Newsletter

ZAP- The Right Idea at the Right Time

March 9, 2005
Volume VI, Issue 21
Home Page : www.otcjournal.com
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To OTC Journal Members:
 

Comments in the BLOG

Apologies to those who were waiting for their weekend questions to be posted in the BLOG. I didn't get to them until this morning. Better late than never. Please check for replies to your postings, and thanks to everyone who is contributing.

To use the BLOG, simply go to the home page at www.otcjournal.com - the BLOG will scroll down automatically on the right side of your screen. The most current journal entries appear in the middle of your screen. Check back frequently for updates particularly when stocks are moving to overbought or oversold levels or in volatile markets.

Here's the first of several new ideas I have been promising:
 

ZAP (OTC BB: ZAPZ): The Right Idea At The Right Time

ZAPZ looks to be the right idea at the right time. ZAPZ, an acronym for Zero Air Pollution, is the California based company that invented the electric motor scooter. 

The company has been innovative in electric powered vehicles. They have a complete line of electric powered scooters, bikes, ATV's, and cars. They are recognized as the world wide leader in this unique market. Check out their web site at www.zapworld.com for a complete review of their products.

ZAPZ was a red hot stock in the late 90's. Sales peaked at $6.4 million back in '99, and the stock traded at a split adjusted all time of $18.25. In the early 90's ZAPZ was beaten down by two problematic events: 1. The Chinese started manufacturing knock offs of their scooter, and flooded the market with cheaper product, and 2. they entered into a death spiral financing.

Fast forward to March 9, 2005. Today's financial news is driven by oil hitting the $55 per barrel mark. The dollar is down, interest rates are up, and commodities are rocketing off the charts. ZAPZ now owns its own production facility in China. ZAPZ has restructured, spent the last year going through a rigorous regulatory process with the DOT and EPA, and is now introducing one of the trendiest and hottest products in the automotive world. This new car is the reason to own the stock:
 

The ZAP Smart Car

The car you see pictured here is the ZAP Smart Car. This car has recently been covered by CNBC, CNN, the La Times, the Wall Street Journal online, the NY Times, and many others. It's the hottest new car to hit the US market in quite some time, and is considered a "gas-sipper".

600,000 of these cars have been sold in Europe. Until now, this car has not been available to American Consumers. 

ZAPZ decided to take on the daunting task of modifying the Smart Car to meet US Standards. Much to the surprise of many in the automotive business, ZAPZ has successfully modified the car and passed rigorous testing by both the EPS and the DOT. The car is now approved for sale in 45 states. Several states which include California and New York have their own testing procedures, and ZAPZ is expecting approval in both those states over the next few months.

The car is manufactured in France by Daimler Chrysler. ZAPZ imports the cars from Europe, and makes the modifications which makes them street legal in the United States. ZAPZ holds the exclusive license to market this product in the US.

Despite it's fragile appearance, this car has a Tridion safety cell structure which has been reinforced with special aluminum cross beams.  In crash tests, this car has actually tested safer than a Mercedes S-Class.

Here are some specs on this bad boy:

  • The car will get up to 60 MPG, but the EPA is only allowing them makes claims in the 38 MPG range.
  • Engine: 60 HP, 3-cylinder, rear mounted turbo engine.
  • Sequential 6 speed automatic transmission.
  • Length- 8 feet; Width- 4'11", Height- 5'; Weight- 1588 lbs (Shaq has shoes bigger than this)
  • Top speed: 85 MPH
The Smart Car was introduced to dealers at the annual NADA (National Automotive Dealers Association) this past January. ZAPZ left the show with $21 million in firm purchase orders. 

Subsequently, on February 8th, ZAPZ announced orders had exceeded $55 million.

Today, after the market closed, ZAPZ announced firm orders for the new SMART CAR have now exceeded the $100 million mark.  This is the trendiest new car on the market, and demand is skyrocketing.

