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 June 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                           (I.R.S. Employer
  of 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.  
                           2,296,420 shares of common stock as of July 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)
                                                                       June 30,
                                                                         1997
--------------------------------------------------------------------------------
                                     ASSETS
CURRENT ASSETS
     Cash                                                           $   195,952
     Receivables                                                        217,384
     Inventories                                                        278,956
     Prepaid expenses and other assets                                  101,424
                                                                    -----------
         Total current assets                                           793,716
                                                                    -----------

PROPERTY AND EQUIPMENT                                                  130,427
                                                                    -----------
OTHER ASSETS
     Investment in joint venture                                         66,380
     Intangibles, net of accumulated amortization                         6,841
          of $2,083
     Deposits                                                            15,986
                                                                    -----------
                                                                         89,207
                                                                    -----------
          Total assets                                              $ 1,013,350
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable                                               $   370,624
     Accrued liabilities and other expenses                              28,420
     Customer Deposits                                                  105,966
     Notes payable                                                      144,362
     Current maturities of long-term debt                                11,321
     Current maturities of obligations under capital leases               6,526
                                                                    -----------
          Total current liabilities                                     667,219
                                                                    -----------
OTHER LIABILITIES
     Obligations under capital leases, less current maturities  23,671
                                                                ------
STOCKHOLDERS' EQUITY
     Common stock, no par value; 10,000,000 shares
     authorized, 2,200,196 shares issued and
     outstanding                                                      1,868,494
     Accumulated deficit                                             (1,546,034)
                                                                    -----------
                                                                        342,460
                                                                    -----------
          Total liabilities and stockholders' equity                $ 1,013,350
                                                                    ===========



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 June 30,         Six Months ended June 30,
                                                1997           1996            1997              1996
--------------------------------------------------------------------------------------------------------
<S>                                        <C>             <C>             <C>             <C>        
NET SALES                                  $   568,223     $   245,218     $   826,123     $   449,016

COST OF GOODS SOLD                             484,853         227,338         706,653         340,178
                                           -----------     -----------     -----------     -----------

GROSS PROFIT                                    83,370          17,880         119,470         108,838
                                           -----------     -----------     -----------     -----------

OPERATING EXPENSES
     Selling                                   172,571         101,108         265,371         187,852
     General and administrative                188,021         115,449         364,221         205,816
     Research and development                   69,527          17,775         118,527          30,146
                                           -----------     -----------     -----------     -----------
                                               430,119         234,332         748,119         423,814
                                           -----------     -----------     -----------     -----------

LOSS FROM OPERATIONS                          (346,749)       (216,452)       (628,649)       (314,976)
                                           -----------     -----------     -----------     -----------

OTHER INCOME (EXPENSE)
     Interest expense                           (6,961)         (1,350)        (15,861)         (2,910)
     Other                                       7,876           2,876           5,276           7,422
                                           -----------     -----------     -----------     -----------
                                                   915           1,526         (10,585)          4,512
                                           -----------     -----------     -----------     -----------

LOSS BEFORE INCOME TAXES                      (345,834)       (214,926)       (639,234)       (310,464)

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


NET LOSS                                   $  (345,834)    $   (214,926)   $  (639,234)    $  (310,464)
                                           ===========     ============    ===========     ===========

NET LOSS PER COMMON SHARE                  $     (0.15)    $      (0.12)   $     (0.29)    $     (0.18)
                                           ===========     ============    ===========     ===========

WEIGHTED AVERAGE OF COMMON
      SHARES OUTSTANDING                     2,254,931       1,724,864       2,190,415       1,684,624
                                           ===========     ============    ===========     ===========


<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>
                                                                           Six months ended June 30,
                                                                          1997                   1996
--------------------------------------------------------------------------------------------------------
<S>                                                                    <C>                    <C>       
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                                          $(639,234)             $(310,410)
     Adjustments to reconcile net loss to net cash
          used by operating activities
            Depreciation and amortization                                 27,024                 18,400
            Allowance for doubtful accounts                                  390                  2,700
            Issuance of common stock for services rendered                10,589                 25,000
          Changes in:
            Receivables                                                 (156,863)               (18,400)
            Inventories                                                  (32,356)               (54,966)
            Prepaid expenses                                              14,015
            Customer Deposits                                            105,480                 (1,362)
            Accounts payable                                              69,424                 61,850
            Accrued liabilities and other expenses                       (37,996)                42,357
                                                                       ---------              ---------
                  Net cash used by operating activities                 (639,621)              (234,831)
                                                                       ---------              ---------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchases of equipment                                              (56,734)               (21,247)
     Investment in subsidiaries                                          (13,882)
                                                                       ---------              ---------
                  Net cash used by investing activities                  (70,616)               (21,247)
                                                                       ---------              ---------

CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from notes payable                                          30,000                 88,362
     Proceeds from long-term debt                                                                25,000
     Decrease in restricted cash                                          10,000
     Sale of common stock, net of stock offering costs                   838,705                300,802
     Principal repayments on long-term debt                               (6,179)                (2,726)
     Payments on obligations under capital leases                         (6,003)
     Principal repayments on note payable                               (122,038)
                                                                       ---------              ---------
                  Net cash provided by financing activities              744,485                411,438
                                                                       ---------              ---------

NET INCREASE IN CASH                                                      34,352                155,360

CASH, beginning of period                                                161,600                 21,800
                                                                       ---------              ---------

CASH, end of period                                                    $ 195,952              $ 177,160
                                                                       =========              =========


<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 June 30, 1997 and June 30, 1996,
and for the interim  results of  operations  for the three months and six months
ended June 30, 1997 and June 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 potentially dilutive securities would be antidilutive.

