UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
MARK ONE
for
the Quarterly Period ended
for the transition period from ________ to ________
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | Zip Code |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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.
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☐ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 7, 2023, Zion Oil & Gas, Inc. had outstanding
INDEX PAGE
i
Zion Oil & Gas, Inc.
Consolidated Condensed Balance Sheets as of
| September 30, 2023 | December 31, 2022 | |||||||
| US$ thousands | US$ thousands | |||||||
| (Unaudited) | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | ||||||||
| Fixed short term bank and escrow deposits – restricted | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Other deposits | ||||||||
| Governmental receivables | ||||||||
| Other receivables | ||||||||
| Total current assets | ||||||||
| Unproved oil and gas properties, full cost method (see Note 4) | ||||||||
| Property and equipment at cost | ||||||||
| Drilling rig and related equipment, net of accumulated depreciation of $ | ||||||||
| Property and equipment, net of accumulated depreciation of $ | ||||||||
| Right of Use Lease Assets (see Note 5) | ||||||||
| Other assets | ||||||||
| Assets held for severance benefits | ||||||||
| Total other assets | ||||||||
| Total assets | ||||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | ||||||||
| Lease obligation – current (see Note 5) | ||||||||
| Asset retirement obligation | ||||||||
| Accrued liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Lease obligation – non-current (see Note 5) | ||||||||
| Provision for severance pay | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (see Note 6) | ||||||||
| Stockholders’ equity | ||||||||
| Common stock, par value $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | ||||||||
The accompanying notes are an integral part of the unaudited interim consolidated condensed financial statements.
1
Zion Oil & Gas, Inc.
Consolidated Condensed Statements of Operations (Unaudited)
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| US$ thousands | US$ thousands | US$ thousands | US$ thousands | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| General and administrative | ||||||||||||||||
| Post impairment of unproved oil and gas properties | ||||||||||||||||
| Other | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense), net | ||||||||||||||||
| Foreign exchange gain (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Financial income (expenses), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss, before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income taxes | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss per share of common stock | ||||||||||||||||
| ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
| Weighted-average shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of the unaudited interim consolidated condensed financial statements.
2
Zion Oil & Gas, Inc.
Consolidated Condensed Statement of Changes in Stockholders’ Equity (Unaudited)
For the three and nine months ended September 30, 2023
| Common Stock | Additional paid-in | Accumulated | ||||||||||||||||||
| Shares | Amounts | Capital | deficit | Total | ||||||||||||||||
| thousands | US$ thousands | US$ thousands | US$ thousands | US$ thousands | ||||||||||||||||
| Balances as of December 31, 2022 | ( | ) | ||||||||||||||||||
| Funds received from sale of DSPP units and shares and exercise of warrants | ||||||||||||||||||||
| Funds received from option exercises | ||||||||||||||||||||
| Costs associated with the issuance of shares | — | ( | ) | ( | ) | |||||||||||||||
| Value of options granted to employees, directors and others as non-cash compensation | — | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances as of September 30, 2023 | ( | ) | ||||||||||||||||||
| * | Less than one thousand. |
| Common Stock | Additional paid-in | Accumulated | ||||||||||||||||||
| Shares | Amounts | Capital | deficit | Total | ||||||||||||||||
| thousands | US$ thousands | US$ thousands | US$ thousands | US$ thousands | ||||||||||||||||
| Balances as of June 30, 2023 | ( | ) | ||||||||||||||||||
| Funds received from sale of DSPP units and shares and exercise of warrants | ||||||||||||||||||||
| Funds received from option exercises | — | |||||||||||||||||||
| Costs associated with the issuance of shares | — | ( | ) | ( | ) | |||||||||||||||
| Value of options granted to employees, directors and others as non-cash compensation | — | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances as of September 30, 2023 | ( | ) | ||||||||||||||||||
3
For the three and nine months ended September 30, 2022
| Common Stock | Additional paid-in | Accumulated | ||||||||||||||||||
| Shares | Amounts | Capital | deficit | Total | ||||||||||||||||
| thousands | US$ thousands | US$ thousands | US$ thousands | US$ thousands | ||||||||||||||||
| Balances as of December 31, 2021 | ( | ) | ||||||||||||||||||
| Funds received from sale of DSPP units and shares and exercise of warrants | ||||||||||||||||||||
| Funds received from option exercises | ||||||||||||||||||||
| Value of options granted to employees, directors and others as non-cash compensation | — | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances as of September 30, 2022 | ( | ) | ||||||||||||||||||
| Common Stock | Additional paid-in | Accumulated | ||||||||||||||||||
| Shares | Amounts | Capital | deficit | Total | ||||||||||||||||
| thousands | US$ thousands | US$ thousands | US$ thousands | US$ thousands | ||||||||||||||||
| Balances as of June 30, 2022 | ( | ) | ||||||||||||||||||
| Funds received from sale of DSPP units and shares and exercise of warrants | ||||||||||||||||||||
| Funds received from option exercises | ||||||||||||||||||||
| Value of options granted to employees, directors and others as non-cash compensation | — | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances as of September 30, 2022 | ( | ) | ||||||||||||||||||
| * | Less than one thousand. |
The accompanying notes are an integral part of the unaudited interim consolidated condensed financial statements.
