the presentation in PDF format.

ZAP OCTOBER 2014 PRESENTATION
Established
Chinese Auto Manufacturer in the Chinese
Electric Vehicle Market
Safe Harbor Statement
This presentation contains certain forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. The forward-looking statements reflect the Company’s current views about future events and are
subject to risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ
materially. Factors that may contribute to these differences include, but are not limited to the following: competition in
the Company’s market; concentration of a substantial percentage of the Company’s converted product revenues among
a few large customers; disruption in the Company’s supply or increase in the cost of waste paper; increased competition
in our region; changes in our retail trade customers’ policies and increased dependence on key retailers in developed
markets; limitations on free cash flow and restrictions on business operations due to the Company’s indebtedness; the
availability of and prices for energy; potential financial exposure if the Company fails to purchase the contracted
quantity of natural gas under an existing supply contract; the Company’s exposure to variable interest rates; the loss of
key personnel; labor interruptions; natural disaster or other disruption to the Company’s facility; the Company’s ability
to finance its capital requirements; costs to comply with government regulations; the Company’s failure to maintain an
effective system of internal controls necessary to accurately report its financial results and prevent fraud; fluctuations in
demand and pricing in the parent roll market, which is a commodity market; reduction in prices for the Company’s
products due to excess supply; the Company’s inability to continue to implement its business strategies or inability to
sell the capacity operated from the Company’s new converting line; failure to complete the project to add a new
converting line successfully or timely; and a significant decline in sales causing the Company to no longer need the new
converting line. For a further list and description of such risks and uncertainties, see the reports filed by the Company
with the Securities and Exchange Commission, including the Company’s Form 10-K for the year ended December 31,
2013. Although the Company believes the expectations reflected in such forward-looking statements are based on
reasonable assumptions, it can give no assurance that its expectations will be realized. The Company disclaims any
intention or obligation to update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise. The information contained herein is not intended as a solicitation of an offer to buy or sell
securities. Any such solicitation can be only by made by an offering memorandum or other appropriate
disclosure document in compliance with applicable federal and state securities laws and regulations.
2
Company Overview
•
ZAP Jonway designs, develops, manufactures and sells both gas and fully electric
advanced technology vehicles
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Recently shifted focus to Chinese electric vehicle market
ZAP acquired 51% of Zhejiang Jonway Automobile Co. Ltd., (Jonway) in January 2011
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Plans to expand ZAP distribution network for electric vehicles internationally
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Currently 70 direct dealerships and over 200 customer support centers in China for traditional gasoline vehicles
Building new dealership network for EV fleet market in China
EV fleet and leasing market initially propelled by Chinese government subsidies
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Jonway’s Factory has ISO9000 compliant production manufacturing facility, certified for EV production
Over 1 million square feet of manufacturing space, with the ability to produce up to 50,000 automobiles per year
Government and corporate fleets can more quickly and successfully adopt and deploy use of electric
vehicle due to adequate charging infrastructure, and availability of centralized service and support
centers
$51.5 million revenues for the year ended December 31, 2013
3
Key Statistics
Share Statistics
Cap Structure
Trading Symbol (OTC MKT)………….ZAAP
Cash on Hand………….……………..….$ 0.51M
Stock Price (as of 9/30/14)............$0.10
Total Debt………………………………….$52.35M
Shares Outstanding……………..…395.81M
Other
52 Week Range………………….….$.07-$.44
Full-time Employees…..........................405
3 Month Avg. Volume……….……..277,988
Fiscal Year Ends…………………..December 31
Insider Ownership…………………….67.81%
Website…………………….www.zapworld.com
Market Capitalization….………….~$40.0M
