<PAGE>
 
  In September 1995, Zapata entered into an agreement (the "Purchase
Agreement") to sell the assets of Energy Industries (the "Energy Industries
Sale") to Weatherford Enterra, Inc. and its wholly owned subsidiary, Enterra
Compression Company (collectively, "Weatherford Enterra"). Pursuant to the
Purchase Agreement, Weatherford Enterra purchased from the Company all of the
assets of Energy Industries for approximately $131 million in cash and assumed
certain liabilities of Energy Industries, subject to final post-closing
adjustments. The Energy Industries Sale closed on December 15, 1995 after
receiving stockholder approval. The Energy Industries Sale resulted in an
after-tax gain of approximately $14.0 million which will be reflected in the
Company's fiscal 1996 financial results. Although a sale price for Cimarron has
not been determined, the Company estimates that, based on preliminary
indications of interest from potential purchasers, the minimum sales price for
Cimarron should be at least equal to book value. The Company expects to
complete the sale of Cimarron in fiscal 1996.
 
  In 1994, the Board of Directors determined that the interests of Zapata's
stockholders would best be served by a sale of the marine protein operations.
Based on preliminary offers to purchase the marine protein operations, the
Company recorded an $8.9 million after-tax book loss in fiscal 1994. On May 5,
1995, Zapata decided to retain the marine protein operations. Zapata had
previously announced that an agreement to sell its marine protein operations
had been reached. However, the acquisition group failed to close the
transaction. The Company subsequently determined to retain these operations. As
a result, the marine protein net assets, results of operations and cash flows
have been reclassified from discontinued operations to continuing operations,
and the $8.9 million after-tax book loss on disposition was reversed in fiscal
1995.
 
  In August 1995, Zapata acquired 31% of the outstanding common stock of
Envirodyne Industries, Inc. ("Envirodyne") for $18.8 million from a trust
controlled by Malcolm Glazer, Chairman of the Board of Zapata and a director of
Envirodyne. Zapata paid the purchase price by issuing to the seller a
subordinated promissory note bearing interest at the prime rate and maturing in
August 1997, subject to prepayment at the Company's option. The Company has
since prepaid approximately $15.6 million on the promissory note. Envirodyne is
one of the world's major suppliers of food packaging products and food service
supplies. This investment was the first step in the transformation of Zapata
into the food-services businesses.
 
  The Energy Industries Sale is another significant step in the Company's
transition from an energy company to a food services company. Of the
approximately $131 million in cash proceeds received from the Energy Industries
Sale, the Company has used approximately $26 million to repay certain bank
debt. See "Liquidity and Capital Resources." Additionally, approximately $1
million was used to pay commissions and fees associated with the sale. The
Company intends to use the remaining net proceeds from the sale for general
corporate purposes, which may include further repayment of debt, and for future
expansion into the food services industry. While the Company is actively
seeking acquisition and joint venture opportunities in the food services
industry, there can be no assurances that the Company will succeed in
consummating any such opportunities or that acquisitions or joint ventures, if
consummated, will be successful. Zapata's Board of Directors has established a
special committee for the purpose of investigating the legal and financial
considerations of one or more merger or acquisition transactions involving the
Company and Houlihan's Restaurant Group, Inc. ("Houlihan's") and Specialty
Equipment Companies, Inc. ("Specialty"). Malcolm Glazer and members of his
family beneficially own approximately 73% and 45% of the outstanding common
stock of Houlihan's and Specialty, respectively, and Malcolm Glazer, Avram
Glazer (the Company's President and Chief Executive Officer) and other members
of their family serve as directors of both of those companies. The Special
Committee was charged with recommending to the Board of Directors what further
steps should be taken by the Company in connection with the above
considerations. To date, the Special Committee has not issued any
recommendations with respect to its consideration of possible transactions
involving either Houlihan's or Specialty.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  At September 30, 1995, Zapata's long-term debt of $37.5 million compared
favorably to working capital of $113.5 million and stockholders' equity of
$145.3 million. At September 30, 1994, the Company's long-
 
                                       15