4
Zion Oil & Gas, Inc.
Consolidated Condensed Statements of Cash Flows (Unaudited)
| For the nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| US$ thousands | US$ thousands | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Cost of options issued to employees, directors and others as non-cash compensation | ||||||||
| Post impairment of unproved oil and gas properties | ||||||||
| Change in assets and liabilities, net: | ||||||||
| Other deposits | ||||||||
| Prepaid expenses and other | ||||||||
| Governmental receivables | ||||||||
| Lease obligation – current | ( | ) | ( | ) | ||||
| Lease obligation – non current | ( | ) | ||||||
| Right of use lease assets | ||||||||
| Other receivables | ( | ) | ||||||
| Severance payable, net | ( | ) | ||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Acquisition of property and equipment | ( | ) | ||||||
| Acquisition of drilling rig and related equipment | ( | ) | ||||||
| Investment in unproved oil and gas properties | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from exercise of stock options | ||||||||
| Costs paid related to the issuance of new shares | ( | ) | ||||||
| Proceeds from issuance of stock and exercise of warrants | ||||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease)/increase in cash, cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Cash, cash equivalents and restricted cash – beginning of period | ||||||||
| Cash, cash equivalents and restricted cash – end of period | ||||||||
| Supplemental schedule of cash flow information | ||||||||
| Non-cash investing and financing activities: | ||||||||
| Unpaid investments in oil & gas properties | ||||||||
| Cost of options issued to employees attributed to oil and gas properties | ||||||||
| New lease accounted for as a right of use lease asset | ||||||||
The accompanying notes are an integral part of the unaudited interim consolidated condensed financial statements.
5
Cash, cash equivalents and restricted cash, are comprised as follows:
| September 30, 2023 | September 30, 2022 | |||||||
| US$ thousands | US$ thousands | |||||||
| Cash and cash equivalents | ||||||||
| Restricted cash included in fixed short-term bank deposits | ||||||||
6
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 1 - Nature of Operations, Basis of Presentation and Going Concern
A. Nature of Operations
Zion Oil & Gas, Inc., a Delaware corporation (“we,” “our,” “Zion” or the “Company”) is an oil and gas exploration company with a history of 23 years of oil & gas exploration in Israel. As of September 30, 2023, the Company has no revenues from its oil and gas operations.
Zion maintains its corporate headquarters in Dallas, Texas. The Company also has branch offices in Caesarea, Israel and Geneva, Switzerland. The purpose of the Israel branch is to support the Company’s operations in Israel, and the purpose of the Switzerland branch is to operate a foreign treasury center for the Company.
On January 24, 2020, Zion incorporated a wholly owned subsidiary, Zion Drilling, Inc., a Delaware corporation, for the purpose of owning a drilling rig, related equipment and spare parts, and on January 31, 2020, Zion incorporated another wholly owned subsidiary, Zion Drilling Services, Inc., a Delaware corporation, to act as the contractor providing such drilling services. When Zion is not using the rig for its own exploration activities, Zion Drilling Services may contract with other operators in Israel to provide drilling services at market rates then in effect.
Zion has the trademark “ZION DRILLING” filed with the United States Patent and Trademark Office. Zion has the trademark filed with the World Intellectual Property Organization in Geneva, Switzerland, pursuant to the Madrid Agreement and Protocol. In addition, Zion has the trademark filed with the Israeli Trademark Office in Israel.
Exploration Rights/Exploration Activities
New Megiddo Valleys License 434 (“NMVL 434”)
The New Megiddo License 428 (“NML 428”) was initially awarded on December 3, 2020 for a six-month term and was extended several times before expiring on February 1, 2023. Zion Oil & Gas, Inc. filed an amended application with the Israel Ministry of Energy for a new exploratory license on January 24, 2023 covering the same area as its License No. 428, which expired on February 1, 2023. However, its original application to replace License No. 428 was filed on May 11, 2022, and a revised application was filed on August 29, 2022.
