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, 2004

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, 2004 (the last business day of the registrant's most
recently completed second fiscal quarter) was $98,222. 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 February 25, 2005, 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 2005 Annual
Meeting of Stockholders, which the Company plans to file with the Securities and
Exchange Commission pursuant to regulation 14C, on or prior to May 2, 2005, 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 Bulletin Board ("OTCBB") 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.

AVAILABLE INFORMATION

The Company files annual, quarterly and current reports and other
information with the Securities and Exchange Commission ("SEC"). The Company's
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to these reports filed under the Exchange Act , as well
as Section 16 filings by officers and directors, are available free of charge at
the Company's website at www.zap.com or www.sec.gov and are posted as soon as
reasonably practicable after they are filed with the SEC. The Company will
provide a copy of these documents to stockholders upon request. The Company's
website is not incorporated by reference in this report.

In addition, the public may read and copy any materials filed by the
Company with the SEC at the SEC's Public Reference Room at 450 Fifth Street,
NW., Washington, DC 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC at www.sec.gov.

The Company has adopted a Code of Ethics and Business Conduct that applies
to all of the Company's directors and key employees, including the Company's
principal executive officer, principal accounting officer or controller or
persons performing similar functions (collectively, the "Selected Officers").
The Company will provide without charge, upon request, a copy of the Code of
Business Conduct and Ethics. Anyone

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wishing to obtain a copy should write to Zap.Com Corporation Investor Relations,
100 Meridian Centre Suite 350, Rochester, NY 14618.

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 a
federal registration for its ZAP.COM trademark.

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.

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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 2004.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

Zap.Com's common stock began trading on November 30, 1999 on the OTCBB
under the symbol "ZPCM." The OTCBB is a regulated quotation service that
displays real-time quotes, last-sale prices and volume information in
over-the-counter equity securities. The OTCBB 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.
Historically, the level of trading in the Company's common stock has been
sporadic and limited and there is no assurance that an active trading market
will develop which will provide liquidity for the Company's stockholders.

The following table presents quarterly high and low bid information for the
Company's common stock reported by the OTCBB for the periods indicated:

As of February 25, 2005, 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, 2004, with
respect to compensation plans under which equity securities of the Company are
authorized for issuance:

(1) Includes an option to purchase 365,000 shares of common stock granted to
Avram A. Glazer, sole director, President and Chief Executive Officer of the
Company at an exercise price of $0.08 per share, which are subject to
stockholder approval. The Company plans to present the proposal for
consideration by its stockholders at the 2005 annual meeting.

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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.

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

(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.

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

FORWARD-LOOKING STATEMENTS

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. In December
2000 Zap.Com ceased all Internet operations. 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 may acquire an operating company. Zap.Com may also
consider developing a new business suitable for its situation.

The following discussion of the financial condition 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."

6

RESULTS OF OPERATIONS

For the year ended December 31, 2004, Zap.Com recorded a net loss of
$142,000. Since inception (which commenced on April 2, 1998), Zap.Com has
incurred a cumulative net loss of $9.1 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, 2004 as compared to the year ended December
31, 2003, operations consisted of the following:

Revenues. Zap.Com did not generate any revenues for years ended December
31, 2004 and 2003, 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, 2004 and 2003.

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, 2004 were $166,000 as compared to
$125,000 for the year ended December 31, 2003. This change is primarily
attributable to an increase in the cost for legal and annual report services as
compared to 2003. Costs for these services increased by $22,000 and $13,000,
respectively.

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, 2004 and 2003 was $24,000 and $22,000, respectively.
The increased interest income for 2004 was primarily a result of sustained
higher interest rates on short-term U.S. Government Agency securities as
compared to rates in 2003.

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.

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.

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, 2004, Zap.Com's cash and cash
equivalents were $1.8 million.

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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 year ended December 31, 2004, the Company
recorded approximately $13,000 as contributed capital for these services, as
compared to $12,000 for the year ended December 31, 2003. 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.

CASH FLOWS

Cash used in operating activities was $95,000 for the year ended December
31, 2004 as compared to $153,000 for the year ended December 31, 2003. The
decrease in cash used in operating activities resulted from a decrease in
payments of accounts payable and accrued liabilities. The decrease in these
payments was attributable to timing differences.

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.

For the years ended December 31, 2004, 2003 and 2002, the Company had no
cash flows from investing activities.

For the years ended December 31, 2004, 2003 and 2002, the Company had no
cash flows from financing activities.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued Statement No. 123R, "Share Based
Payment," that requires companies to expense the value of employee stock options
and similar awards for interim and annual periods beginning after June 15, 2005
and applies to all outstanding and unvested stock-based awards at a company's
adoption date. The Company is in the process of reviewing the impact of the
adoption of this statement and believes that the adoption of this standard may
have a material effect on the Company's financial position and results of
operations.

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 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, 2004.

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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, 2004, Zap.Com held approximately $1,000 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.

THERE IS AN 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 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.

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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 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 $.08. 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 DEVOTES 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 OTCBB. 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 SEC, 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.

There can be no assurance we will have market makers in our stock. If the
number of market makers in our stock should decline, 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 51 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, Related Stockholder Matters and Issuer Purchases of Equity
Securities."

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 707,907 shares, Avram Glazer
owns 50,000 shares with the remainder owned by public stockholders. 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 9 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 U.S. 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 $1.8 million at December
31, 2004 as a hypothetical constant cash balance, an adverse change of 1% in
interest rates would decrease interest income by approximately $18,000 during a
twelve-month period.

13

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 2004 and December 31, 2003, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2004 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 the standards of the Public Company Accounting Oversight Board
(United States). Those standards 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.

