ZAP COM CORP - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

OR

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 000-27729
ZAP.COM CORPORATION
(Exact name of Registrant as specified in its charter)

NEVADA 74-0571159
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

100 MERIDIAN CENTRE, SUITE 350 14618
ROCHESTER, NY (Zip Code)
(Address of principal executive offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (585) 242-2000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE.

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

TITLE OF EACH CLASS:
COMMON STOCK, $0.001 PAR VALUE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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] or No [ ].

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of June 30, 2003 (the last business day of the registrant's most
recently completed second fiscal quarter) was $147,332. For the sole purpose of
making this calculation, the term "non-affiliate" has been interpreted to
exclude directors, corporate officers and holders of 10% or more of the
Company's common stock. As of March 5, 2004, the Registrant had outstanding
50,004,474 shares common stock, $0.001 par value.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrant's Information Statement for its 2004 Annual
Meeting of Stockholders, which the Company plans to file with the Securities and
Exchange Commission pursuant to regulation 14C, on or prior to April 30, 2004,
are incorporated by reference in Part III (Items 10, 11, 12, 13 and 14) of this
Form 10-K.

TABLE OF CONTENTS

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FORWARD-LOOKING STATEMENTS

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. This document contains certain
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
intends such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995, and includes this statement for purposes of such
safe harbor provisions. Forward-looking statements, which are based upon certain
assumptions and describe future plans, strategies and expectations of the
Company, are generally identifiable by use of the words "believes," "expects,",
"intends," "anticipates," "plans," "seeks," "estimates," "projects" or similar
expressions. The ability of the Company to predict results or the actual effect
of future plans or strategies is inherently uncertain. Important factors which
may cause actual results to differ materially from the forward-looking
statements contained herein or in other public statements by the Company are
described under the caption "Part II -- Item 7 Management Discussion and
Analysis of Financial Condition and Results of Operation-Significant Factors
That Could Affect Future Performance and Forward-Looking Statements" appearing
in this Report and other risks identified from time to time in the Company's
filings with the Securities and Exchange Commission ("SEC"), press releases and
other communications. The Company assumes no obligation to update
forward-looking statements or to update the reasons actual results could differ
from those projected in the forward-looking statements.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

Zap.Com Corporation ("Zap.Com" or the "Company") was founded by Zapata
Corporation ("Zapata") (NYSE:ZAP) in April 1998 as a Nevada corporation.
Zap.Com's principal corporate offices are located at 100 Meridian Centre, Suite
350, Rochester, New York 14618.

Zapata formed Zap.Com for the purpose of creating and operating a global
network of independently owned web sites. In April 1999, Zap.Com announced its
plan to establish the ZapNetwork by connecting web sites through a proprietary
multi-functional, portal-like Internet banner known as the ZapBox. Zap.Com
intended to distribute advertising and e-commerce opportunities over this
network. From its inception on April 2, 1998 through November 12, 1999, Zap.Com
operated as a wholly owned subsidiary of Zapata. In November 1999, Zapata and
two of its directors invested $10.1 million of equity in Zap.Com. On November
12, 1999, Zapata distributed to its stockholders 477,742 shares of Zap.Com
common stock, leaving Zapata as the holder of approximately 98 percent of
Zap.Com's outstanding common stock. On November 30, 1999, Zap.Com's stock began
to trade on the NASD's OTC Electronic Bulletin Board under the symbol "ZPCM,"
establishing Zap.Com as a separate public company.

During 1999 and 2000, Zap.Com engaged primarily in the research and
investigation of the Internet industry, the development of the Company's
business model, the establishment of strategic relationships to provide Internet
connectivity and technology systems to support the ZapNetwork, the development
of the ZapBox and the Zap.Com homepage, the filing of patent and trademark
applications and the solicitation of web sites to join the ZapNetwork.

On December 15, 2000, the Zap.Com Board of Directors concluded that
Zap.Com's operations were not likely to become profitable in the foreseeable
future and therefore, it was in the best interest of the Company and its
stockholders to cease all Internet operations. Zap.Com terminated all salaried
employees and all third party contractual relationships entered into in
connection with its Internet business.

Since ceasing its Internet operations, the Company has had no existing
business operations, other than to comply with its reporting requirements under
the Securities Exchange Act of 1934. In the future, Zap.Com

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may acquire an operating company. Zap.Com may also consider developing a new
business suitable for its situation.

The Company will have broad discretion in identifying and selecting both
the industries and the possible acquisition candidates within those industries
that it will acquire. The Company has not identified a specific industry on
which it initially intends to focus and has no present plans, proposals,
arrangements or understandings with respect to the acquisition of any specific
business. There can be no assurance that the Company will be able to identify or
successfully complete any acquisitions.

The Company has no preference as a general matter as to whether to issue
shares of common stock or cash in making acquisitions and it may use either
shares of its common stock or cash, or a combination thereof. The form of the
consideration that the Company uses for a particular acquisition will depend
upon the form of consideration that the sellers of the business require and the
most advantageous way for the Company to account for, or finance the
acquisition. To the extent the Company uses common stock for all or a portion of
the consideration to be paid for future acquisitions, existing stockholders may
experience significant dilution.

In order to effect an acquisition, Zap.Com may need additional financing.
There is no assurance that any such financing will be available, or available on
terms favorable or acceptable to the Company. In particular, potential third
party equity investors may be unwilling to invest in Zap.Com due to Zapata's
voting control over Zap.Com and the significant potential for dilution of a
potential investor's ownership in the Company's common stock. Zapata's voting
control may be unattractive because it makes it more difficult for a third party
to acquire the Company even if a change of control could benefit the Company's
stockholders by providing them with a premium over the then current market price
for their shares. If the Company raises additional funds through the issuance of
equity, equity-related or debt securities, these securities may have rights,
preferences or privileges senior to those of the rights of Zap.Com's common
stockholders, who would then experience dilution.

In general, any new business development is difficult, and the Company's
particular realities impose significant constraints that make such an
undertaking even more difficult. These constraints include the following: the
need to acquire or develop the business without paying substantial cash or
taking on significant debt, unless it can be serviced by cash flow from the new
business; the handicap of not having actively traded stock to use to procure
this business; the requirement that, after launch, the new business should not
need a significant capital investment to fund its initial operations unless this
can be accomplished through cash flow from the new business; and the requirement
that the new business should produce a positive cash flow in the near term.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Company follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which establishes standards for the way companies report
information about operating segments in annual financial statements. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company has determined that it does
not have any separately reportable business segments.