On September 14, 2023, the Israel Ministry of Energy approved a new Megiddo Valleys License 434 (“NMVL 434”), allowing for oil and gas exploration on approximately 75,000 acres or 302 square kilometers. This Exploration License 434 will be valid for three years until September 13, 2026 with four 1-year extensions for a total of seven years until September 13, 2030. This NMVL 434 effectively supersedes our previous NML 428.
We continue our exploration focus here based on our studies as it appears to possess the key geologic ingredients of an active petroleum system with significant exploration potential.
Zion is deploying new technologies, focusing on new stimulation methods for MJ-01, and aiming to potentially unlock hydrocarbon flows in several identified key zones. Zion has already procured service contractors and ancillary items required for efficient operations. Zion must receive approval of its work plan from the Ministry of Energy prior to commencing its re-completion activities. Zion’s planned activities are currently suspended as a result of the Israel-Hamas war (See Subsequent Events for further insight).
7
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 1 - Nature of Operations, Basis of Presentation and Going Concern (cont’d)
B. Basis of Presentation
The accompanying unaudited interim consolidated condensed financial statements of Zion Oil & Gas, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals necessary for a fair statement of financial position, results of operations and cash flows, have been included. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The year-end balance sheet data presented for comparative purposes was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the operating results for the year ending December 31, 2023 or for any other subsequent interim period.
C. Going Concern
The Company incurs cash outflows from operations, and all exploration activities and overhead expenses to date have been financed by way of equity or debt financing. The recoverability of the costs incurred to date is uncertain and dependent upon achieving significant commercial production of hydrocarbons.
The Company’s ability to continue as a going
concern is dependent upon obtaining the necessary financing to undertake further exploration and development activities and ultimately
generating profitable operations from its oil and natural gas interests in the future. While the Company is still actively engaging service
providers in planning activities for the re-completion of the MJ-01 well, our activities are temporarily suspended due to the Israel-Hamas
war. War was declared by Israel on Hamas following the October 7, 2023 invasion by Hamas in southern Israel. It is not known how long
this war will last and, therefore, we cannot predict with certainty when our exploration activities will resume. The Company’s current
operations are dependent upon the adequacy of its current assets to meet its current expenditure requirements and the accuracy of management’s
estimates of those requirements. Should those estimates be materially incorrect, the Company’s ability to continue as a going concern
may be impaired. The consolidated financial statements have been prepared on a going concern basis, which contemplates realization of
assets and liquidation of liabilities in the ordinary course of business. During the nine months ended September 30, 2023, the Company
incurred a net loss of approximately $
To carry out planned operations, the Company must raise additional funds through additional equity and/or debt issuances or through profitable operations. There can be no assurance that this capital or positive operational income will be available to the Company, and if it is not, the Company may be forced to curtail or cease exploration and development activities. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
8
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 2 - Summary of Significant Accounting Policies
A. Net Loss per Share Data
Basic
and diluted net loss per share of common stock, par value $
B. Use of Estimates
The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of expenses. Such estimates include the valuation of unproved oil and gas properties, deferred tax assets, asset retirement obligations, borrowing rate of interest consideration for leases accounting and legal contingencies. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity, foreign currency, regional hostilities and energy markets have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic and operating environment will be reflected in the consolidated financial statements in future periods.
See comments in our Subsequent Events for the impact of the Israel-Hamas war on our business and future operations.
C. Oil and Gas Properties and Impairment
The Company follows the full-cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized.
All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is included in loss from continuing operations before income taxes, and the adjusted carrying amount of the proved properties is amortized on the unit-of-production method.
9
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 2 - Summary of Significant Accounting Policies (cont’d)
The Company’s oil and gas property represents an investment in unproved properties. These costs are excluded from the amortized cost pool until proved reserves are found or until it is determined that the costs are impaired. All costs excluded are reviewed at least quarterly to determine if impairment has occurred. The amount of any impairment is charged to expense since a reserve base has not yet been established. Impairment requiring a charge to expense may be indicated through evaluation of drilling results, relinquishing drilling rights or other information.