PricewaterhouseCoopers LLP
Rochester, New York
March 11, 2005

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 OTCBB 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 9.

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." 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:

During 2004, the Company issued stock options to its sole director,
corporate secretary and certain Zapata employees. See Note 6.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued Statement No. 123R, "Share Based
Payment," that requires companies to expense the value of employee stock options
and similar awards for interim and annual periods beginning after June 15, 2005
and applies to all outstanding and unvested stock-based awards at a company's
adoption date. The Company is in the process of reviewing the impact of the
adoption of this statement and believes that the adoption of this standard may
have a material effect on the Company's financial position and results of
operations.

NOTE 3. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

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.

21

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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, 2004 and 2003 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, 2004 and 2003, Zap.Com had approximately $7.8
million and $7.6 million of net operating loss carryforwards that expire in 2024
and 2023, 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. 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 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, 2004, there were 2,488,700 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, 2004 and 2003, 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, 2004 and 2003, 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, 2004 and 2003,
there were no stock awards outstanding.

In November 2004, Zap.Com granted stock options to its sole director,
corporate secretary and certain Zapata employees under the 1999 Plan. These
options vest ratably during the first three years after issuance

22

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

and have five-year terms. Vesting is contingent upon continued employment with
the Company. This grant includes options to purchase 365,000 shares of common
stock granted to Avram A. Glazer, sole director, President and Chief Executive
Officer of the Company at an exercise price of $0.08 per share, which are
subject to stockholder approval. The Company plans to present the proposal for
consideration by its stockholders at the 2005 annual meeting. Zap.Com accounted
for the stock options granted to its director in accordance with FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation (an interpretation of APB Opinion No. 25)." Because Zapata controls
Zap.Com, the stock options granted to Zap.Com's Corporate Secretary and grants
to Zapata employees have been accounted for as a stock dividend from Zap.Com to
Zapata under Emerging Issues Task Force Issue 00-23, "Issues Related to the
Accounting for Stock Compensation under APB Opinion No. 25 and FASB
Interpretation No. 44." For options granted to the Company's corporate
secretary, Zapata will recognize compensation expense ratably over the three
year vesting period.

The stock options granted in 2004 were issued at market price on the date
of grant. The Company used the Black-Scholes option-pricing model to determine
fair value of each stock option granted with the following weighted average
assumptions: risk free interest rate of 2.86%, 3 year expected life, expected
volatility of 442%, and no expected dividends. The weighted average fair value
of the 2004 grants was $0.08 per stock option.

A summary of the status of the Company's stock options is presented below.

NOTE 7. 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,
2004, 2003 and 2002, 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 8. 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

23

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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 9. 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.
For the year ended December 31, 2004, the Company recorded approximately $13,000
as contributed capital for services rendered as compared to approximately
$12,000 for the years ended December 31, 2003 and 2002.

In November 2004, Zap.Com granted stock options to its sole director,
corporate secretary and certain Zapata employees under the 1999 Plan. This grant
includes options to purchase 365,000 shares of common stock granted to Avram A.
Glazer, sole director, President and Chief Executive Officer of the Company at
an exercise price of $0.08 per share, which are subject to stockholder approval.
The Company plans to present the proposal for consideration by its stockholders
at the 2005 annual meeting. Zap.Com accounted for the stock options granted to
its director in accordance with FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation (an interpretation of APB
Opinion No. 25)." Because Zapata controls Zap.Com, the stock options granted to
Zap.Com's Corporate Secretary and grants to Zapata employees have been accounted
for as a stock dividend from Zap.Com to Zapata under Emerging Issues Task Force
Issue 00-23, "Issues Related to the Accounting for Stock Compensation under APB
Opinion No. 25 and FASB Interpretation No. 44." For options granted to the
Company's corporate secretary, Zapata will recognize compensation expense
ratably over the three year vesting period.

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

24

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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.

NOTE 10. 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-15(e) and 15d-15(e)) 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.

25

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Changes in Internal Controls Over Financial Reporting

No significant changes in the Company's internal controls over financial
reporting occurred during the quarter ended December 31, 2004 that has
materially affected or is reasonably likely to materially affect, the Company's
internal control over financial requesting.

Notwithstanding the foregoing, there can be no assurance that the Company's
disclosure controls and procedures will detect or uncover all failures of
persons within the Company to disclose material information otherwise required
to be set forth in the Company's periodic reports. There are inherent
limitations to the effectiveness of any system of disclosure controls and
procedures, includes the possibility of human error and the circumvention or
overriding of the controls and procedures. Accordingly, even effective
disclosure controls and procedures can only provide reasonable, not absolute,
assurance of achieving their control objectives.

ITEM 9B. OTHER INFORMATION

None.

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
2005 Annual Meeting of Stockholders (the "2005 Information Statement") to be
filed pursuant to Regulation 14C under 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 2005 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 2005 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 2005 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 2005 Information Statement in response to Item 9(e)
of Schedule 14A.

26

ZAP.COM CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)LIST OF DOCUMENTS FILED

(1) Financial Statements

Financial statements, Zap.Com Corporation.

Report of Independent Registered Public Accounting Firm.

Balance sheets as of December 31, 2004 and 2003.

Statements of operations for the years ended December 31, 2004, 2003, and
2002.

Statements of cash flows for the years ended December 31, 2004, 2003, and
2002.

Statements of changes in stockholders' equity for the years ended
December 31, 2004, 2003, and 2002.

Notes to financial statements.

(2) Financial Statement Schedules

None.

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

(b) 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 10, 2005

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.