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 September 30, 1997


[ ]      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.  2,345,335 shares of common
stock as of October 7, 1997


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

Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

ZAP POWER SYSTEMS
CONDENSED BALANCE SHEETS
(Unaudited)
                                                                   September 30,
                                                                       1997
--------------------------------------------------------------------------------

                                     ASSETS
CURRENT ASSETS
     Cash                                                           $   129,385
     Receivables                                                        203,734
     Inventories                                                        270,151
     Prepaid expenses and other assets                                   86,285
                                                                    -----------
         Total current assets                                           689,555
                                                                    -----------

PROPERTY AND EQUIPMENT                                                  140,200
                                                                    -----------

OTHER ASSETS
     Investment in joint venture                                         66,381
     Intangibles, net of accumulated amortization                        18,905
          of $3,132
     Deposits                                                            21,956
                                                                    -----------
                                                                        107,242
                                                                    -----------
          Total assets                                              $   936,997
                                                                    ===========

          LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable                                               $   193,437
     Accrued liabilities and other expenses                              35,475
     Customer Deposits                                                  176,050
     Notes payable                                                      144,362
     Current maturities of long-term debt                                 8,067
     Current maturities of obligations under capital leases               3,583
                                                                    -----------
          Total current liabilities                                     560,974
                                                                    -----------

OTHER LIABILITIES
     Obligations under capital leases, less current maturities           26,928
                                                                    -----------
STOCKHOLDERS' EQUITY
     Common stock, no par value; 10,000,000 shares
             authorized, 2,343,135 shares issued and
             outstanding                                              2,087,361
     Accumulated deficit                                             (1,738,266)
                                                                    -----------
                Total stockholders' equity                              349,095
                                                                    -----------

Total liabilities and stockholders' equity                          $   936,997
                                                                    ===========

The accompanying notes are an integral part of these financial statements

                                       2
<PAGE>
<TABLE>
ZAP POWER SYSTEMS
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
                                  Quarter ended September 30,  Nine Months ended September 30,
                                      1997           1996           1997           1996
----------------------------------------------------------------------------------------------
<S>                               <C>            <C>            <C>            <C>        
NET SALES                         $   501,025    $   403,618    $ 1,327,148    $   852,634

COST OF GOODS SOLD                    328,443        278,047      1,035,096        618,225
                                  -----------    -----------    -----------    -----------

GROSS PROFIT                          172,582        125,571        292,052        234,409
                                  -----------    -----------    -----------    -----------

OPERATING EXPENSES
     Selling                          159,516        152,186        424,887        340,038
     General and administrative       136,652        156,776        500,873        362,592
     Research and development          66,475         28,239        185,002         58,386
                                  -----------    -----------    -----------    -----------
                                      362,643        337,201      1,110,762        761,016
                                  -----------    -----------    -----------    -----------

LOSS FROM OPERATIONS                 (190,061)      (211,630)      (818,710)      (526,607)
                                  -----------    -----------    -----------    -----------

OTHER INCOME (EXPENSE)
     Interest expense                  (6,356)        (3,607)       (22,217)        (6,517)
     Other                              4,185          2,856          9,537         10,278
                                  -----------    -----------    -----------    -----------

                                       (2,171)          (751)       (12,680)         3,761
                                  -----------    -----------    -----------    -----------

LOSS BEFORE INCOME TAXES             (192,232)      (212,381)      (831,390)      (522,846)

PROVISION FOR INCOME TAXES               --             --             --             --
                                  -----------    -----------    -----------    -----------

NET LOSS                          $  (192,232)   $  (212,381)   $  (831,390)   $  (522,846)
                                  ===========    ===========    ===========    ===========

NET LOSS PER COMMON SHARE         $     (0.08)   $     (0.11)   $     (0.37)   $     (0.28)
                                  ===========    ===========    ===========    ===========

WEIGHTED AVERAGE OF COMMON
      SHARES OUTSTANDING            2,319,328      1,972,094      2,233,385      1,848,479
                                  ===========    ===========    ===========    ===========

<FN>
The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>
                                       3
<PAGE>
<TABLE>