During
the fourth quarter of 2022, the Company testing protocol was concluded at the MJ-02 well. The test results confirmed that the MJ-02 well
did not contain hydrocarbons in commercial quantities in the zones tested. As a result, in the year ended December 31, 2022, the Company
recorded a non-cash impairment charge to its unproved oil and gas properties of $
During
the three and nine months ended September 30, 2023, the Company recorded post-impairment charges of $
Currently,
the Company has no economically recoverable reserves and no amortization base. The Company’s unproved oil and gas properties consist
of capitalized exploration costs of $
D. Fair Value Measurements
The Company follows Accounting Standards Codification (ASC) 820, “Fair Value Measurements and Disclosures,” as amended by Financial Accounting Standards Board (FASB) Financial Staff Position (FSP) No. 157 and related guidance. Those provisions relate to the Company’s financial assets and liabilities carried at fair value and the fair value disclosures related to financial assets and liabilities. ASC 820 defines fair value, expands related disclosure requirements, and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, assuming the transaction occurs in the principal or most advantageous market for that asset or liability.
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:
| ● | Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; |
| ● | Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and |
| ● | Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
The Company’s financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities, are carried at historical cost. At September 30, 2023, and December 31, 2022, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.
10
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 2 - Summary of Significant Accounting Policies (cont’d)
E. Stock-Based Compensation
ASC 718, “Compensation – Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the consolidated financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 718 Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of the performance commitment date or performance completion date.
F. Warrants
In connection with the Dividend Reinvestment and Stock Purchase Plan (“DSPP”) financing arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are stand-alone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded and accounted as a part of the DSPP investment as additional paid-in capital of the common stock issued. All other warrants are recorded at fair value and expensed over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note 3, Stockholders’ Equity.
G. Related parties
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. All transactions with related parties are recorded at fair value of the goods or services exchanged.
Zion did not have any related party transactions for the periods covered in this report.
11
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 2 - Summary of Significant Accounting Policies (cont’d)
H. Recently Adopted Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments”: The amendments in this update are to clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2020-03 are not expected to have a significant effect on current accounting practices. The ASU improves various financial instrument topics in the Codification to increase stakeholder awareness of the amendments and to expedite the improvement process by making the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. The ASU is effective for smaller reporting companies for fiscal years beginning after December 15, 2022 with early application permitted. Zion adopted ASU 2020-03 in the first quarter of 2023. The adoption of this ASU did not have any impact on its consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires companies to apply the definition of a performance obligation under ASC 606 to recognize and measure contract assets and contract liabilities relating to contracts with customers acquired in a business combination. Prior to the adoption of this ASU, an acquirer generally recognized assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. The ASU results in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC 606. The ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. Zion adopted ASU 2021-08 in the first quarter of 2023. The adoption of this ASU did not have a material impact on our consolidated financial statements; the impact in future periods will be dependent upon the contract assets acquired and contract liabilities assumed in any future business combinations.
In September 2022, the FASB issued ASU No. 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50). The ASU requires companies to disclose information about supplier finance programs, including key terms of the program, outstanding confirmed amounts as of the end of the period, a roll forward of such amounts during each annual period, and a description of where the amounts are presented. The new standard does not affect the recognition, measurement, or financial statement presentation of supplier finance obligations. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods, except for roll forward information, which is effective for fiscal years beginning after December 15, 2023. The adoption of this ASU did not have any impact on its consolidated financial statements.
Other Recent Accounting Pronouncements
The Company does not believe that the adoption of any recently issued accounting pronouncements in 2023 had a significant impact on our consolidated financial position, results of operations, or cash flow.
12
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 2 - Summary of Significant Accounting Policies (cont’d)
I. Depreciation and Accounting for Drilling Rig and Related Equipment
Zion
purchased an onshore oil and gas drilling rig, drilling pipe, related equipment and spare parts for a purchase price of $
Zion uses the First In First Out (“FIFO”) method of accounting for the inventory of spare parts, meaning that the earliest items purchased will be the first item charged to the well in which the inventory of spare parts gets consumed.
It is also noteworthy that various components and systems on the rig will be subject to certifications by the manufacturer to ensure that the rig is maintained at optimal levels. Per standard practice in upstream oil and gas, each certification performed on our drilling rig increases the useful life of the rig by five years. The costs of each certification will be added to the drilling rig account, and our straight-line amortization will be adjusted accordingly.
