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volume sold. Omega attributes the higher fish meal prices, fish oil prices and fish oil volumes to strong worldwide demand for fish meal and competing oil markets rebounding from historic low levels.

Cost of Revenues. Zapata’s consolidated cost of revenues for the quarter ended June 30, 2002 was $20.3 million, a $3.3 million increase from $17.0 million for the quarter ended June 30, 2001. Cost of sales primarily includes Omega Protein’s direct fishing and processing costs. As a percent of revenues, cost of sales was 75% for the quarter ended June 30, 2002 as compared to 89% for the quarter ended June 30, 2001. The decrease in cost of sales as a percentage of revenues was primarily due to higher sales prices of 36% and 57% for Omega’s fish meal and fish oil, respectively.

Selling, General, and Administrative Expenses. Zapata’s consolidated selling, general and administrative expenses decreased $388,000 or 10% compared to the quarter ended June 30, 2001. This decrease was primarily due to Omega Protein’s $634,000 decrease in the provision for uncollectible insurance accounts receivable, partially offset by Omega’s higher advertising and employee related costs in the current quarter ended June 20, 2002 as compared to the previous quarter ended June 30, 2001.

Interest Income, Net. Interest income decreased by $533,000 for the quarter ended June 30, 2002 as compared to the quarter ended June 30, 2001. The decrease was primarily due to lower interest rates on cash and cash equivalents and short-term investments as compared to the previous quarter.

Realized loss on non-investment grade securities. The Company did not incur any realized losses on non-investment grade securities for the quarter ended June 30, 2002. For the quarter ended June 30, 2001, realized loss on non-investment grade securities was approximately $10.0 million and consisted mainly of the write-down to market value of the non-investment grade debt held in the Company’s available for sale portfolio.

(Provision) benefit for Income Taxes. The Company’s consolidated provision for income taxes was $1.2 million for the quarter ended June 30, 2002 as compared to a benefit of approximately $1.2 million for the quarter ended June 30, 2001. The $2.4 million swing from a provision to a benefit is primarily due to Omega Protein’s generation of income during the current quarter as compared to a loss in the same quarter of the previous period.

Six Months Ended June 30, 2002 and 2001

Zapata had consolidated net income of approximately $2.4 million or $1.02 per share for the six months ended June 30, 2002 compared to net loss of approximately $11.1 million or $4.65 per share for the six months ended June 30, 2001. The net income for this period was primarily due to net income at Omega Protein. Omega reported net income of $5.7 million or $0.23 per share as compared to a net loss of $904,000 or $0.04 per share for the same period of the previous year.

Revenues. For the six months ended June 30, 2002, Zapata’s consolidated revenues increased approximately 33% from the six months ended June 30, 2001. The revenue increase was primarily due to higher sales prices of 18% and 68% for Omega Protein’s fish meal and fish oil, respectively, along with a 16% increase in fish oil volume sold. Omega attributes the higher fish meal prices, fish oil prices and fish oil volumes to strong worldwide demand for fish meal and competing oil markets rebounding from historic low levels.

Cost of Revenues. Zapata’s consolidated cost of revenues for the six months ended June 30, 2002 was $37.3 million, a $2.2 million increase from $35.0 million for the six months ended June 30, 2001. Cost of sales primarily includes Omega Protein’s direct fishing and processing costs. As a percent of revenues, cost of sales was 73% for the six months ended June 30, 2002 as compared to 92% for the six months ended June 30, 2001. The decrease in cost of sales as a percentage of revenues was primarily due to higher sales prices of 18% and 68% for Omega’s fish meal and fish oil, respectively.

Selling, General, and Administrative Expenses. Zapata’s consolidated selling, general and administrative expenses decreased $240,000 or 4% compared to the six months ended June 30, 2001. This decrease resulted from eliminating expenses from Charged Productions, Inc. after the sale of that company in April of 2001, partially offset by Omega’s higher advertising and employee related costs in the current six months ended June 20, 2002 as compared to the previous six months ended June 30, 2001.

Contract Termination Settlement. There were no contract termination settlements in the six months ended June 30, 2002. For the six months ended June 30, 2001, Zap.Com favorably settled disputes over two of its contracts which had been reserved for in the fourth quarter of 2000 in connection with the termination of Internet operations. Accordingly, Zap.Com reversed previous accruals of $403,000 as income resulting from the settlement amounts being less than the associated accrued liabilities.

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