ZAP POWER SYSTEMS
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
                                                             Nine months ended September 30,
                                                                  1997           1996
--------------------------------------------------------------------------------------------
<S>                                                           <C>            <C>         
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                                 $  (831,390)   $  (522,791)
     Adjustments to reconcile net loss to net cash
          used by operating activities
              Depreciation and amortization                        46,024         32,400
              Allowance for doubtful accounts                      (2,538)         4,700
              Issuance of common stock for services rendered       67,770         56,000
          Changes in:
              Receivables                                        (140,286)       (28,000)
              Inventories                                         (23,581)       (86,067)
              Prepaid expenses                                     29,155           --
              Deposits                                            165,981         (1,658)
              Accounts payable                                   (107,753)       116,187
              Accrued liabilities and other expenses              (27,453)        54,034
                                                              -----------    -----------
                  Net cash used by operating activities          (824,071)      (375,195)
                                                              -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchases of equipment                                       (80,618)       (74,639)
     Investment in subsidiaries                                   (13,882)          --
     Patent Defense                                               (13,113)          --
                                                              -----------    -----------
                  Net cash used by investing activities          (107,613)       (74,639)
                                                              -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from notes payable                                   30,000         83,362
     Proceeds from long-term debt                                                 25,000
     Decrease in restricted cash                                   10,000
     Sale of common stock, net of stock offering costs          1,000,405        420,942
     Principal repayments on long-term debt                        (9,409)        (4,600)
     Payments on obligations under capital leases                  (9,509)        (3,380)
     Principal repayments on note payable                        (122,000)        10,000
                                                              -----------    -----------
                  Net cash provided by financing activities       899,487        531,324
                                                              -----------    -----------

NET INCREASE/(DECREASE) IN CASH                                   (32,197)        81,490

CASH, beginning of period                                         161,582         21,800
                                                              -----------    -----------

CASH, end of period                                           $   129,385    $   103,290
                                                              ===========    ===========
<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, 1996.

The financial statements presented herein as of September 30, 1997 and September
30, 1996,  and for the interim  results of  operations  for the three months and
nine months ended  September 30, 1997 and  September  30, 1996  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

                                                             September 30, 1997
                                                             ------------------

Trade accounts receivable                                         $ 217,596
Less allowance for doubtful accounts                                (13,862)
                                                                  ---------
                                                                  $ 203,734
                                                                  =========

(3) - INVENTORIES

                                                             September 30, 1997
                                                             ------------------

Raw materials                                                     $ 181,834
Work-in-process                                                      68,536
Finished goods                                                       19,781
                                                                  ---------
                                                                  $ 270,151
                                                                  =========

(4) - PROPERTY AND EQUIPMENT

                                                             September 30, 1997
                                                             ------------------

Demonstration items                                               $  79,638
Machinery and equipment                                              45,122
Equipment under capital leases                                       45,940
Office furniture and fixtures                                        37,985
Computers                                                            19,135
Leasehold improvements                                               10,432
Vehicle                                                               4,300
                                                                  ---------
                                                                    242,552
Less accumulated depreciation and amortization                     (102,352)
                                                                  --------- 
                                                                  $ 140,200
                                                                  =========
                                       5
<PAGE>

(5) - NOTES PAYABLE

                                                             September 30, 1997
                                                             ------------------

Notes to stockholders,  with interest at 12%;
     interest  and  principal  due  when  the
     notes mature in November  and  December,
     1997.  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.                           $   109,000

Notes to a stockholder, with interest at 10%;
     principal  and  interest is due when the
     notes   mature   in   December,    1997;
     unsecured                                                       35,362
                                                                -----------

                                                                $   144,362
                                                                ===========

(6) - COMMON STOCK

In November 1996,  the Company began offering for sale,  directly to the public,
500,000  shares of common stock at $5.25 per share.  The net  proceeds  from the
sale are to be used to retire certain debt, increase manufacturing capacity, and
provide working capital for new product development and general purposes.

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  65% kits and 35%  electric  bicycles.  Dollar sales have been 50%
kits and 50% electric bicycles.

         The Company sells its electric  bicycles and kits to retail  customers,
police  departments,  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 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 

                                       6
<PAGE>

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.

     U.P.S.  and  Federal  Express  usually  ship the  electric  motor  kits and
electric bicycles sold by ZAP. Larger quantity orders to wholesale  distributors
are  shipped  common  carrier.  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  recently began  manufacturing an electric scooter known as the
"Zappy". The patent on this product is currently pending. Sixty orders have been
received  on this  product  which  is  expected  to be  available  some  time in
December.

     The Company as of  September  30, 1997 had a $180,949  sales  backlog.  The
company  expects to fill these orders within the next 60 days.  Additionally,  a
contract with Central and South West Services,  Inc., is in progress  subject to
SEC approval. The finalized documentation with the effective date will determine
if and when SEC  approval is granted.  The  contract is for $500,000 in products
beginning in the fourth  quarter of 1997 and extending out through the middle of
1998.  The  company  also has  purchase  orders in hand in excess of  $1Million.
Although these purchase orders are in hand, no assurance can be made that either
the Central and South West or the others will be less than their orders.

     The Company's  growth  strategy is to increase net sales by augmenting  its
marketing  and sales force,  and by  increasing  distribution  channels  through
retail organizations and wholesale  distributors both domestically and overseas.
The  company is also  working on  setting up  franchise  stores to assist in the
retail sales arena.  Currently  California and Florida have been the only states
with  approval  for this  venture.  The Company  will  continue to increase  its
production capability to meet the increasing demand for its product. The Company
will  continue  to develop  the product so that it is the low cost leader in the
industry.  Product  improvements and new product  introductions will continue to
enlarge ZAP's presence in the electric vehicle industry.