COMPETITION

Numerous companies throughout the United States will compete vigorously
with Zap.Com for target acquisition candidates. Venture capital companies as
well as established corporations and entities, most of which have greater
resources than the Company does, will vie for such acquisition candidates.

INTELLECTUAL PROPERTY

Zap.Com owns certain intellectual property rights related to the ZapBox and
the ZapNetwork. In connection with the foregoing rights, Zap.Com currently has a
patent application pending before the United States Patent and Trademark Office
for a business process patent which is directed to a unique Internet-based
commerce method and system underlying the business model. Zap.Com also owns
numerous trademarks and

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service marks. It has obtained federal registration of several of such marks,
and has applied for federal registration of various other marks with the United
States Patent and Trademark Office.

REGULATORY MATTERS

The Company does not yet know what business it will enter as this is
dependent on which target acquisition it determines to purchase; however all
industries have generally become increasingly regulated in recent years. The
Company is likely to be subject to the various States, Federal, and local laws,
rules, regulations and acts once it commences an acquisition and commences
active business operations.

EMPLOYEES

Since terminating its Internet operations, Zap.Com has had two employees,
Avram Glazer, President and CEO, and Leonard DiSalvo, VP-Finance and Chief
Financial Officer. Neither Mr. Glazer nor Mr. DiSalvo receive a salary from
Zap.Com and currently devote a significant portion of their business time to
Zapata, where they hold the same offices. Both of these officers, however, will
devote such time to Zap.Com's affairs as is required to perform their duties to
Zap.Com.

ITEM 2. PROPERTIES

Zap.Com's headquarters are located in Rochester, New York, in space
subleased to it by Zapata on a month-to-month basis. Zapata has advised Zap.Com
that it has waived its rights to collect rent until future notice.

ITEM 3. LEGAL PROCEEDINGS

As of the date of this report, Zap.Com is not involved in any legal
proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of Zap.Com's stockholders during the
fourth quarter of 2003.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Zap.Com's common stock began trading on November 30, 1999 on the NASD's OTC
electronic bulletin board under the symbol "ZPCM." The OTC electronic bulletin
board is a regulated quotation service that displays real-time quotes, last-sale
prices and volume information in over-the-counter equity securities. The OTC
electronic bulletin board market quotations reflect inter-dealer prices, without
retail mark up, mark down or commission, are not necessarily representative of
actual transactions, and may not be indicative of the value of the common stock
or the existence of an active market.

The following table presents quarterly high and low prices for the
Company's common stock reported by the OTC electronic bulletin board for the
periods indicated:

The level of trading in the Company's common stock has been sporadic and
limited.

The Company has been advised that several NASD member firms are currently
acting as market makers for the Company's common stock. There is no assurance
that an active trading market will develop which will provide liquidity for the
Company's stockholders.

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As of March 5, 2004, the closing price reported on the OTC electronic
bulletin board for our common stock was $0.20. As of such date there were
approximately 1,500 holders of record of our common stock. This number does not
include the stockholders for whom shares are held in a "nominee" or "street"
name.

Zap.Com has never declared or paid cash dividends on its common stock and
does not anticipate paying any cash dividends in the foreseeable future. The
payment of any future dividends will be at the discretion of the Board of
Directors and will depend upon a number of factors including future earnings,
the success of its business activities, capital requirements, the general
financial conditions and future prospects of any business that is acquired,
general business conditions and such other factors as the Board of Directors may
deem relevant.

The following table sets forth information as of December 31, 2003, with
respect to compensation plans under which equity securities of the Company are
authorized for issuance:

ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth certain selected financial data derived from
Zap.Com's audited financial information for the periods and as of the dates
presented. The following information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto included in Item 7 of
this report.

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(1) Zap.Com ceased all Internet operations in December 2000. See Note 1 to the
Company's Financial Statements included in Item 8 of this report.

(2) In November 1999, Zapata and two of its directors invested a total of $10.1
million in Zap.Com as its initial capitalization.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION

FORWARD-LOOKING STATEMENTS

The following discussion of the financial conditions and results of
operations of Zap.Com should be read in conjunction with the financial
statements and notes thereto included elsewhere herein. This discussion contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including, but not
limited to, those set forth under "Significant Factors That Could Affect Future
Performance and Forward-Looking Statements."

RESULTS OF OPERATIONS

For the year ended December 31, 2003, Zap.Com recorded a net loss of
$104,000. Since inception (which commenced on April 2, 1998), Zap.Com has
incurred a cumulative net loss of $9.0 million, including $743,000 in non-cash
charges associated with warrants issued to American Internetwork Sports and all
of the costs associated with the development and implementation of the
ZapNetwork, the ZapBox, and the public registration of Zap.Com's common stock.

For the year ended December 31, 2003 as compared to the year ended December
31, 2002, operations consisted of the following:

Revenues. Zap.Com did not generate any revenues for years ended December
31, 2003 and 2002, nor does it presently have any business from which it may
generate revenue in the future.

Cost of revenues. As a result of ceasing all Internet operations, Zap.Com
incurred no cost of revenues for the years ended December 31, 2003 and 2002.

General and administrative. General and administrative expenses consist
primarily of legal and accounting services, insurance premiums, printing and
filing costs, salaries and wages (including costs allocated by Zapata pursuant
to a services agreement), and various other costs. General and administrative
expenses for the year ended December 31, 2003 were $125,000 as compared to
$154,000 for the year ended December 31, 2002. This decrease is primarily
attributable to a reduction in legal expenses of $19,000 and annual report
expenses of $19,000 in 2003. These decreases relate to the reduction of legal
and annual report accruals during 2003 due to the decrease of expenses for these
services in comparison to estimates made for 2002.

Interest income. Interest income is generated on cash reserves which are
invested in short-term U.S. Government Agency securities. Interest earned for
the year ended December 31, 2003 and 2002 was $22,000 and $34,000, respectively.
The decreased interest income for 2003 was primarily a result of sustained lower
interest rates on short-term U.S. Government Agency securities as compared to
rates in 2002, as well as declining cash reserves available for investment.

For the year ended December 31, 2002 as compared to the year ended December
31, 2001, operations consisted of the following:

Revenues. Zap.Com did not generate any significant revenue for years ended
December 31, 2002 and 2001, nor does it presently have any business from which
it may generate revenue in the future.

Cost of revenues. As a result of ceasing all Internet operations, Zap.Com
incurred no cost of revenues for the years ended December 31, 2002 and 2001.

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Sales and marketing. Zap.Com incurred no sales and marketing expenses
during 2002 as compared to $18,000 in the prior year which related to media
relation costs during the termination of the Company's Internet operations.