Corporate HQ……………………Santa Rosa, CA
Enterprise Value………………..…~$92.35M
Financials
Revenue (TTM)………………..…….$39.32M
EBITDA (TTM)………………………….$(8.0)M
4
ZAP Jonway Acquisition
• January 2011 ZAP (US) acquired 51% of Jonway Automobile (China)
• Combining complementary strengths of EV technology know-how with China
auto manufacturing experience and licensed established platform
• Supported by Cathaya Capital investing over $40 million in ZAP since 2009
Over 20 years
Electric vehicle
(EV) designer,
developer &
marketer
Over 12 years in
Conventional
passenger vehicle
manufacturer in
China
Electric & traditional
vehicle manufacturer
offering China Market
access, established
sales network, and
delivering affordable
and quality products
5
ZAP and Jonway
Unique China Auto Market Positioning
• Ideal China auto platform as JV partner for international auto
manufacturer
– Transparent and US SEC reported financials of ZAP and Jonway since
2011 (almost 3 years of public reporting on joint entities)
– Access to auto sales & manufacturing license in China
– Immediate access to established China nationwide dealership network
with customer support centers
– Certified EV manufacturing factory in Jonway auto plant
– Knowledgeable China auto market team proficient with Chinese auto
regulations and market requirements
– Significant shareholders = fast decision making
 Cathaya Capital and Wang family hold >50% of ZAP
6
ZAP and Jonway Auto Strategy & Vision
• ZAP and Jonway to become one of the leading providers of EV products in
China
• Leveraging Silicon Valley technology and business model know-how with
China market auto experience base
• Utilizing Jonway Group’s motorcycle distribution network to expand EV
market sales and support network quickly
– Establish new fleet support centers nationwide
– Pave the way for rapid adoption of EVs in secondary cities using URBEE (cost
competitive LSV for city drivers – less than US$5000)
– Establish ZAP and Jonway as EV market leaders with HIGH VALUE products
and customer service support
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ZAP and Jonway Auto: Turning Point
• Renewed team, new vision, and strong market
• Realigning resources to focus on EV and renewable energy vehicles
• Significant backlog of URBEEs from all of the top mega motorcycle dealers
in China
• Utilize the largest motorcycle dealers to pave the sales network for LSVs
(Low Speed Vehicles) in China, in anticipation of government standard
policies to be issued
• Building on the momentum of URBEES to jump start EV market expansion
8
ZAP Jonway Team
•
Dr. Priscilla Lu is Chairman of ZAP and Jonway Auto, founder and Managing Partner of Cathaya Capital. Limited Partner and formerly
Advisor of Mayfield to China investment and helped establish GSR Fund in 2003; was Founder, Chairman and CEO of interWAVE
Communications, and took the Company public on NASDAQ with over 3 billion market cap; formerly Bell Labs Scholar and worked for AT&T
Bell Labs for 16 years, held position as Director of AT&T Bell Labs Data Systems organization. Received Doctorate from Northwestern
University in Computer Science and Engineering, and Masters and Bachelors from University of Wisconsin, Madison in Computer Science
and Math. Currently on the Advisory board of Northerwestern University McCormick School of Engineering, and Vice Chairman of Asia
Pacific Medical Group.
•
Wang, Huai Yi is the founder and Chairman of Jonway Group, a multi-business enterprise owned 100% by him and his immediate
family. The company is headquartered in Taizhou, Zhejiang Province. He founded Jonway Auto in 2004, which was a wholly owned 100%
by Jonway Group until ZAP acquired 51% of the equity in January 2011. Jonway Group also owns Jonway Motorcycle, which produces more
than a million motorcycles a year, primarily focused at the international markets. Jonway Group also owns a number of real estate
enterprises that have real estates in Zhejiang Province. He has had a long history in automobiles and owns a number of auto supply parts
companies that supplies to Jonway Auto and other automobile companies.
•
Wang "Alex" Gang , Co-CEO of ZAP and CEO of Zhejiang Jonway Automobile Co. Ltd., graduated from the University of Sunderland in the
United Kingdom with an undergraduate degree in business administration. A member of the Zhejiang Council and member of the After 70's
Elite Club in Taizhou, Mr. Wang has many years of manufacturing management experience as well as a broad overview of international
market development and management. Through his manufacturing innovations and international training, Mr. Wang has been able to
enhance Jonway Auto's level of modernization and internationalization.