Results of Operations
<TABLE>
         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:
<CAPTION>
                                                               Quarter ended September 30,  Nine months ended September 30, 
                                                                 1997           1996               1997            1996
                                                                 ----           ----               ----            ----
<S>                                                             <C>             <C>               <C>             <C>    
     Statements of Income Data:                                                                 
         Net sales........................................      100.0%          100.0%            100.0%          100.0% 
         Cost of sales....................................       65.6            68.9              78.0            72.5
         Gross profit (Loss)..............................       34.4            31.1              22.0            27.5
         Operating  expenses..............................       72.4            83.5              83.7            89.3
         Loss from operations.............................      (38.0)          (52.4)            (61.7)          (61.8)
         Other  income (expense)..........................       (0.4)          ( 0.2)             (1.0)            0.5
         Loss before income taxes.........................      (38.4)          (52.6)            (62.7)          (61.3)
         Provision for income taxes.......................        0.0             0.0               0.0             0.0
         Net loss.........................................      (38.4)          (52.6)            (62.7)          (61.3)
</TABLE>

Quarter Ended September 30, 1997 Compared to Quarter Ended September 30, 1996 
                                                          
Net sales for the quarter ended  September 30, 1997,  were $501,025  compared to
$403,618 in the prior year, an increase of $97,407 or 24%. The increase in sales
is primarily  attributed to sales of complete electric bicycles,  electric motor
kits, and scooters.

     Gross profit (loss). Gross profit increased as a percentage of net sales to
34% from 31%. The total gross profit increased  $47,011 or 37%. This increase is
due to improved cost efficiency and stronger inventory controls.

                                       7
<PAGE>

     Selling  expenses in the quarter ended  September 30, 1997 were $159,519 as
compared to $152,186  for the quarter  ended  September  30,  1996.  This was an
increase of $7,333 or 5% from 1996 to 1997.  As a percentage  of sales,  selling
expenses  decreased  from  38% of  sales  to 32% of  sales.  This  was due to an
increase in sales compared to the 1996 period.

     General and  administrative  expenses for the quarter  ended  September 30,
1997 were  $136,652.  This is a  decrease  of  $20,124  or 13% from  1996.  As a
percentage of sales,  general and  administrative  expense decreased to 27% from
39% of net sales.  Expense  decreases during the 3rd quarter of 1997 as compared
to the 3rd quarter of 1996  resulted  from reduced  personnel  needs and greater
cost controls.

     Research and  development  increased  $38,236 or 135% in the 3rd quarter of
1997 as  compared to the 3rd quarter of 1996.  As a  percentage  of net sales it
increased  to 13% of sales in the 3rd quarter of 1997 as compared to 7% of sales
in the 3rd quarter of 1996. The expense  increase in the 3rd quarter of 1997 was
due to increased efforts to create new products  including the new "Zappy" to be
introduced in December as well as products for the China  Market.  Additionally,
the company is renting a second building for the Research and Development group.

     Other income (expense)  decreased $1,420 or 189% in the 3rd quarter of 1997
as compared to 1996. This decrease was due to interest expense increasing $2,749
in the third quarter of 1997 as compared to 1996.


Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996

     Net sales for the nine months ended  September  30, 1997,  were  $1,327,148
compared with $852,634 in the nine months ended  September 30, 1996, an increase
of  $474,514  or 56%.  The  increase  in  sales is  attributed  to sales of both
complete  electric  bicycles and electric motor kits to a large bicycle company.
The company has also increased its sales impact overseas.

     Gross profit (loss).  Gross profit  decreased as a percentage of net sales,
from 27% to 22%.  The total gross  profit  increased  $57,643 or 25%.  The gross
profit as a percentage of sales  decrease was due to the earlier  liquidation of
the 1996 models in January of 1997,  additional  manufacturing  costs associated
with  the  startup  of the  1997  models,  and  the  additional  assembly  costs
associated with the production of the new single motor bicycle.

     Selling expenses in the nine months ended September 30, 1997 were $424,887.
This was an  increase  of  84,849  or 25% from the  same  period  in 1996.  As a
percentage  of sales,  selling  expenses  decreased  from 40% of sales to 32% of
sales. This was due to a greater  percentage of increased sales in comparison to
the dollars spent on selling costs.

     General and administrative expenses for the nine months ended September 30,
1997 were  $500,873.  This is an increase  of  $138,281  or 38% from 1996.  As a
percentage of sales, general and  administrative  expenses decreased from 43% to
38% of net sales.  Expense  increases during the nine months ended September 30,
1997 as compared to the nine months ended  September  30, 1996 resulted from the
expense  increases in  accounting  and  administration  to support the Company's
sales  growth,  increases  in sales and  corporate  development,  and legal fees
associated with opening ZAP electric vehicle franchise outlet stores.