See the table below for a reconciliation of the rig-related activity during the nine months ended September 30, 2023:
| As of September 30, 2023 | ||||||||||||||||
| I-35 Drilling Rig | Rig Spare Parts | Other Drilling Assets | Total | |||||||||||||
| US$ thousands | US$ thousands | US$ thousands | US$ thousands | |||||||||||||
| December 31, 2022 | ||||||||||||||||
| Asset Additions | ||||||||||||||||
| Asset Depreciation | ( | ) | ( | ) | ( | ) | ||||||||||
| Asset Disposals for Self-Consumption | ( | ) | ( | ) | ||||||||||||
| September 30, 2023 | ||||||||||||||||
During
the nine months ended September 30, 2023 and 2022, the Company had depreciation expense of $
13
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity
The
Company’s shareholders approved the amendment of the Company’s Amended and Restated Certificate of Incorporation to increase
the number of shares of common stock, par value $
A. 2021 Omnibus Incentive Stock Option Plan
Effective
June 9, 2021, the Company’s shareholders authorized the adoption of the Zion Oil & Gas, Inc. 2021 Omnibus Incentive Stock Option
Plan (“Omnibus Plan”) for employees, directors and consultants, initially reserving for issuance thereunder
The Omnibus Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, bonus stock, awards in lieu of cash obligations, other stock-based awards and performance units. The plan also permits cash payments under certain conditions.
The
compensation committee of the Board of Directors (comprised of independent directors) is responsible for determining the type of award,
when and to whom awards are granted, the number of shares and the terms of the awards and exercise prices. The options are exercisable
for a period not to exceed
During the nine months ended September 30, 2023, the Company granted the following options from the 2021 Equity Omnibus Plan for employees, directors and consultants, to purchase shares of common stock as non-cash compensation:
| i. | Options to purchase |
| ii. | Options to purchase |
| iii. | Options to purchase
| |
| iv. | Options to purchase |
| v. | Options to purchase | |
| vi. | Options to purchase | |
| vii. | Options to purchase | |
| viii. | Options to purchase |
14
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
During the nine months ended September 30, 2022, the Company granted the following options from the 2021 Equity Omnibus Plan for employees, directors and consultants, to purchase shares of common stock as non-cash compensation:
| i. | Options to purchase |
| ii. | Options to purchase |
| iii. | Options to purchase |
| iv. | Options to purchase |
| v. | Options to purchase |
| vi. | Options to purchase | |
| vii. | Options to purchase | |
| viii. | Options to purchase | |
| ix. | Options to purchase |
15
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
| x. | Options to purchase |
| xi. | Options to purchase |
| xii. | Options to purchase |
| xiii. | Options to purchase
| |
| xiv. | Options to purchase
| |
| xv. | Options to purchase | |
| xvi. | Options to purchase | |
| xvii. | Options to purchase | |
| xviii. | Options to purchase | |
| xix. | Options to purchase | |
| xx. | Options to purchase |
16
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
B. Stock Options
| Number of shares | Weighted Average exercise price | |||||||
| US$ | ||||||||
| Outstanding, December 31, 2022 | ||||||||
| Changes during 2023 to: | ||||||||
| Granted to employees, officers, directors and others | ||||||||
| Expired/Cancelled/Forfeited | ( | ) | ||||||
| Exercised | ( | ) | ||||||
| Outstanding, September 30, 2023 | ||||||||
| Exercisable, September 30, 2023 | ||||||||
17
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
| Shares underlying outstanding options (non-vested) | Shares underlying outstanding options (fully vested) | |||||||||||||||||||||||||||||
| Range
of exercise price |
Number outstanding |
Weighted average remaining contractual life (years) |
Weighted Average Exercise price |
Range
of exercise price |
Number Outstanding |
Weighted average remaining contractual life (years) |
Weighted Average Exercise price |
|||||||||||||||||||||||
| US$ | US$ | US$ | US$ | |||||||||||||||||||||||||||
| — | — | — | — | |||||||||||||||||||||||||||
| — | — | — | — | |||||||||||||||||||||||||||
| — | — | — | — | |||||||||||||||||||||||||||
18
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
Granted to employees
| For the nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Weighted-average fair value of underlying stock at grant date | $ | $ | ||||||
| Dividend yields | — | |||||||
| Expected volatility | % | % | ||||||
| Risk-free interest rates | % | % | ||||||
| Expected lives (in years) | ||||||||
| Weighted-average grant date fair value | $ | $ | ||||||
Granted to non-employees
The following table sets forth information about the weighted-average fair value of options granted to non-employees during the year, using the Black Scholes option-pricing model and the weighted-average assumptions used for such grants:
| For the nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Weighted-average fair value of underlying stock at grant date | $ | |||||||
| Dividend yields | — | |||||||
| Expected volatility | % | % | ||||||
| Risk-free interest rates | % | % | ||||||
| Expected lives (in years) | ||||||||
| Weighted-average grant date fair value | $ | |||||||
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the options.