General and administrative. General and administrative expenses consist
primarily of legal and accounting services, insurance premiums, printing and
filing costs, salaries and wages (including costs allocated by Zapata pursuant
to a services agreement), and various other costs. General and administrative
expenses for the year ended December 31, 2002 were $154,000 as compared to
$713,000 for the year ended December 31, 2000. This decrease primarily relates
to a $447,000 decrease in Directors and Officers Liability Insurance expense in
2002 after the Company's carrier reduced premiums pursuant to the ceasing of
Internet operations. The decrease is also attributable to an $84,000 reduction
in compensation expense in 2002. In 2001, compensation expenses of $96,000
related to salaries during the termination of Internet operations, as compared
to compensation expenses of $12,000 in 2002 related to management fees allocated
by Zapata Corporation.

Loss on disposal of assets. No assets were disposed of during 2002. During
2001, the Company disposed of certain computer equipment no longer needed after
ceasing Internet operations and recognized a loss on the disposal of $24,000.

Contract termination (settlement) expenses. No contract termination
(settlement) expenses were recorded by the Company during 2002. During 2001, the
Company favorably settled its disputes over two of its contracts and reversed
previous accruals of $403,000 as income resulting from the settlement amounts
being less than the associated accrued liabilities. The original expenses and
accruals were recorded during the fourth quarter of 2000 after the Board
resolution to terminate Internet operations. At that time, the Company
determined that certain outstanding contracts had no future value.

Interest income. Interest income is generated on cash reserves which are
invested in short-term U.S. Government Agency securities. Interest earned for
the year ended December 31, 2002 and 2001 was $34,000 and $96,000, respectively.
The decreased interest income for 2002 was primarily a result of sustained lower
interest rates on short-term U.S. Government Agency securities as compared to
rates in 2001, as well as declining cash reserves available for investment.

LIQUIDITY AND CAPITAL RESOURCES

Zap.Com has not generated any significant revenue since its inception. As a
result, the Company's primary source of liquidity has been its initial
capitalization from Zapata Corporation and two Zapata directors, and thereafter,
the interest income generated on cash reserves invested in short-term US
Government Agency securities. As of December 31, 2003, Zap.Com cash and cash
equivalents were $1.9 million.

Since its inception, the Company has utilized services of the management
and staff and office space of its majority stockholder, Zapata Corporation,
under a shared services agreement that allocated these costs. Effective May 1,
2000, Zapata has waived its rights under the services agreements to be
reimbursed these costs. For the years ended December 31, 2003 and 2002, the
Company recorded approximately $12,000 as contributed capital for these
services. Should Zapata not renew its waiver, Zap.Com may incur future cash
payments under the shared services agreement.

Zap.Com believes that is has sufficient resources to satisfy its existing
and contingent liabilities and its anticipated operating expenses for the next
twelve months. Until such time as a business combination is consummated, Zap.Com
expects these expenses to consist mainly of general and administrative expenses
incurred in connection with maintaining its status as a publicly traded company.
The Company has no commitments for capital expenditures and foresees none,
except for possible future acquisitions. In order to effect an acquisition,
however, Zap.Com may need additional financing. There is no assurance that any
such financing will be available or available on the terms favorable or
acceptable to the Company.

Zap.Com filed a Post-Effective Amendment No. 3 to Form S-1 on June 4, 2003
deregistering 30,000,000 shares of Zap.Com common stock which had been
registered for sale by Zap.Com in connection with potential acquisitions and
other transactions. The Securities & Exchange Commission had originally

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declared the registration effective on March 3, 2000. Zap.Com did not issue any
shares under the registration statement.

CASH FLOWS

Cash used in operating activities was $153,000 for the year ended December
31, 2003 as compared to $103,000 for the year ended December 31, 2002. The
increase in cash used in operating activities resulted from an increase in
payments of accounts payable and accrued liabilities. The increase in these
payments was attributable to timing differences.

Cash used in operating activities was $103,000 for the year ended December
31, 2002 as compared to $596,000 for the prior year. The decrease in cash used
in operating activities resulted from a reduction in payments made for accounts
payable and accrued liabilities. These payables and liabilities were
attributable to the ceasing of Internet operations and were paid during 2001.

For the years ended December 31, 2003, 2002 and 2001, the Company had no
cash flows from investing activities.

For the years ended December 31, 2003 and 2002, the Company had no cash
flows from financing activities as compared to cash provided by financing
activities of $2,000 for 2001. The cash provided by financing activities in 2001
represented payments made by Zapata on behalf of Zap.Com.

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN No. 45), which expands previously
issued accounting guidance and disclosure requirements for certain guarantees.
The Interpretation requires an entity to recognize an initial liability for the
fair value of an obligation assumed by issuing a guarantee. The provision for
initial recognition and measurement of the liability will be applied on a
prospective basis to guarantees issued or modified after December 31, 2002. The
adoption of FIN No. 45 did not have a material impact on the Company's financial
position, results of operations or cash flows.

In December 2002, FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure, an amendment of FASB Statement No.
123." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based
Compensation" to provide alternative methods of transition for a voluntary
change to the fair value-based method of accounting for stock-based employee
compensation. It also amends the disclosure provisions of that Statement to
require prominent disclosure about the effects on reported net income of an
entity's accounting policy decisions with respect to stock-based employee
compensation. Finally, this Statement amends APB Opinion No. 28, "Interim
Financial Reporting", to require disclosure about those effects in interim
financial information. Although the Company continues to account for stock-based
compensation according to APB 25, the Company has adopted the required
disclosure provisions for interim financial reporting under SFAS No. 148. As a
result of the Company's continued use of the intrinsic value method of
accounting for stock-based compensation, the transition provisions did not have
an effect of the Company's financial position, results of operations or cash
flows upon adoption of SFAS 148.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of Zap.Com's financial condition and results of
operations are based upon financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires management to
make estimates and assumptions that affect amounts reported therein. The
estimates that require management's most difficult, subjective or complex
judgments are described below. The Company believes that the critical judgments
impacting the financial statements include:

Valuation allowances for deferred income taxes. The Company reduces its
deferred tax assets to an amount that it believes is more likely than not to be
realized. In so doing, the Company estimates future

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taxable income in determining if any valuation allowance is necessary. As a
result, the Company had a full valuation allowance against the deferred tax
assets as of December 31, 2003.