•
Charles "Chuck" Schillings is Co-CEO of ZAP. Mr. Schillings has more than 20 years experience in high tech equipment industries. He is a
Director of Strasbaugh, a company which designs, manufactures, and markets semiconductor equipment worldwide. As President & CEO of
Strasbaugh from 2005 to 2010, he led the company through its initial public offering. Chuck also held executive management positions at
Strasbaugh subsidiary, R. H. Strasbaugh, between 1994 and 2001, serving as Vice President of Marketing, Director of International Sales for
Asia Pacific, and President & CEO. Mr. Schillings started up the company’s Asia Pacific sales division, working with companies like Fujitsu,
Hyundai, NEC, Samsung, UMC, and others, increasing revenues from less than $500,000 to more than US$40 million annually. Chuck has a
strong financial background gained from prior positions as Vice President of a securities syndication company and as an investment analyst
for a securities broker-dealer. Mr. Schillings holds an M.S.B.A. degree in International Business from San Francisco State University and a
B.S. degree in Business Finance with an Economics minor from San Diego State University.
9
China is Largest Auto Market in the World
with Greatest EV Market Potential
•
•
•
•
•
•
•
Chinese Automotive Market
Chinese Population = 1.3 Billion
Over 90% of Chinese produced
vehicles are consumed in China
Only 5% of Chinese households
currently have a vehicle
EV government rebate incentives
$5,000 to $20,000 per vehicle
No license costs for EVs in major cities
No Sales and Consumer Taxes for EVs
Special auto loans and leasing
programs are available for EV’s from
local Chinese banks
No restrictions and no taxes on EV ownership, restrictions and taxes on gasoline vehicles
10
US vs. Worldwide Car Sales Growth
11
Market Dynamics
• Government Stimulus Program
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Extension until 2020
Pure EV lithium battery based only
Elimination of VAT and Consumer taxes (15% in aggregate)
Elimination of license fees (over US$20,000 in major cities)
No restriction on alternative days driving
• Explosive Growth in China Leasing Companies
– Escalation in EV car leasing market stimulated by government subsidies and no driving
restrictions in major cities
• Fleet market Expansion
– Propelled by Government policies enforcing EV quotas of 30% of ALL government vehicles
to be Chinese brand manufactured Evs (ZAP Jonway qualifies)
– Stimulated by demand from logistic companies for delivery vehicles, especially Alibaba
which announced its exclusive use of EV as delivery vehicles
• Electric charge station deregulation – increased availability
– Deregulation on installation of charging infrastructures (private companies can set up
stations)
12
China EV Incentives
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•
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Jonway Automobile is authorized by the Chinese government through Jonway Group's
separate licensing entity in Hangzhou for auto manufacturing and has the formal auto
manufacturing and sales license to get approval for both the SUV and Minivan models
for highway speed EV products
With the license and approvals, the electric vehicle purchases are eligible for full EV
rebate incentives offered by the central and local governments based on “range” (i.e.
distance traveled with a single battery charge)
Recent announcements confirmed that the rebate incentives will continue through the
year 2020, with additional exemptions of registration fees and sales and consumer
taxes for EVs
30% of the government’s new vehicles have to be an EV from a Chinese auto
manufacturer
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When pollution indices exceed the allowed levels for the major cities, government gasoline vehicles are
banned from being on the road
13
Competition in China
• EV market in China is a “specialty” market, addressing fleets, government
entities, corporate logistics companies, and leasing companies which requires
a sophisticated sales team
• Large auto companies
– Entrenched in traditional dealership networks
– Requires large volume sales to cover overhead costs
– EV not their focus because it is in early adoption stage, sales will be tens of
thousands only per model over the next few years