There are currently about 100 cars in California going through the final conversion stage and completing the final testing phase to meet federal standards. Those cars are the first to hit the market, and should be heading to dealers soon.

In the interim, the company is diligently working to find production partners to help them meet the extraordinary demand for this new car. At this time, they do not have the production capacity to meet $100 million in purchase orders.

In my view, this is an outstanding chart. As you can see, the stock rocketed from the $1.25 level to $5.15 in mid November when the word on the Smart Car started to spread.

The stock then pulled back and made a bottom in January. Since Mid January, the stock has been in an uptrend which I believe will carry this stock to much higher levels, especially in light of the revelation that the company has exceeded the $100 million in orders mark. 

The cars sells to dealers in the $15,000 to $20,000 range. Therefore, I estimate they have purchase orders in hand for about 2,000 cars. In light of the 600,000 cars that have been sold to the European market, there is plenty of upside in order flow.

As it stands today, ZAPZ cannot handle the demand for cars. They will have to find a manufacturing facility or partner to help them ramp up. There will probably be a lot going on as the company moves towards larger production capacity.

In November ZAPZ reported 25.7 million shares I&O-Since that time they have probably issued additional shares from fundings and warrant conversions, so let's use 30 million as a working number. As of today's close, the market was valuing the company about $100 million.

I don't have a forecast for profit margins, but will be addressing that issue as more information comes to light. 

With $100 million in revenues as a near certainty in their future, I believe this stock could command a much higher market value in the future, especially in light of a mere 2,000 cars order vs the 600,000 that have been sold in Europe.

The hard part is going to be buying this stock. The stock will not open tomorrow where it closed today. The $4 level is a near certainty, and I'm wondering if the stock might even try to get back to the November high.

If history repeats itself, the stock will probably make the high of the day in the 1st half hour of trading, and then likely pull back. You might get a favorable entry level later in the day. 

The bad news: I will be on a plane when the market opens tomorrow, so I won't be able to post on BLOG to provide some guidance on the trading side. You will have to use common sense.

Nevertheless, this is just the beginning of what could be a multi year expansion for this company. Against a back drop of skyrocketing oil prices, this is the right idea at the right time.

Here is the complete text of today's release for your review:
 

ZAP Crosses $100 Million Threshold for High-Efficiency ZAP! SMARTCAR Advanced Transportation; $45 Million in New Bookings Validates Powerful U.S. Consumer Demand for Popular European-Made Microcar

Business Wire via COMTEX

Mar 9, 2005 4:01:01 PM

SANTA ROSA, Calif., Mar 09, 2005 (BUSINESS WIRE) --

-ZAP (OTCBB: ZAPZ), pioneering the next generation of advanced transportation and energy technologies, has announced that the Company has crossed the $100 million threshold for purchase orders for its SMARTCAR high gas mileage vehicles. Steve Schneider, CEO of ZAP, made the announcement.

"The high rate of new purchase orders we've been booking for the Smart Car has further confirmed that the American public is eager to purchase cars that will help drivers save significantly on gasoline costs as well as enable them to take meaningful steps to protect the environment," said Mr. Schneider. "Millions of American consumers have already demonstrated a strong interest in fuel-efficient transportation, as evidenced by the popularity of minicars and fuel-efficient hybrid vehicles from leading automotive makers. We believe the Smart Car, which is already a major success throughout Europe, will define the next generation of fuel-efficient and hip transportation for Americans."

The new orders follow the Company's announcement last month totaling $55 million from dealers who want to supply consumer demand for cars that provide substantial advantages in gas mileage, in a safe and stylish vehicle. The Smart Car, one of ZAP's next-generation automobiles, was debuted for dealers in January, at the annual convention of the National Automobile Dealers Association Dealers (NADA) in New Orleans. The Company booked approximately $21 million in purchase orders at that convention and anticipates it will receive continuing SMARTCAR purchase orders from U.S. dealers as it further expands its national dealer network for its line of innovative ZAP Cars(R).