(2) -  RECEIVABLES

                                                                   June 30, 1997
                                                                  --------------
Trade accounts receivable                                         $   234,174
Less allowance for doubtful accounts                                  (16,790)
                                                                  ------------

                                                                  $   217,384
                                                                  ============
(3) - INVENTORIES

                                                                   June 30, 1997
                                                                  --------------
Raw materials                                                     $   159,994
Work-in-process                                                        43,719
Finished goods                                                         75,243
                                                                  -------------

                                                                  $   278,956
                                                                  =============
(4) - PROPERTY AND EQUIPMENT

                                                                   June 30, 1997
                                                                  --------------
Demonstration bicycles                                            $    60,514
Machinery and equipment                                                47,723
Equipment under capital leases                                         42,100
Office furniture and fixtures                                          30,835
Computers                                                              19,135
Leasehold improvements                                                 10,221
Vehicle                                                                 4,300
                                                                  --------------
                                                                      214,828
Less accumulated depreciation and amortization                        (84,401)
                                                                  --------------
                                                                  $   130,427
                                                                  =============

                                       5
<PAGE>

(5) - NOTES PAYABLE

                                                                  June 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 installation

                                       6
<PAGE>


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  industry  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 selling an electric scooter  manufactured by
an Italian company through a joint marketing agreement where they have rights to
sell the Company's products in Italy and Austria,  and the Company has the right
to sell their  product in Northern  America.  Subsequent  to this  agreement the
company has sold approximately 70 units.

         The  Company as of June  30,1997  had a  $359,913  sales  backlog.  The
company expects to fill these orders within the next 60 days.

         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 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 June 30,   Six months ended June 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....................................       85.3            92.7         85.5         75.8
         Gross profit (Loss)..............................       14.7             7.3         14.5         24.2
         Operating  expenses..............................       75.7            95.5         90.6         94.4
         Loss from operations.............................      (61.0)          (88.2)       (76.1)       (70.2)
         Other  income (expense)..........................       (0.2)            0.6         (1.2)         1.0
         Loss before income taxes.........................      (60.8)          (87.6)       (77.3)       (69.2)
         Provision for income taxes.......................        0.0             0.0          0.0          0.0
         Net loss.........................................      (60.8)          (87.6)       (77.3)        69.2
</TABLE>

Quarter Ended June 30, 1996 Compared to Quarter Ended June 30, 1997

Net sales for the  quarter  ended  June 30,  1997,  were  $568,223  compared  to
$245,218 in the prior year,  an  increase of $323,005 or 132%.  The  increase in
sales is primarily  attributed to sales of both complete  electric  bicycles and
electric motor kits to a large bicycle company. The Company also sold $15,755 of
the imported  Italian  scooter  through its  distributor  agreement  with Movity
S.r.l.

     Gross profit (loss).  Gross profit  increased as a percentage of net sales,
from 7% to 15%. The total gross profit increased  $65,490 or 366%. This increase
is due to increased  production  volume  increasing thus lower the cost per unit
manufactured.

                                       7
<PAGE>


         Selling  expenses in the quarter  ended June 30, 1997 were  $172,571 as
compared to $101,100 for the quarter  ended June 30, 1996.  This was an increase
of $71,463 or 71% from 1996 to 1997. As a percentage of sales,  selling expenses
decreased  from 41% of sales to 30% of  sales.  This was due to an  increase  in
sales compared to the 1996 period.

         General and administrative expenses for the quarter ended June 30, 1997
were $188,021.  This is an increase of $72,572 or 63% from 1996. As a percentage
of sales,  general and  administrative  expense decreased from 47% to 33% of net
sales.  Expense  increases during the 2nd quarter of 1997 as compared to the 2nd
quarter  of   1996  resulted  from  the  increased   accounting,   auditing  and
administration expense to support the Company's public offering and the increase
in sales activity.

         Research and development increased $51,752 or 291% from the 2nd quarter
of 1996 as compared to the 2nd quarter of 1997.  As a percentage of net sales it
increased  to 12% of sales in the 1st quarter of 1997 as compared to 7% of sales
in the 1st quarter of 1996. The expense  increase in the 2nd quarter of 1997 was
related to the electric  scooter  products that will be introduced in the second
half of 1997.

