<PAGE>
 
                              ZAPATA CORPORATION
                         NOTES TO FINANCIAL STATEMENTS


NOTE 1.  FINANCIAL STATEMENTS
- - -----------------------------

  The condensed consolidated financial statements included herein have been
prepared by Zapata, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission.  The financial statements reflect all
adjustments which are, in the opinion of management, necessary to fairly present
such information.  All such adjustments are of a normal recurring nature.
Although Zapata believes that the disclosures are adequate to make the
information presented not misleading, certain information and footnote
disclosures, including significant accounting policies, normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations.  It is suggested that these condensed financial statements be read
in conjunction with the financial statements and the notes thereto included in
Zapata's latest annual report on Form 10-K.

  In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112, "Employers Accounting for Post-
employment Benefits," which will require the recognition of an obligation by
employers who provide benefits to former or inactive employees after employment
but before retirement.  Adoption of the new standard by Zapata is required no
later than the fiscal year ending September 30, 1995.  Based on existing
conditions and a preliminary review, management believes adoption of the new
standard will not have a material impact on Zapata's results of operations or
financial position as Zapata currently provides post-employment benefits on a
very limited basis.

  In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS 115"), which addresses the accounting and
reporting for investments in equity securities that have readily determinable
fair values and for all investments in debt securities.  Adoption by Zapata is
required no later than the fiscal year ending September 30, 1995.  Zapata
currently owns approximately 673,000 shares of Tidewater Inc. ("Tidewater")
common stock which has a book value of approximately $7.9 million.  Upon
adoption of SFAS 115, this security would be reported at fair value and any
unrealized gain or loss recorded as a separate component of stockholders' equity
(net of deferred income taxes).  If Zapata had  implemented the new standard at
June 30, 1994, an adjustment would have been made to increase other assets by
$7.7 million, with a corresponding decrease of $2.7 million to the deferred
income tax asset and an increase of $5.0 million to stockholders' investment for
the unrealized appreciation.

  On April 27, 1994, Zapata's stockholders approved a one-for-five reverse stock
split of the Company's outstanding common stock effective May 3, 1994 that
reduced the number of common shares outstanding from approximately 158.3 million
to approximately 31.7 million.  The number of authorized shares remained at
165.0 million and par value of the common stock was unchanged.  All references
to earnings per share and average number of shares outstanding have been
restated to reflect the reverse stock split.  Additionally Zapata's Board of
Directors declared a common stock dividend of $0.035 per share totalling
approximately $1.1 million to be paid in July 1994 to stockholders of record on
June 30, 1994.

                                       8