ZAP is continuing to assess potential additional partners to supply the fast-growing U.S. demand for Smart Cars. It has been meeting with prospective manufacturing partners and suppliers in the U.S., China and in other countries. The Company added that efforts to broaden its Smart Car auto dealer network throughout the country have proceeded faster and more successfully than initially projected.

"Demand for the Smart Car growing sharply, and we're focusing a great deal of energy on our business plan to build strong relationships worldwide with vendors, subcontractors, suppliers and all of the government agencies to help ZAP bring Smart Cars and other advanced transportation vehicles to the U.S. market," said Mr. Schneider.

ZAP "Americanizes" the European-made Smart Car to meet U.S. safety and emissions standards at its facility in California. The small and maneuverable SMARTCAR is one of the most fuel-efficient internal combustion vehicles available. With the ability to park in the space of a motorcycle, the two-passenger SMARTCAR coupe is designed to address many of the serious problems of crowded urban traffic and rising fuel prices. Its unique Tridion Safety Cell, manufactured from high-tensile steel, forms the core safety element of each SMARTCAR. It creates a cage-like safety structure for the occupants, making the SMART coupe one of the safest small cars on the road. Additional SMARTCAR design features include advanced "crashbox" low-speed dent-resistant body panels, dual airbags, performance engine and transmission technology, and a range of standard features and options. ZAP also produces all-electric cars, scooters, bikes and ATVs.

About ZAP

ZAP, Zero Air Pollution(R), has been a leader in advanced transportation technologies and energy products since 1994. ZAP serves the multi-billion-dollar markets for next-generation transportation and power products through three divisions: ZAP Automotive; ZAP Personal Transportation; and ZAP Energy. The Company has delivered more than 90,000 fuel-efficient and pollution-free vehicles powered by gasoline, electric, hydrogen and other fuels to customers in more than 75 countries around the world.

ZAP holds exclusive license from Smart-Automobile LLc to deliver the popular European-made Smart Car, a high-efficiency gas vehicle, to the American marketplace. ZAP "Americanizes" the Smart Car to meet U.S. federal and state safety and emissions standards. The U.S. Environmental Protection Agency and the Department of Transportation have approved a Smart Car model Americanized by ZAP for domestic use in 45 U.S. states. ZAP is not affiliated with, or authorized by, smart gmbh, the manufacturer of SMART automobiles, or the smartUSA division of Mercedes-Benz LLC, the exclusive authorized U.S. importer and distributor of those vehicles. ZAP purchases its vehicles from non- affiliated direct importer Smart-Automobile LLC.

The Company's all-electric vehicles include the ZAP Intimidator LUV and ZAP Worldcar neighborhood and urban electric cars, ZAPPY(R) Scooters, Mobility Scooters, Bikes, and All Terrain Vehicles (ATV). These products offer convenient, dependable and fun transportation that's heavy duty, powerful, and noise-free. The ZAP Portable Energy division has developed a next-generation, multi-use battery for electronic products that deliver up to four times the power of typical batteries, to charge or power a variety of devices, including cell phones, digital cameras, DVD and MP3 players, camcorders and laptops. To view online videos about ZAP, visit http://www.zapworld.com/about/video.asp. For more information, visit http://www.zapworld.com. For investor-specific information, please visit http://www.trilogy-capital.com/tcp/html/zap.htm.

Cautionary Statement

Forward-looking statements in this release are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, without limitation, continued acceptance of the Company's products, increased levels of competition for the Company, new products and technological changes, the Company's dependence upon third-party suppliers, intellectual property rights, and other risks detailed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission

SOURCE: ZAP

ZAP Steven Kim, 707-525-8658 x 298 (Investor Relations) skim@zapworld.com Alex Campbell, 707-525-8658 x 241 (Media Relations) acampbell@zapworld.com
Copyright Business Wire 2005



 
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