Impairment of long-lived assets. Zap.Com reviews the recoverability of its
long-lived assets when events or changes in circumstances occur that indicate
that the carrying value of the asset may not be recoverable. The assessment of
possible impairment is based on Zap.Com's ability to recover the carrying value
of the asset from the expected future cash flows. If these cash flows are less
than the carrying amount of the asset, an impairment loss is recognized for the
difference between estimated fair value and carrying value. The measurement
requires management to estimate future cash flows and the fair value of
long-lived assets. As of December 31, 2003, Zap.Com held approximately $2,000 in
long-lived assets.

SIGNIFICANT FACTORS THAT COULD AFFECT FUTURE PERFORMANCE AND FORWARD-LOOKING
STATEMENTS

WE HAVE LIMITED ASSETS AND NO SOURCE OF REVENUE.

The Company has limited assets and has had no significant revenue since its
inception, nor will the Company receive any operating revenues until it
completes an acquisition, reorganization or merger or successfully develops a
new business. The Company can provide no assurance that any acquired business
will produce any material revenues for the Company or its stockholders or that
any such business will operate on a profitable basis.

WE HAVE NOT SELECTED A SPECIFIED INDUSTRY IN WHICH TO ACQUIRE OR DEVELOP A
BUSINESS.

To date, the Company has not identified any particular industry or business
in which to concentrate its acquisition efforts. Accordingly, prospective
investors currently have no basis to evaluate the comparative risks and merits
of investing in the industry or business in which the Company may acquire. To
the extent that the Company may acquire a business in a high-risk industry, the
Company will become subject to those risks. Similarly, if the Company acquires a
financially unstable business or a business that is in the early stages of
development, the Company will become subject to the numerous risks to which such
businesses are subject. Although management intends to consider the risks
inherent in any industry and business in which it may become involved, there can
be no assurance that it will correctly assess such risks.

ABSENCE OF SUBSTANTIVE DISCLOSURE RELATING TO PROSPECTIVE NEW BUSINESSES.

Because the Company has not yet identified any assets, property or business
that it may acquire or develop, potential investors in the Company will have
virtually no substantive information about any such new business upon which to
base a decision whether to invest in the company. The Company can provide no
assurance that any investment in the Company will not ultimately prove to be
unfavorable. In any event, stockholders will not have access to any information
about any new business until such time as a transaction is completed and the
Company files a report with the Securities and Exchange Commission disclosing
the nature of such transaction and/or business.

IF AN ACQUISITION IS CONSUMMATED, STOCKHOLDERS WILL NOT KNOW ITS STRUCTURE AND
WILL LIKELY SUFFER DILUTION.

Management has had no preliminary contact or discussions regarding, and
there are no present plans, proposals or arrangements to acquire any specific
assets, property or business. Accordingly, it is unclear whether such an
acquisition would take the form of an exchange of capital stock, a merger or an
asset acquisition. However, because the Company has limited resources as of the
date hereof, such acquisition is likely to involve the issuance of stock.

We currently have 1,500,000,000 authorized shares of common stock and
150,000,000 authorized shares of preferred stock. As of the date of this report,
we have 50,004,474 shares of common stock outstanding and no outstanding
preferred stock. We will be able to issue significant amounts of additional
shares of common stock without obtaining stockholder approval, provided we
comply with the rules and regulations of any exchange or national market system
on which our shares are then listed. As of the date of this report, we are

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not subject to the rules of any exchange that would require stockholder
approval. To the extent we issue additional common stock in the future, existing
stockholders will experience dilution in percentage ownership.

As of the date of this report, we have reserved 5,000,000 shares of common
stock for issuance on the exercise of 2,000,000 warrants issued to American
Internetwork Sports and 3,000,000 for options issued or to be issued pursuant to
our 1999 Long-Term Incentive Stock Option Plan. The warrants have an exercise
price of $2.00 per share and became fully vested in December of 2000. The
outstanding options have a weighted average exercise price of $2.00. The
issuance of shares upon the exercise of the above securities may have a dilutive
effect in the future on our common stock, which may adversely affect the price
of our common stock.

MANAGEMENT TO DEVOTE INSIGNIFICANT TIME TO ACTIVITIES OF THE COMPANY.

Members of the Company's management are not required to devote their full
time to the affairs of the Company. Because of their time commitments to Zapata,
as well as the fact that the Company has no business operations, the members of
management anticipate that they will not devote a significant amount of time to
the activities of the Company, except in connection with identifying a suitable
acquisition target or business to develop.

ZAPATA AND ZAP.COM'S OFFICERS MAY HAVE CONFLICTS OF INTEREST.

Although the Company has not identified any potential acquisition target or
new business opportunities, the possibility exists that the Company may acquire
or merge with a business or company in which the Company's executive officers,
directors, beneficial owners or their affiliates may have an ownership interest.
A transaction of this nature would present a conflict of interest to those
parties with a managerial position and/or an ownership interest in both the
Company and the acquired entity, and may compromise management's fiduciary
duties to the Company's stockholders. See "Zapata's control and the presence of
interlocking directors and officers create potential conflicts of interest and
could prevent a change of control" discussed below. An independent appraisal of
the acquired company may or may not be obtained in the event a related party
transaction is contemplated.

THERE IS SIGNIFICANT COMPETITION FOR ACQUISITION CANDIDATES.

Management believes that there are numerous companies that are also seeking
merger or acquisition transactions. These entities will present competition to
the Company in its search for a suitable transaction candidate, and the Company
makes no assurance that it will be successful in that search.

THERE IS NO ASSURANCE OF CONTINUED PUBLIC TRADING MARKET AND BEING A LOW
PRICED SECURITY MAY AFFECT THE MARKET VALUE OF STOCK.

To date, there has been only a limited public market for our common stock.
Our common stock is currently quoted on the Over the Counter Bulletin Board. As
a result, an investor may find it difficult to dispose of, or to obtain accurate
quotations as to the market value of our stock. Our stock is subject to the low-
priced security or so called "penny stock" rules that impose additional sales
practice requirements on broker-dealers who sell such securities. The Securities
Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure in
connection with any trades involving a stock defined as a penny stock
(generally, according to recent regulations adopted by the U.S. Securities and
Exchange Commission, any equity security that has a market price of less than
$5.00 per share, subject to certain exceptions that we no longer meet). For
example, brokers/dealers selling such securities must, prior to effecting the
transaction, provide their customers with a document that discloses the risks of
investing in such securities. Included in this document are the following:

- the bid and offer price quotes in and for the "penny stock," and the
number of shares to which the quoted prices apply,

- the brokerage firm's compensation for the trade, and

- the compensation received by the brokerage firm's sales person for the
trade.

