  products in the marketplace.  In addition,  as the company's products
have gained greater market acceptance,  the company has been able to realize, on
average,  higher net sales  prices in 1998 as compared to 1997.  The increase in
prices can be specifically  identified as more sales of the company's  specially
designed  electric bikes and electric  scooters.  Distributor sales increased by
$62,000 or 49% while dealer sales increased $148,000 or 528% in 1998 as compared
to the same period in 1997.

                                       7
<PAGE>

         Gross  profit.  Gross profit  increased as a percentage of net sales to
42% from 14%. The total gross profit increased $155,500 or 331%. The increase in
gross margin can be  attributed to 1) the impact of realizing a higher net sales
price on equivalent  products as discussed above and 2) efficiency  increases in
the  manufacturing of products in the current quarter as compared to the quarter
ended March 31, 1997.  Direct Materials were 47% of sales in 1998 as compared to
63% in 1997.  This is mainly due to enhanced  control over  purchasing  needs in
1998. Direct labor and overhead were 11% of net sales in 1998 as compared to 22%
in 1997.  This is mainly due to  increased  efficiencies  resulting  from higher
utilization of production personnel and facilities in 1998 as compared to 1997.

         Selling  expenses in the quarter  ended March 31, 1998 were $159,000 as
compared to $92,800 for the quarter  ended March 31, 1997.  This was an increase
of $66,200 or 71% from 1997 to 1998. As a percentage of sales,  selling expenses
decreased  from 36% of sales to 34% of sales.  The increase in selling  expenses
was a result of added  personnel  costs and  increased  promotional  activity to
enhance customer demand. Additionally,  sales team members were sent to specific
trade shows in the first quarter of 1998 relating to specialty products over and
above the number of shows attended in the first quarter of 1997.

         General and  administrative  expenses  for the quarter  ended March 31,
1998  were  $162,500.  This  is a  decrease  of  $9,700  or 6% from  1997.  As a
percentage of sales,  general and  administrative  expense decreased to 35% from
68% of net sales.  Expense  decreases during the 1st quarter of 1998 as compared
to the 1st quarter of 1997  resulted  from reduced  personnel  needs and greater
cost controls.

         Research and development  decreased $16,700 or 34% from the 1st quarter
of 1997 as compared to the 1st quarter of 1998.  As a percentage of net sales it
decreased  to 7% of sales in the 1st quarter of 1998 as compared to 19% of sales
in the 1st  quarter of 1997.  Extensive  efforts  in  developing  the  ZAPPY(TM)
scooter and single speed low-cost  motor system  resulted in higher costs in the
1st quarter of 1997.

         Other income (expense).  The increase in other income (expense) in 1998
over 1997 is the result of lower  interest  expense and higher  interest  income
levels  experienced  in 1998 as  compared  to 1997.  Additionally,  a  loss  was
recognized on the trade-in of a 1980 truck for the purchase of a 1998 Chevy Van.
These  events  resulted  in an  increase  in other  income of $13,300 in the 1st
quarter of 1998 as compared to the 1st quarter of 1997.


Liquidity and Capital Resources

         The Company used cash from  operations of $395,600 and $401,000  during
the quarters ended March 31, 1998 and 1997 respectively. Cash used in operations
in the first  quarter  of 1998 was the result of the net loss  incurred  for the
quarter of  $157,600,  offset by net non cash  expenses of $94,700,  and the net
change in operating assets and liabilities resulting in a further use of cash of
$332,700. Cash used in operations in the first quarter of 1997 was the result of
the net loss  incurred  for the  quarter  of  $293,400,  offset  by net non cash
expenses  of $33,700,  and the net change in  operating  assets and  liabilities
resulting in a further use of cash of $141,300.

         Investing  activities used cash of $47,400 and $35,400 during the first
quarters ended March 31, 1998 and 1997  respectively.  The uses of cash were for
the purchase and construction of fixed assets.

         Financing  activities provided cash of $125,400 and $444,100 during the
first quarters ended March 31, 1998 and 1997  respectively.  In both years,  the
cash provided by financing  activities  resulted from the sales of common stock,
$126,400  and  $547,100  for the first  quarters  ended  March 31, 1998 and 1997
respectively, offset by principal payments on outstanding debt. In addition, the
company  purchased a new cargo van  through a loan in the first  quarter of 1998
that increased financing activities.

         At March 31, 1998 the Company had cash and cash equivalents of $370,000
as compared to $169,300 at March 31, 1997.  At March 31,  1998,  the Company had
working capital of $759,700, as compared to working capital of $153,900 at March
31, 1997. The increases in both cash and cash equivalents and working capital in
the first  quarter of 1998 over the first  quarter of 1997 are  primarily due to
the proceeds  received from the Company's 

                                       8
<PAGE>

direct  public  offering  which more than offset the Company's net losses during
the same period.  The Company,  at present,  does not have a credit  facility in
place  with a bank or other  financial  institution.  The  Company  does have in
process a second  direct  public  offering for the twelve months ended March 31,
1998 of its common stock with maximum  potential  gross  proceeds of  $3,000,000
before expenses. The Company believes that the cash and cash equivalents on hand
at March 31, 1998,  along with the expected  proceeds from the Company's  direct
public  offering,  will be  sufficient  to allow the  Company  to  continue  its
expected level of operations for the remainder of the year.

         The Company's  primary  capital needs are to fund its growth  strategy,
which  includes  increasing  its net sales,  increasing  distribution  channels,
improving   existing   product  lines  and   development  of  strong   corporate
infrastructure.


Dates following December 31, 1999 and beyond (the "Year 2000 Problem")

         Many existing computer systems and applications, and other devices, use
only two digits to identify a year in the date field,  without  considering  the
impact of the  upcoming  change in the century.  Such  systems and  applications
could fail or create erroneous results unless  corrected.  The Company relies on
its internal financial systems and external systems of business enterprises such
as  customers,   suppliers,   creditors,   and  financial   organizations   both
domestically  and globally,  directly and  indirectly  for accurate  exchange of
data. The Company has evaluated such systems and believes the cost of addressing
the Year 2000 Problem will not have a material  adverse  affect on the result of
operations  or  financial  position  of the  Company.  However,  even though the
internal  systems of the  Company are not  materially  affected by the Year 2000
issue the Company could be affected  through  disruption in the operation of the
enterprises with which the Company interacts.

Seasonality and Quarterly Results

         The Company's business is subject to seasonal influences. Sales volumes
in the bicycle industry  typically slow down during the winter months,  November
to March, in the U.S. The Company is selling  worldwide and is not impacted 100%
by the U.S. seasonality in the bicycle industry.

Inflation

         The Company's  raw  materials are sourced from stable cost  competitive
industries.  As such,  the Company  does not foresee any  material  inflationary
trends for its raw material sources.


                                       9
<PAGE>


PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

      There were no material  proceedings  pending in which the  Registrant  was
named as a party.

Item 2.  Changes in Securities

      There were no changes in rights of securities holders.

Item 3.  Defaults Upon Senior Securities

      There were no defaults upon senior securities.

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

      There were no matters submitted to the vote of security holders.

Item 5.  Other Information

      There were no major contracts signed during the period.

Item 6.  Exhibits and Reports on Form 8-K

      No reports on Form 8-K were filed during the quarter.



                                       10
<PAGE>



                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


      ZAP POWER SYSTEMS
------------------------------------
        (Registrant)


Date ___________________               _________________________________________
                                        James McGreen - President and Director


Date ___________________               _________________________________________
                                            Gary Starr - Managing Director



                                       12