• Challenges to large auto companies
– EV technologies will continue to CHURN over the next 5 to 10 years, which
require “agile” technical and production team to adapt and adopt
– Volume doesn’t justify their focus at this point
– Specialized technical support is expensive to deploy for large sales network and
customer centers
– EVs Unable to get quick clearance for fast track to market
• ZAP Jonway benefits from lower overhead and lower profitability threshold
14
Jonway Manufacturing and Sales
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Production facilities
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ISO 9000 certified manufacturing
50,000 units/year prod. Capacity
400+ employees
100,000 square meters (>1M sq ft) of factory space on 65.9 acres
6 Certified EV Production lines
3 EV Production Lines Operational
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3 Traditional Gasoline Production Lines
FULL AUTO Production Plant: Molding, Pressing, Welding, Painting, and Assembly
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Facilities
Pressing
Welding
Painting
Assembly
16
Target Product Rollout Road Map
New 5-Door A380
2Q2012
Gasoline Van
4Q2012
5-Door E380 EV SUV
A380 SUV G3 New Model
2Q2013
EV Van
4Q2013
A380 SUV New Model
4Q2013
E380-3 Door SUV New Model
URBEE
4Q2014
E380 G3 EV SUV
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Growth Strategy
• Continue to deliver and address URBEE demand
– Ramping to 2,000 units/month
• Expand sales into tier #1 cities with direct sales dealership
– Managed by Jonway Auto’s own team (Shanghai, Beijing, Tianjin, Ningbo)
• Establish sales network in US for new LSV models
– Led by URBEE
• Launch new markets for URBEE in the Americas and Europe
– Urbee is DOT and EU certified
18
ZAP Jonway Path to Breakeven
• $1 million monthly burn
• Targeting $11 million sales volume with 10% gross
margin to breakeven
• Targeted production mix
– 2,000 Urbees per month @ $3,000 per unit = $6,000,000
• Current backlog would imply the demand for URBEEs exceeds supply
– 500 gasoline SUVs per month @ $10,000 unit = $5,000,000
• 2013 revenues of $51 million was primarily from the sale of gasoline
vehicles
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Summary
•
ZAP Jonway is focusing on escalating demand for EVs in China
– Targeting specialty fleet sector
– 70 direct dealerships and over 200 customer support centers in China
•
ZAP Jonway realigning its resources to address EV market
– Manufacturing and now offers both gas and fully electric vehicles for all its models
•
Current annual production capacity with up to 50,000 vehicles
– ISO9000 compliant production manufacturing facility
– One million square feet of manufacturing space
•
ZAP Jonway potentially offers a platform to international auto companies who are
not manufacturing in China
– Viable access to the rapidly growing auto market for gasoline and electric vehicles in
China
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Appendix
21
Products
•
Jonway Automotive Products: Gasoline Model
– Jonway’s current automotive product line includes the gas fueled A380
Five-Door SUV and the A380 Three-Door SUV
• ZAP Automotive Products: Electric Vehicles
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ZAP Jonway SUV E380 (both 5 –door & 3-door)
ZAP Jonway MiniVan (passenger and delivery van)
URBEE : LSV (lead acid) targeted for China
SPARKEE: LSV and standard EV for international markets
UTV and MTV
22
E380 EV3 5-Door SUV
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EV MINIVAN
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URBEE
25
SPARKEE
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Manufacturing Quality Certifications
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•
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2006, ISO 9001
2008, China CCC
2009, GSO
2009, SGS
2010, ISO/TS: 16949
2011, EV certification of production plant
27
Technology
• ZAP has developed expertise in electric drive train integration
• ZAP Hangzhou JV has filed more than 10 patents
– Key technologies in the area of vehicle management system (VMS)
 Control system that manages and coordinates the functions between the motor, the battery
management system, and the auxiliary systems that require power from the batteries (power