10

In addition, the brokerage firm must send the investor:

- a monthly account statement that gives an estimate of the value of each
"penny stock" in the investor's account, and

- a written statement of the investor's financial situation and investment
goals.

If the person purchasing the securities is someone other than an accredited
investor or an established customer of the broker/dealer, the broker/dealer must
also approve the potential customer's account by obtaining information
concerning the customer's financial situation, investment experience and
investment objectives. The broker/dealer must also make a determination whether
the transaction is suitable for the customer and whether the customer has
sufficient knowledge and experience in financial matters to be reasonably
expected to be capable of evaluating the risk of transactions in such
securities. Accordingly, the Commission's rules may limit the number of
potential purchasers of the shares of our common stock.

Resale restrictions on transferring "penny stocks" are sometimes imposed by
some states, which may make transaction in our stock more difficult and may
reduce the value of the investment. Various state securities laws pose
restrictions on transferring "penny stocks" and as a result, investors in our
common stock may have the ability to sell their shares of our common stock
impaired.

We currently have several National Association of Securities Dealers, Inc.
member broker/dealers who maintain a market in our stock as market makers. There
can be no assurance we will be able to maintain such market makers. If the
number of market makers in our stock declines, the liquidity of our common stock
could be impaired, not only in the number of shares of common stock which could
be bought and sold, but also through possible delays in the timing of
transactions, and lower prices for the common stock than might otherwise
prevail. Furthermore, the lack of market makers could result in persons being
unable to buy or sell shares of the common stock on any secondary market.

ZAPATA'S CONTROL AND THE PRESENCE OF INTERLOCKING DIRECTORS AND OFFICERS
CREATE POTENTIAL CONFLICTS OF INTEREST AND COULD PREVENT A CHANGE OF CONTROL.

As of the date of this report Zapata owns approximately 98 percent of our
outstanding common stock. As a result, Zapata's directors and officers will be
able to control the outcome of substantially all matters submitted to the
stockholders for approval, including the election of directors and any proposed
merger, liquidation, transfer or encumbrance of a substantial portion of its
assets, or amendment to our charter to change our authorized capitalization.
This concentration of ownership may also have the effect of delaying or
preventing a change in control of Zap.Com even if it would be beneficial to our
stockholders.

In addition, our executive officers also are directors, officers or
employees of Zapata and, in most cases, either own, or hold an option to
purchase, equity securities of Zapata. In addition, Malcolm Glazer, who is the
father of our President and Chief Executive Officer, Avram Glazer, controls and
beneficially owns approximately 46 percent of Zapata's outstanding common stock.
As a result, these executive officers have inherent potential conflicts of
interest when making decisions related to transactions between Zapata and us.
Zapata's ability to control matters listed above together with the potential
conflicts of interest of its executive officers who also serve as executive
officers of Zap.Com and our Chairman of the Board could adversely affect the
trading price and liquidity of our common stock. These factors could limit the
price that investors might be willing to pay for our common stock in the future.

WE HAVE LIABILITIES AS A MEMBER OF ZAPATA'S CONSOLIDATED TAX GROUP.

We have been, and expect to continue to be for the foreseeable future, a
member of Zapata's consolidated tax group under federal income tax law until the
Zap.Com securities held by Zapata do not constitute either 80 percent or greater
of the voting power or the market value of Zap.Com's outstanding stock. Each
member of a consolidated group for federal income tax purposes is jointly and
severally liable for the federal income tax liability of each other member of
the consolidated group. Similar rules may apply under state income tax laws.
Although we have entered into a tax sharing and indemnity agreement with Zapata,
if Zapata or members of its consolidated tax group (other than us) fail to pay
tax liabilities arising prior to the time that we are no

11

longer a member of Zapata's consolidated tax group, we could be required to make
payments in respect of these tax liabilities and these payments could materially
adversely affect our financial condition.

BECAUSE WE DO NOT INTEND TO PAY ANY CASH DIVIDENDS ON OUR COMMON STOCK,
HOLDERS OF OUR COMMON STOCK WILL NOT BE ABLE TO RECEIVE A RETURN ON THEIR
SHARES UNLESS THEY SELL THEIR SHARES.

We have paid no dividends on our common stock. We do not anticipate paying
any cash dividends on our common stock in the foreseeable future. Unless we pay
dividends, holders of our common stock will not be able to receive a return on
their shares unless they sell them, which could be difficult unless a more
active market develops in our stock. See Item 5. "Market for the Registrant's
Common Equity and Related Stockholder Matters."

OUR ANTI-TAKEOVER PROVISIONS IN OUR CORPORATE DOCUMENTS MAY HAVE AN ADVERSE
EFFECT ON THE MARKET PRICE OF OUR COMMON STOCK.

If Zapata were ever to lose voting control over us, provisions within our
charter and by-laws could make it more difficult for a third party to gain
control of us. This would be true even if a change in control might be
beneficial to our stockholders. This could adversely affect the market price of
our common stock. These provisions include:

- the elimination of the right to act by written consent by stockholders
after Zapata no longer holds a controlling interest in us;

- the elimination of the right to call special meetings of the stockholders
by stockholders except that Zapata may do so as long as it holds a
controlling interest in us;

- the creation of a staggered board of directors; and,

- the ability of the board of directors to designate, determine the rights
and preferences of, and to issue preferred stock, without stockholder
consent, which could adversely affect the rights of our common
stockholders.

A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK IS ELIGIBLE FOR SALE INTO THE MARKET
AND THIS COULD DEPRESS OUR STOCK PRICE.

Sales of a substantial number of shares of our common stock in the future
could cause the market price of our common stock to decline. As of the date of
this document, we have outstanding 50,004,474 shares of common stock, of which
Zapata owns 48,972,258 shares, Malcolm Glazer owns 707,908 shares, Avram Glazer
owns 50,020 shares and public stockholders own 274,288 shares. In addition, we
have 3,000,000 shares of common stock reserved for issuance under our 1999
Long-Term Incentive Plan and 2,000,000 shares of our common stock reserved for
issuance of shares that may be purchased under the warrants granted to American
Internetwork Sports.

All of our shares distributed by Zapata to its stockholders on November 12,
1999 are freely tradable without restriction or further registration under the
federal securities laws unless acquired by our "affiliates," as that term is
defined in Rule 144 under the Securities Act of 1933. All of the shares held by
Zapata (other than 1,000,000 shares available for sale by Zapata under an
effective registration statement), acquired by "affiliates" in Zapata's
distribution or by the Glazers in connection with their November 1999 investment
are "restricted securities" under the Securities Act and available for resale
upon compliance with Rule 144, including the one year holding period and the
timing, manner and volume of sales of these shares. In the absence of Rule 144's
availability, these shares may only be publicly resold if they are registered or
another exemption is available.