The expected life represents the weighted average period of time that options granted are expected to be outstanding. The expected life of the options granted to employees and directors is calculated based on the Simplified Method as allowed under Staff Accounting Bulletin No. 110 (“SAB 110”), giving consideration to the contractual term of the options and their vesting schedules, as the Company does not have sufficient historical exercise data at this time. The expected life of the option granted to non-employees equals their contractual term. In the case of an extension of the option life, the calculation was made on the basis of the extended life.
19
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
C. Compensation Cost for Warrant and Option Issuances
| For the three months ended September 30, | ||||||
| 2023 | 2022 | |||||
| US$ thousands | US$ thousands | |||||
| For the nine months ended September 30, | ||||||
| 2023 | 2022 | |||||
| US$ thousands | US$ thousands | |||||
The following table sets forth information about the compensation cost of warrant and option issuances recognized for non-employees:
| For the three months ended September 30, | ||||||
| 2023 | 2022 | |||||
| US$ thousands | US$ thousands | |||||
| For the nine months ended September 30, | ||||||
| 2023 | 2022 | |||||
| US$ thousands | US$ thousands | |||||
The following table sets forth information about the compensation cost of option issuances recognized for employees and non-employees and capitalized to Unproved Oil & Gas properties:
| For the three months ended September 30, | ||||||
| 2023 | 2022 | |||||
| US$ thousands | US$ thousands | |||||
| For the nine months ended September 30, | ||||||
| 2023 | 2022 | |||||
| US$ thousands | US$ thousands | |||||
The following table sets forth information about the compensation cost of option issuances recognized for employees and non-employees and capitalized to Unproved Oil & Gas properties:
As
of September 30, 2023, there was $
20
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
D. Dividend Reinvestment and Stock Purchase Plan (“DSPP”)
On March 13, 2014 Zion filed a registration statement on Form S-3 that was part of a replacement registration statement that was filed with the SEC using a “shelf” registration process. The registration statement was declared effective by the SEC on March 31, 2014. On February 23, 2017, the Company filed a Form S-3 with the SEC (Registration No. 333-216191) as a replacement for the Form S-3 (Registration No. 333-193336), for which the three year period ended March 31, 2017, along with the base Prospectus and Supplemental Prospectus. The Form S-3, as amended, and the new base Prospectus became effective on March 10, 2017, along with the Prospectus Supplement that was filed and became effective on March 10, 2017. The Prospectus Supplement under Registration No. 333-216191 describes the terms of the DSPP and replaces the prior Prospectus Supplement, as amended, under the prior Registration No. 333-193336.
On March 27, 2014, we launched our Dividend Reinvestment and Stock Purchase Plan (the “DSPP”) pursuant to which stockholders and interested investors can purchase shares of the Company’s Common Stock as well as units of the Company’s securities directly from the Company. The terms of the DSPP are described in the Prospectus Supplement originally filed on March 31, 2014 (the “Original Prospectus Supplement”) with the Securities and Exchange Commission (“SEC”) under the Company’s effective registration Statement on Form S-3, as thereafter amended.
On
January 13, 2015, the Company amended the Original Prospectus Supplement (“Amendment No. 3”) to provide for a unit option
(the “Unit Option”) under the DSPP comprised of one share of Common Stock and three Common Stock purchase warrants with each
unit priced at $
The
ZNWAB warrants first became exercisable on May 2, 2016 and, in the case of ZNWAC on May 2, 2017 and in the case of ZNWAD on May 2, 2018,
at a per share exercise price of $
As of May 2, 2017, any outstanding ZNWAB warrants expired.
As of May 2, 2018, any outstanding ZNWAC warrants expired.
On May 29, 2019, the Company extended the termination date of the ZNWAD Warrant by one (1) year from the expiration date of May 2, 2020 to May 2, 2021. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
On September 15, 2020, the Company extended the termination date of the ZNWAD Warrant by two (2) years from the expiration date of May 2, 2021 to May 2, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
As of May 2, 2023, any outstanding ZNWAD warrants expired.
On
November 1, 2016, the Company launched a unit offering under the Company’s DSPP pursuant to which participants could purchase units
comprised of seven shares of Common Stock and seven Common Stock purchase warrants, at a per unit purchase price of $
The
ZNWAE warrants became exercisable on May 1, 2017 and continued to be exercisable through May 1, 2020 at a per share exercise price of
$
On
May 29, 2019, the Company extended the termination date of the ZNWAE Warrant by one (
On
September 15, 2020, the Company extended the termination date of the ZNWAE Warrant by two (
21
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
As of May 1, 2023, any outstanding ZNWAE warrants expired.