steering, power brakes, air conditioning and heating, power windows and locks)
28
Low-speed Neighborhood Electric Vehicles (NEVs)
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NEVs defined by US National Highway Traffic Safety Administration subject to
Federal Motor Vehicle Safety Standard (FMVSS) No. 500 (49 CFR 571.500)
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4 wheels
Top Speed 32-40 km/hr (20-25 mph)
GVWR less than 1,361 kg (3,000 lbs)
10 safety equipment items and compliance label
LSV is the technically correct term – NEVs used by industry and fleets referring to
passenger vehicles conforming to FMVSS 500
Federal Motor Vehicle Safety Standard No. 500 Requires
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Headlamps
Stop lamps
Turn signal lamps
Tail Lamps
Reflex reflectors
Parking brakes (service and emergency)
Rearview mirrors - 2
Windshields – safety glass
Seat belts – Class 1 or 2
Vehicle identification numbers
ZAP Jonway Urbee is the Company’s entry into the NEV Market
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EEC Regulations – Directive 2002/24/EC
•
•
Heavy Quadricycles (L7e) are designed to meet specific EU standards in weight,
speed and safety for on-road use
URBEE and SPARKEE Quadricycles (category L7e) as defined by the European
Union’s Directive 2002/24/EC Type Approval apply to motor vehicles with four
wheels with the following characteristics
– Unladen mass is not more than 400 kg (550 kg for vehicles intended for carrying goods),
not including the mass of batteries in the case of electric vehicles
– Maximum net engine power does not exceed 15KW
– Technical requirements applicable to motor quadricycles of category L5e
• Engine with > 50 cm³ if of the internal combustion type and/or maximum design
speed of > 45 km/hr
30
Cap Structure
Capital Structure Data
For the Fiscal Period Ending
Currency
Units
Total Debt
Total Common Equity
Total Minority Interest
Total Capital
12 months Dec-31-2013
USD
Millions
52.488
0.415
8.936
61.839
% of Total
84.878%
0.671%
14.45%
100.00%
6 months Jun-30-2014
USD
Millions
52.352
4.28
6.143
62.775
% of Total
83.396%
6.818%
9.786%
100.00%
Debt Summary Data
For the Fiscal Period Ending
Currency
Units
12 months Dec-31-2013
USD
Millions
% of Total
6 months Jun-30-2014
USD
Millions
% of Total
Total Revolving Credit
Total Term Loans
Total Senior Bonds and Notes
Total Principal Due
30.603
0.072
21.832
52.507
58.305%
0.137%
41.594%
100.036%
30.73
0.012
21.534
52.276
58.699%
0.023%
41.133%
99.855%
Total Adjustments
Total Debt Outstanding
(0.019)
52.488
(0.036%)
100.00%
0.076
52.352
0.145%
100.00%
Available Credit
Undrawn Revolving Credit
Total Undrawn Credit
0.6
0.6
-
0.6
0.6
-
2.629
49.859
52.507
21.832
31.809
20.679
30.675
51.282
30.603
20.679
51.282
1.225
1.153
45.808
100.036%
41.594%
60.602%
39.398%
58.442%
97.702%
58.305%
39.398%
97.702%
2.334%
2.197%
87.273%
0.509
51.843
52.276
21.534
31.673
20.679
30.742
51.409
30.73
20.679
51.409
0.867
0.855
44.692
99.855%
41.133%
60.50%
39.50%
58.722%
98.199%
58.699%
39.50%
98.199%
1.656%
1.633%
85.368%
Additional Totals
Total Cash & ST Investments
Net Debt
Total Senior Debt
Total Convertible Debt
Total Short-Term Borrowings
Curr. Port. of LT Debt/Cap. Leases
Total Bank Debt
Total Secured Debt
Senior Secured Loans
Senior Secured Bonds and Notes
Total Senior Secured Debt
Total Unsecured Debt
Senior Unsecured Bonds and Notes
Fixed Rate Debt
31
Balance Sheet
32
Income Statement
Income Statement
For the Fiscal Period Ending
Currency
Revenue
Other Revenue
Total Revenue
Cost Of Goods Sold
Gross Profit
Selling General & Admin Exp.
R & D Exp.
12 months
Dec-31-2013
USD
51.547
51.547
50.595
0.952
16.083
0.618
Depreciation & Amort.
-
Other Operating Expense/(Income)
-
Other Operating Exp., Total
Operating Income
Interest Expense
Interest and Invest. Income
Net Interest Exp.
Income/(Loss) from Affiliates
Other Non-Operating Inc. (Exp.)
EBT Excl. Unusual Items
Impairment of Goodwill
Asset Writedown
Other Unusual Items
EBT Incl. Unusual Items
Income Tax Expense
Earnings from Cont. Ops.
Earnings of Discontinued Ops.
Extraord. Item & Account. Change
Net Income to Company
Minority Int. in Earnings
Net Income
16.701
(15.749)
(3.666)
(3.666)
(0.899)
0.951
(19.363)
(2.64)
(22.003)
(0.054)
(21.949)
(21.949)
6.953
(14.996)
33