         Other income  (expense)  decreased  $611 or 40% from the 2nd quarter of
1996 to 1997. This decrease was due to interest expense increasing $5,600 in the
second quarter of 1997 as compared to the second quarter of 1996.


Six Months Ending June 30, 1996 Compared to Six Months Ending June 30, 1997

         Net  sales  for the six  months  ended  June 30,  1997,  were  $826,123
compared  to  $449,016  in the six months  ended June 30,  1996,  an increase of
$377,107 or 84%. The increase in sales is  attributed  to sales of both complete
electric  bicycles  and  electric  motor kits to a large  bicycle  company.  The
Company sold $15,755 of the imported  Italian  scooter  through its  distributor
agreement with Movity S.r.l. in the first half of 1997.

         Gross  profit  (loss).  Gross profit  decreased as a percentage  of net
sales,  from 24% to 14%.  The total gross profit  increased  $10,632 or 10%. The
gross profit as a percentage of sales decrease was due to the liquidation of the
1996 models in January of 1997,  additional  manufacturing costs associated with
the startup of the 1997 models, and the additional initial costs associated with
the large bicycle manufacturer order in the second quarter of 1997.

         Selling  expenses in the six months ended June 30, 1997 were  $265,371.
This was an  increase  of  77,519  or 41% from the  same  period  in 1996.  As a
percentage  of sales,  selling  expenses  decreased  from 42% of sales to 32% of
sales.  This was due to a  decrease  in  marketing  to auto  dealerships  and an
increase in direct retail sales and other dealer outlets as compared to the 1996
period.

         General and  administrative  expenses for the six months ended June 30,
1997 were  $364,221.  This is an increase  of  $158,405  or 77% from 1996.  As a
percentage of sales,  general and  administrative  expense decreased from 46% to
44% of net sales. Expense increases during the six months ended June 30, 1997 as
compared  to the six  months  ended  June 30,  1996  resulted  from the  expense
increases in,  accounting,  auditing and administration to support the Company's
public offering, increases in sales and corporate development.

         Research and development  increased $88,381 or 293% from the six months
ended June 30,  1996 as  compared to the six months  ended June 30,  1997.  As a
percentage  of net sales it  increased  to 14% of sales in the six months  ended
June 30, 1997 as compared to 7% of sales in the six months  ended June 30, 1996.
The  expense  increase  in the six  months  ended June 30,  1997 was  related to
development  of the electric  scooter  products  that will be  introduced in the
second half of 1997, and new products to be introduced in foreign markets.

         Other income  (expense)  decreased  $15,097 or 334% from the six months
ended June 30, 1996 to the six months ended June 30, 1997. This decrease was due
to interest expense  increasing $12,951 in the six months ended June 30, 1997 as
compared to the six months ended June 30, 1996.

                                       8
<PAGE>

Liquidity and Capital Resources

         In the six months ended June 30, 1997 the Company had a cash deficit of
$639,621  from  operations  as compared to a cash deficit of $234,831 in the six
months  ended June 30,  1996.  In order to meet all of the  Company's  operating
expenses,  the Company  relied on the sales of common  stock and the issuance of
notes payable.

         In the six months  ended June 30,  1997 the  Company  raised a total of
$838,705 from common stock sales and $30,000 from the issuance of notes payable.
In the six months  ended June 30, 1996 the Company  raised  $300,802  from stock
sales and $88,362 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 six months ended June 30, 1997 were  utilized to
pay the Company's operating expenses and capital expenditures.

         At June 30, 1996 and 1997, the Company had a working capital of $70,800
and $126,497  respectively.  As of June 30, 1997,  the Company had total current
assets of $793,716, including cash of $195,957, accounts receivable of $217,384,
inventories of $278,956, and prepaid expenses of $101,424. The Company's current
liabilities as of June 30,1997 were  $667,219,  including  accounts  payable and
accrued  expenses of $399,044,  notes payable of $144,362 and $17,847 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 June 30,  1997 is a  prepayment  from the  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 $411,438
for the six months  ended June 30,  1996,  and $744,485 for the six months ended
June 30,  1997.  Net cash  provided by financing  activities  for the six months
ended June 30, 1996 was from notes payable  proceeds of $88,362,  a bank loan of
$25,000,  and sale of common stock of $300,802.  Net cash  provided by financing
activities for the six months ended June 30,1997 was $30,000 from notes payable,
$838,705  from the sale of common  stock,  less  $124,220 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 $11,321 as of June 30, 1997, will be paid off March
of 1998. The equipment leases are with AT&T Credit Corporation, (July 1996), had
an initial balance of $43,076 with monthly payments of $1,186 for three years.

         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",  but  includes  the  disclosures  required by SFAS 123 in the annual
report.

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.

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

                                       9
<PAGE>


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
              ---------------           ----------------------------------------
                                        Gary Starr - Managing Director

         Date
              ---------------           ----------------------------------------
                                        James McGreen - President and Director


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