     Research  and  development  increased  $122,616  or 217% in the nine months
ended  September  30, 1997,  as compared to the nine months ended  September 30,
1996.  As a  percentage  of net sales it  increased  to 14% of sales in the nine
months  ended  September  30, 1997 as compared to 7% of sales in the nine months
ended  September  30,  1996.  The  expense  increase  in the nine  months  ended
September  30,  1997 was  related to  development  of the  "Zappy"  that will be
introduced in December, the new single motor electricruizer,  the new worldbike,
and vehicles for the China market.

     Other income (expense)  decreased  $16,441 or 437% in the nine months ended
September  30, 1997 compared to the nine months ended  September 30, 1996.  This
decrease was due to interest expense increasing $15,700 in the nine months ended
September 30, 1997 as compared to the nine months ended September 30, 1996.

                                       8
<PAGE>

Liquidity and Capital Resources

     In the nine months ended  September 30, 1997 the Company had a cash deficit
of $831,390  from  operations  as compared to a cash  deficit of $522,791 in the
nine months  ended  September  30, 1996.  In order to meet all of the  Company's
operating  expenses the Company  relied on the sales of common stock and issuing
notes payable.

     In the nine months ended  September 30, 1997 the Company  raised a total of
$1,000,405  from  common  stock  sales and  $30,000  from the  issuance of notes
payable. In the nine months ended September 30, 1996 the Company raised $420,942
from stock sales and $83,362 from the issuance of notes payable. The Company was
cleared  by the SEC to sell  public  shares  on  November  29,  1996.  The funds
received from this direct public offering in the nine months ended September 30,
1997 were utilized to pay down accounts  payable and accrued expenses and to pay
the Company's operating expenses.

     At  September  30,  1997 and 1996,  the  Company  had a working  capital of
$128,581 and ($46,308)  respectively.  As of September 30, 1997, the Company had
total  current  assets  of  $689,555,   including  cash  of  $129,385,  accounts
receivable  of  $203,784,  inventories  of  $270,151,  and  prepaid  expenses of
$86,285.  The  Company's  current  liabilities  as of  September  30,  1997 were
$560,974,  including  accounts payable and accrued  expenses of $228,912,  notes
payable of  $144,362  and  $11,650 of current  maturity  of  long-term  debt and
leases.  The balance of notes payable issued in November and December of 1996 in
the amount of $109,000  are due in  November  and  December of 1997.  These note
holders  were  granted  a total of  21,800  warrants.  The  proceeds  from  this
placement went to fund increased inventory levels, accounts receivables, capital
expenditures  and the Company's public stock offering  expenses.  The balance of
notes payable $35,362,  was an unsecured note with an interest rate of 10%. This
note is due in December of 1997.  Deposits  from  customers as of September  30,
1997 include a prepayment from a large bicycle  manufacturer paid to the Company
per the terms of the purchase order from them.

     The Company had net cash  provided by financing  activities of $899,487 for
the nine months ended September 30, 1997, and $531,324 for the nine months ended
September  30,  1996.  Net cash  provided by financing  activities  for the nine
months ended  September 30, 1996 was from notes payable  proceeds of $83,362,  a
bank loan of $25,000, and sale of common stock of $420,942. Net cash provided by
financing  activities  for the nine months ended  September 30, 1997 was $30,000
from notes payable,  $1,000,405 from the sale of common stock,  less $122,000 of
repayments of notes payable, bank debt and lease obligations and the elimination
of restricted cash required on the notes payable.

     The bank loan with Wells Fargo Bank (March  1996) had an initial  principal
balance of $25,000  amortized over 2 years at an interest rate of 15%. The note,
with a balance of $8,067 as of September 30, 1997,  will be paid off by March of
1998. The equipment leases with AT&T Credit  Corporation  (July 1996 & May 1997)
had an total  balance of $45,930 for all three leases with  monthly  payments of
$1,654  for three  years.  The new lease  with AT&T that  began in May was for a
forklift used by the production area.

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

Recent Accounting Pronouncements

     During  October  1995,  the  Financial  Accounting  Standards  Board issued
Statement No. 123,  "Accounting for Stock-Based  Compensation" ("SFAS No. 123"),
which  established  a fair  value-based  method of  accounting  for  stock-based
compensation  plans.  The Company is currently  following  the  requirements  of
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees."

Seasonality and Quarterly Results

     The  Company's  business is subject to seasonal  influences  similar to the
bike industry.  Sales volumes in the bicycle industry typically slow down during
the winter months, November to March, in the U.S.

                                       9
<PAGE>

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.

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.


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<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





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