We have registered 1,000,000 shares of Zap.Com common stock for resale by
Zapata from time to time under a separate registration statement. We have also
granted Zapata registration rights with respect to all of its shares. These
registration rights effectively allow Zapata to register and publicly sell all
of its shares at any time and to participate as a selling stockholder in future
public offerings by Zap.Com.

12

The warrants issued to American Internetwork Sports became fully vested
after the December 2000 decision to cease operations. See Note 11 to the
Company's Financial Statements included in Item 8 of this report. All of the
shares issued to American Internetwork Sports upon exercise of the warrants will
be available for public resale under Rule 144 following the expiration of a one
year holding period commencing upon the issuance of shares after the exercise of
the warrants and compliance with the other requirements of Rule 144. Further,
Zap.Com is required to register the shares issued upon exercise of the warrants
on a registration statement on Form S-8, upon the demand of American
Internetwork Sports.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to the Company's operations result primarily from
changes in interest rates. The Company invests its cash and cash equivalents in
short-term US Government Agency securities with maturities generally not more
than 90 days. Due to the short duration and conservative nature of these
instruments, the Company does not believe that the value of these instruments
have a material exposure to interest rate risk. However, changes in interest
rates do affect the investment income the Company earns on its cash equivalents
and marketable securities and, therefore, impacts its cash flows and results of
operations. Accordingly, there is inherent roll-over risk for the Company's
investment grade securities as they mature and are renewed at current market
rates. Using the investment grade security balance of $1.9 million at December
31, 2003 as a hypothetical constant cash balance, an adverse change of 1% in
interest rates would decrease interest income by approximately $19,000 during a
twelve-month period.

13

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
Zap.Com Corporation

In our opinion, the accompanying balance sheets and the related statements
of operations, changes in stockholders' equity and cash flows present fairly, in
all material respects, the financial position of Zap.Com Corporation at December
31, 2003 and 2002, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2003 in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

Rochester, New York
March 5, 2004

14

ZAP.COM CORPORATION

BALANCE SHEETS

The accompanying notes are an integral part of these financial statements.

15

ZAP.COM CORPORATION

STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these financial statements.

16

ZAP.COM CORPORATION

STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these financial statements.

17

ZAP.COM CORPORATION

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

The accompanying notes are an integral part of these financial statements.
18

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS

NOTE 1. BUSINESS AND ORGANIZATION

Zapata Corporation ("Zapata") formed Zap.Com for the purpose of creating
and operating a global network of independently owned web sites. In April 1999,
Zap.Com announced its plan to establish the ZapNetwork by connecting web sites
through a proprietary multi-functional, portal-like Internet banner known as the
ZapBox. Zap.Com intended to distribute advertising and e-commerce opportunities
over this network. From its inception on April 2, 1998 through November 12,
1999, Zap.Com operated as a wholly owned subsidiary of Zapata. In November 1999,
Zapata and two of its directors invested $10.1 million of equity in Zap.Com. On
November 12, 1999, Zapata distributed to its stockholders 477,742 shares of
Zap.Com common stock, leaving Zapata as the holder of approximately 98 percent
of Zap.Com's outstanding common stock. On November 30, 1999, Zap.Com's stock
began to trade on the NASD's OTC Electronic Bulletin Board under the symbol
"ZPCM," establishing Zap.Com as a separate public company.

During 1999 and 2000, Zap.Com engaged primarily in the research and
investigation of the Internet industry, the development of the Company's
business model, the establishment of strategic relationships to provide Internet
connectivity and technology systems to support the ZapNetwork, the development
of the ZapBox and the Zap.Com homepage, the filing of patent and trademark
applications and the solicitation of web sites to join the ZapNetwork.

On December 15, 2000, the Zap.Com Board of Directors concluded that
Zap.Com's operations were not likely to become profitable in the foreseeable
future and therefore, it was in the best interest of the Company and its
stockholders to cease all Internet operations. Zap.Com terminated all salaried
employees and all third party contractual relationships entered into in
connection with its Internet business.

Since ceasing its Internet operations, the Company has had no existing
business operations, other than to comply with its reporting requirements under
the Securities Exchange Act of 1934. Currently, Zap.Com's principal activities
are exploring methods to enhance stockholder value. Zap.Com is likely to search
for assets or businesses that it can acquire so that it can become an operating
company. Zap.Com may also consider developing a new business suitable for its
situation.

Management believes that it has sufficient resources to satisfy its
existing and contingent liabilities and its anticipated operating expenses for
at least the next twelve months.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

General and administrative expenses reflected in the financial statements
include allocations of certain corporate expenses from Zapata for management
services and rent provided under a Shared Services Agreement. Management
believes these allocations were made on a reasonable basis; however, they do not
necessarily equal the costs that would have been or will be incurred by the
Company prospectively. Zapata has waived its rights to receive these
reimbursements since May 1, 2000. The Company records these waived amounts as
contributed capital. See Note 11.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
reported in future periods could differ from these estimates.

19

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid debt instruments with an original
maturity of 90 days or less to be cash equivalents. Cash and cash equivalents
represent government debt instruments that are carried at cost, which
approximates market.

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost and depreciated over the
estimated useful lives of the assets using the straight-line method. Estimated
useful lives of assets acquired, determined as of the date of acquisition are
3-7 years. Replacements and major improvements are capitalized; maintenance and
repairs are charged to expense as incurred. Upon sale or retirement, the costs
and related accumulated depreciation are eliminated from the accounts. Any
resulting gains or losses are included in the statement of operations.

INCOME TAXES

The Company utilizes the liability method to account for income taxes. This
method requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of existing temporary differences between the
financial reporting and tax-reporting basis of assets and liabilities, and
operating loss and tax credit carry forwards for tax purposes. The Company is
included in Zapata's consolidated U.S. federal income tax return and its income
tax effects are allocated to the Company in proportion to its contribution of
taxable income to consolidated taxable income.

A valuation allowance is provided to reduce deferred tax assets to a level
which, more likely than not, will be realized. Primary factors considered by
management to determine the size of the allowance include the estimated taxable
income level for future years and the limitations on the use of such carry
forwards and expiration dates.