On
May 22, 2017, the Company launched a new unit offering. This unit offering consisted of a new combination of common stock and warrants,
a new time period in which to purchase under the program, and a new unit price, but otherwise the same unit program features, conditions
and terms in the Prospectus Supplement applied. The unit offering terminated on July 12, 2017. This program enabled participants to purchase
Units of the Company’s securities where each Unit (priced at $
All
ZNWAF warrants became exercisable on August 14, 2017 and continued to be exercisable through August 14, 2020 at a per share exercise
price of $
On May 29, 2019, the Company extended the termination date of the ZNWAF Warrant by one (1) year from the expiration date of August 14, 2020 to August 14, 2021. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
On September 15, 2020, the Company extended the termination date of the ZNWAF Warrant by two (2) years from the expiration date of August 14, 2021 to August 14, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
As of August 14, 2023, any outstanding ZNWAF warrants expired.
An Amendment No. 2 to the Prospectus Supplement (as described below) was filed on October 12, 2017.
Under
Amendment No. 2, the Company initiated another unit offering which terminated on December 6, 2017. This unit offering enabled participants
to purchase Units of the Company’s securities where each Unit (priced at $
The warrants became exercisable on January 8,
2018 and continue to be exercisable through January 8, 2023 at a revised per share exercise price of $
22
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
On December 14, 2022, the Company extended the termination date of the ZNWAG warrant by one (1) year from the expiration date of January 8, 2023 to January 8, 2024. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
On
February 1, 2018, the Company launched another unit offering which terminated on February 28, 2018. The unit offering consisted of Units
of our securities where each Unit (priced at $
The
warrants became exercisable on April 2, 2018 and continued to be exercisable through April 2, 2020 at a per share exercise price of $
On
May 29, 2019, the Company extended the termination date of the ZNWAH Warrant by one (
On
September 15, 2020, the Company extended the termination date of the ZNWAH Warrant by two (
As of April 2, 2023, any outstanding ZNWAH warrants expired.
On
August 21, 2018, the Company initiated another unit offering, and it terminated on September 26, 2018. The offering consisted of Units
of the Company’s securities where each Unit (priced at $
The
warrants became exercisable on October 29, 2018 and continued to be exercisable through October 29, 2020 at a per share exercise price
of
On
May 29, 2019, the Company extended the termination date of the ZNWAJ Warrant by one (
On
September 15, 2020, the Company extended the termination date of the ZNWAJ Warrant by two (
On
December 10, 2018, the Company initiated another unit offering, and it terminated on January 23, 2019. The offering consisted of Units
of the Company’s securities where each Unit (priced at $
23
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
The
warrants became exercisable on February 25, 2019 and continued to be exercisable through February 25, 2020 at a per share exercise price
of $
On May 29, 2019, the Company extended the termination date of the ZNWAK Warrant by one (1) year from the expiration date of February 25, 2020 to February 25, 2021. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
On September 15, 2020, the Company extended the termination date of the ZNWAK Warrant by two (2) years from the expiration date of February 25, 2021 to February 25, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
As of February 25, 2023, any outstanding ZNWAK warrants expired.
On April 24, 2019, the Company initiated another unit offering and it terminated on June 26, 2019, after the Company, on June 5, 2019, extended the termination date of the unit offering.
The
warrants became exercisable on August 26, 2019 and continued to be exercisable through August 26, 2021 at a per share exercise price
of $
On September 15, 2020, the Company extended the termination date of the ZNWAL Warrant by two (2) years from the expiration date of August 26, 2021 to August 26, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
As of August 26, 2023, any outstanding ZNWAL warrants expired.
Under our Plan, the Company under a Request For
Waiver Program executed Waiver Term Sheets of a unit option program consisting of a Unit (shares of stock and warrants) of its securities
and subsequently an option program consisting of shares of stock to a participant. The participant’s Plan account was credited with
the number of shares of the Company’s Common Stock and warrants that were acquired. Each warrant affords the participant the opportunity
to purchase one share of our Common Stock at a warrant exercise price of $
On
March 21, 2022, the Company extended the termination date of the ZNWAM warrant by one (
On June 16, 2023, the Company extended the termination date of the ZNWAM warrant from July 15, 2023 to September 6, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
On August 21, 2023, the Company extended the termination date of the ZNWAM warrant from September 6, 2023 to October 31, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
On October 19, 2023, the Company extended the termination date of the ZNWAM warrant from October 31, 2023 to December 31, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
On February 1, 2021, the Company initiated a unit offering and it terminated on March 17, 2021.
24
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
The
unit offering consisted of Units of the Company’s securities where each Unit (priced at $
The
warrants became exercisable on May 16, 2021 and continued to be exercisable through May 16, 2023 at a per share exercise price of $
As of May 16, 2023, any outstanding ZNWAN warrants expired.