STOCK-BASED COMPENSATION

The Company accounts for its employee stock-based compensation plans under
Accounting Principles Board ("APB") No. 25, "Accounting for Stock Issued to
Employees." Accordingly, no recognition of compensation expense is required for
stock options granted to employees for which the exercise price equals or
exceeds the fair market value of the stock at the grant date. The Company has
adopted the required disclosure provisions under SFAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure, an amendment of the
Financial Accounting Standards Board ("FASB") Statement No. 123," at December
31, 2002. SFAS No. 148 amends SFAS No.123, "Accounting for Stock-Based
Compensation."

20

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Had compensation expense for the 1999 Plan been determined based on fair
value at the grant date consistent with SFAS No. 123, the Company's net loss and
net loss per share (basic and diluted) would have been as follows:

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN No. 45), which expands previously
issued accounting guidance and disclosure requirements for certain guarantees.
The Interpretation requires an entity to recognize an initial liability for the
fair value of an obligation assumed by issuing a guarantee. The provision for
initial recognition and measurement of the liability will be applied on a
prospective basis to guarantees issued or modified after December 31, 2002. The
adoption of FIN No. 45 did not have a material impact on the Company's financial
position, results of operations or cash flows.

In December 2002, FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure, an amendment of FASB Statement No.
123." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based
Compensation" to provide alternative methods of transition for a voluntary
change to the fair value-based method of accounting for stock-based employee
compensation. It also amends the disclosure provisions of that Statement to
require prominent disclosure about the effects on reported net income of an
entity's accounting policy decisions with respect to stock-based employee
compensation. Finally, this Statement amends APB Opinion No. 28, "Interim
Financial Reporting", to require disclosure about those effects in interim
financial information. Although the Company continues to account for stock-based
compensation according to APB 25, the Company has adopted the required
disclosure provisions for interim financial reporting under SFAS No. 148. As a
result of the Company's continued use of the intrinsic value method of
accounting for stock-based compensation, the transition provisions did not have
an effect of the Company's financial position, results of operations or cash
flows upon adoption of SFAS 148.

NOTE 3. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

21

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4. STOCKHOLDERS' EQUITY

In March 2000, the SEC declared the effectiveness of Zap.Com's shelf
registration statement on Form S-1, covering 20,000,000 shares of common stock,
$.001 par value per share. This registration statement also covered up to an
additional 30,000,000 shares of Zap.Com's common stock, $.001 par value per
share in connection with potential acquisitions and other transactions. In June
2003, the company filed a Post-Effective Amendment No. 3 to Form S-1
deregistering these 30,000,000 shares. The company had not issued any shares
under this registration statement.

During December 2000, the Board of Directors resolved to cease the
operations of the Company, effectively terminating the Company's stock bonus
plan. Upon termination, there were no ZapNetwork members who had met the
eligibility requirements to receive the stock bonus. As such, the Company
deregistered the remaining 19,995,526 shares under the plan in January 2001.

NOTE 5. INCOME TAXES

As a result of net operating losses, the Company has not recorded a
provision for income taxes. The components of the deferred tax assets and
related valuation allowance at December 31, 2003 and 2002 are as follows:

The Company believes sufficient uncertainty exists regarding the
realizability of the deferred tax assets such that a full valuation allowance is
required. As of December 31, 2003 and 2002, Zap.Com had approximately $7,634,000
and $7,530,000 of net operating loss carryforwards that expire in 2023 and 2022,
respectively. In the event there is a change of control in the ownership of
Zap.Com, as defined by the Internal Revenue Code, the annual utilization of the
net operating losses could be limited.

NOTE 6. LOSS ON DISPOSAL OF ASSETS

During 2001, the Company disposed of certain computer equipment related to
the terminated Internet business and recognized a loss on the disposal of
$24,000.

NOTE 7. CONTRACT TERMINATION SETTLEMENT

Based on the December 2000 Board resolution to terminate Internet
operations, certain contracts entered into by the Company during its development
stage were deemed to have no future value to the Company. In 2001, the Company
favorably settled its disputes over two of these contracts. The Company reversed
previous accruals of $403,000 as income resulting from the settlement amounts
being less than the associated accrued liabilities.

NOTE 8. STOCK OPTIONS AND STOCK ISSUANCE PLANS

The Company's 1999 Long-Term Incentive Plan (the "1999 Plan") allows the
Company to provide awards to existing and future officers, employees,
consultants and directors of the Company from time to time. The 1999 Plan is
intended to promote the long-term financial interests and growth of the Company
by

22

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

providing employees, officers, directors, and consultants of the Company with
appropriate incentives and rewards to enter into and continue in the employment
of, or relationship with, the Company and to acquire a proprietary interest in
the long-term success of the Company.

Under the 1999 Plan, 3,000,000 shares of common stock are available for
awards. As of December 31, 2003, there were 2,525,000 shares available for grant
under the plan. The 1999 Plan provides for the grant of any or all of the
following types of awards: stock options, stock appreciation rights, stock
awards, cash awards, or other rights or interests. Allocations of awards are
made by the Board of Directors at its sole discretion within the provisions of
the 1999 Plan. As of December 31, 2003 and 2002, there were no cash awards or
other rights or interest outstanding under the plan.

Stock appreciation rights are rights to receive, without payment to
Zap.Com, cash or shares of common stock with a value determined by reference to
the difference between the exercise or strike price of the stock appreciation
rights and the fair market value or other specified valuation of the shares at
the time of exercise. Stock appreciation rights may be granted in tandem with
stock options or separately. As of December 31, 2003 and 2002, there were no
stock appreciation rights outstanding.

Stock awards may consist of shares of common stock and may provide for
voting rights and dividend equivalent rights. The Company may specify conditions
for awards, including vesting service and performance conditions. Vesting
conditions may include, without limitation, provision for acceleration in the
case of a change-in-control of Zap.Com, vesting conditions and performance
conditions, including, without limitation, performance conditions based on
achievement of specific business objectives, increases in specified indices and
attaining specified growth measures or rates. As of December 31, 2003 and 2002,
there were no stock awards outstanding.

The Company issues stock options to executives and key employees that vest
ratably during the first three years after issuance and have five-year terms.
Vesting is contingent upon continued employment with the Company. A summary of
the status of the Company's 1999 Long-Term Incentive Plan is presented below.

Each of the 475,000 stock options outstanding and exercisable as of
December 31, 2003 have an exercise price of $2.00 and expire in the fourth
quarter of 2004.

NOTE 9. LOSS PER SHARE

Basic loss per share is computed by dividing the net loss by the sum of the
weighted average number of shares of common stock outstanding. Diluted earnings
per share is based on the potential dilution that would occur on exercise or
conversion of securities into common stock. For the years ended December 31,
2003,

23

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2002 and 2001, all outstanding stock options were excluded from the computation
of diluted net loss per share because to do so would have an antidilutive
effect.

NOTE 10. COMMITMENTS AND CONTINGENCIES

The Company has applied the disclosure provisions of FASB Interpretation
No. 45 (FIN 45), "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others," to its
agreements containing guarantee or indemnification clauses. These disclosure
provisions expand those required by SFAS No. 5, "Accounting for Contingencies,"
by requiring a guarantor to disclose certain types of guarantees, even if the
likelihood of requiring the guarantor's performance is remote. The following is
a description of arrangements in which the Company is the guarantor.

Zap.Com's articles of incorporation, bylaws and certain other agreements
contain indemnification clauses for its officers and directors for losses
incurred as a result of claims made against such individuals arising out of, or
because of their service to the Company. The maximum potential amount of future
payments the Company could be required to make under these indemnification
agreements is unlimited; however, Zap.Com maintains Director and Officer
Liability insurance that limits this exposure. As a result of this insurance
coverage, it is the opinion of Zap.Com's management that the estimated fair
value of any liabilities under these indemnification agreements is minimal and
should not materially impact the Company's financial position, results of
operations or cash flows. These indemnification obligations were in effect prior
to December 31, 2002 and are therefore grandfathered under the provisions of FIN
No. 45. Accordingly, no liabilities have been recorded for the indemnification
clauses in these agreements.

Related to its 1999 Initial Public Offering, the Company entered into
numerous transactions with third parties and with Zapata. Pursuant to certain of
these transactions, the Company may be obligated to indemnify other parties to
these agreements. These obligations include indemnifications for losses incurred
by such parties arising out of the inaccuracy of representations of information
supplied by the Company in connection with such transactions. These
indemnification obligations were in effect prior to December 31, 2002 and are
therefore grandfathered under the provisions of FIN No. 45. Accordingly, no
liabilities have been recorded for the indemnification clauses in these
agreements.

NOTE 11. RELATED PARTY TRANSACTIONS

Since its inception, the Company has utilized the services of the
management and staff of its majority stockholder, Zapata Corporation, under a
shared services agreement that allocated these costs on a percentage of time
basis. Zap. Com also subleases its office space in Rochester, New York from
Zapata Corporation. Under the sublease agreement, annual rental payments are
allocated on a cost basis. Zapata Corporation has waived its rights under the
shared services agreement to be reimbursed for these expenses since May 2000. As
a result, no allocations were made in the year ended December 31, 2001. For the
years ended December 31, 2003 and 2002, the Company recorded approximately
$12,000 as contributed capital for services rendered.

In October 1999, the Company granted to American Internetwork Sports
Company, LLC stock warrants in consideration for sports related consulting
services. American Internetwork Sports is owned by the siblings of Avram Glazer,
the Company's President and Chief Executive Officer. The Company accounted for
this transaction in accordance with EITF 96-18, which requires the recognition
of expense based on the then current fair value of the warrants at the end of
each reporting period with adjustment of prior period expense to actual expense
at each vesting date. Pursuant to the December 2000 decision to cease the
operations of the Company, these warrants became fully vested. As a result, the
Company recorded the entire cost of $743,000 for all 2,000,000 warrants at the
then market value of the stock.

24

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

An evaluation was performed under the supervision of the Company's
management, including the Chief Executive Officer (CEO) and Chief Financial
Officer (CFO), of the effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Securities Exchange Act of
1934 (the "Exchange Act") Rules 13a-14(c) and 15-d-14(c)) as of the end of the
period covered by this report. Based on that evaluation, the Company's
management, including the CEO and CFO, concluded that the Company's disclosure
controls and procedures were effective to ensure that information we are
required to disclose in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.

Changes in internal controls

Further, there have been no significant changes in the Company's internal
controls or in other factors that could significantly affect our disclosure
controls subsequent to the evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

25

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Pursuant to General Instruction G on Form 10-K, the information called for
by Item 10 of Part III of Form 10-K is incorporated by reference to the
information set forth in the Company's Information Statement relating to its
2004 Annual Meeting of Stockholders (the "2004 Information Statement") to be
filed pursuant to Regulation 14C under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), in response to Items 401 and 405 of Regulation S-K
under the Securities Act of 1933, as amended, and the Exchange Act ("Regulation
S-K").

ITEM 11. EXECUTIVE COMPENSATION

Pursuant to General Instruction G of Form 10-K, the information called for
by Item 11 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 2004 Information Statement in response to Item 402
of Regulation S-K, excluding the material concerning the report on executive
compensation and the performance graph specified by paragraphs (k) and (l) of
such Item.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Pursuant to General Instruction G of Form 10-K, the information called for
by Item 12 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 2004 Information Statement in response to Item 403
of Regulation S-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to General Instruction G of Form 10-K, the information called for
by Item 13 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 2004 Information Statement in response to Item 404
of Regulation S-K.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Pursuant to General Instruction G of Form 10-K, the information called for
by Item 14 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 2004 Information Statement in response to Item 9(e)
of Schedule 14A.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)LIST OF DOCUMENTS FILED

(1) Financial Statements

Financial statements, Zap.Com Corporation.

Report of Independent Auditors.

Balance sheets as of December 31, 2003 and 2002.

Statements of operations for the years ended December 31, 2003, 2002, and
2001.

Statements of cash flows for the years ended December 31, 2003, 2002, and
2001.

26

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Statements of changes in stockholders' equity for the years ended
December 31, 2003, 2002, and 2001.

Notes to financial statements.

(2) Financial Statement Schedules

Filed herewith as a financial statement schedule is the schedule supporting
Zap.Com's financial statements listed under paragraph (a) of this Item, and the
Independent Auditors' Report with respect thereto.

(3) Exhibits filed as part of this report. See (c) below.

(b) CURRENT REPORTS ON FORM 8-K

No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.

(c) EXHIBITS

Those exhibits required to be filed by Item 601 of Regulation S-K are
listed in the Exhibit Index immediately preceding the exhibits filed herewith
and such listing is incorporated herein by reference.

- ---------------

* Incorporated by reference to the exhibit number referenced in the
parenthesis and filed with Zap.Com's Registration Statement on Form S-1
(File No. 333-76135) originally filed with the Securities and Exchange
Commission on April 12, 1999, as amended.

27

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

ZAP.COM CORPORATION (Registrant)

By: /s/ AVRAM GLAZER
------------------------------------
Name: Avram Glazer
Title: President and CEO
Dated: March 26, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

28

SCHEDULE II

ZAP.COM CORPORATION

VALUATION AND QUALIFYING ACCOUNTS