On April 12, 2021, the Company initiated a unit offering and it terminated on May 12, 2021.
The
warrants became exercisable on June 12, 2021 and continued to be exercisable through June 12, 2023 at a per share exercise price of $
As of June 12, 2023, any outstanding ZNWAO warrants expired.
Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet for a program consisting of Zion securities to a participant. After conclusion of the program on June 17, 2021, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock that were acquired.
Under our Plan, the Company under a Request For
Waiver Program executed a Waiver Term Sheet of a unit program consisting of units of shares of stock and warrants to a participant. After
conclusion of the program on June 18, 2021, the participant’s Plan account was credited with the number of shares of the Company’s
Common Stock and warrants that were acquired. Each warrant affords the participant the opportunity to purchase one share of our Common
Stock at a warrant exercise price of $.25. The warrant shall have the company notation of “ZNWAQ.” The warrants will not be
registered for trading on the OTCQX or any other stock market or trading market. The warrants were issued on May 5, 2022 and were exercisable
through July 15, 2023 at a revised per share exercise price of $
25
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
On June 16, 2023, the Company extended the termination date of the ZNWAQ warrant from July 15, 2023 to September 6, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
On August 21, 2023, the Company extended the termination date of the ZNWAQ warrant from September 6, 2023 to October 31, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
On October 19, 2023, the Company extended the termination date of the ZNWAQ warrant from October 31, 2023 to December 31, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet to a participant. After conclusion of the program on September 15, 2021, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock that were acquired.
Under
our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program consisting of units of shares
of stock and warrants to a participant. After conclusion of the program on November 15, 2021, the participant’s Plan account was
credited with the number of shares of the Company’s Common Stock and warrants that will be acquired. Each warrant affords the participant
the opportunity to purchase one share of our Common Stock at a warrant exercise price of $1.00. The warrant shall have the company notation
of “ZNWAS.” The warrants will not be registered for trading on the OTCQX or any other stock market or trading market. The
warrants will be issued and become exercisable on November 15, 2025 and continue to be exercisable through December 31, 2025 at a revised
per share exercise price of $
On December 9, 2019 Zion filed an Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-235299) solely for the purpose of re-filing a revised Exhibit 5.1 to the Registration Statement. This Amendment No. 1 does not modify any provision of the prospectus that forms a part of the Registration Statement and accordingly, such prospectus has not been included herein.
On December 10, 2021 Zion filed an Amendment No. 1 to the Registration Statement on Form S-3 (File No. 333-235299) for the purpose of converting the existing Form S-1 to the Registration Statement on Form S-3. This Amendment No. 1 does not modify any provision of the prospectus that forms a part of the Registration Statement and accordingly such prospectus has not been included herein.
Under
our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program consisting of units of shares
of stock and warrants to a participant. After conclusion of the program on September 30, 2022, the participant’s Plan account was
credited with the number of shares of the Company’s Common Stock and Warrants that were acquired. Each warrant affords the participant
the opportunity to purchase one share of our Common Stock at a warrant exercise price of $
Under
our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program consisting of units of shares
of stock and warrants to a participant. After conclusion of the program on December 31, 2022, the participant’s Plan account was
credited with the number of shares of the Company’s Common Stock and Warrants that were acquired. Each warrant affords the participant
the opportunity to purchase one share of our Common Stock at a warrant exercise price of $
Under our Plan, the Company under a Request For
Waiver Program executed a Waiver Term Sheet of a program consisting of shares of stock to a participant. After conclusion of the program
on August 31, 2023, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock that
were acquired. Zion incurred $
On March 13, 2023, Zion filed with the Securities and Exchange Commission an Amendment No. 2 to the Prospectus Supplement dated as of December 15, 2021 and accompanying base prospectus dated December 1, 2021 relating to the Company’s Dividend Reinvestment and Direct Stock Purchase Plan. This Amendment No. 2 to Prospectus Supplement amended the Prospectus Supplement. The Prospectus forms a part of the Company’s Registration Statement on Form S-3 (File No. 333-261452), as amended, which was declared effective by the SEC on December 15, 2021.
26
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
Amendment No. 2 - New Unit Option under the Unit Program
Under
our Plan, we provided a Unit Option under Amendment No. 2. Our Unit Program consisted of the combination of Common Stock and warrants
with basic Unit Program features, conditions and terms outlined in the Original Prospectus Supplement and Amendment No. 1. Amendment
No. 2 provided the option period, unit price and the determination of the number of shares of Common Stock and warrants per unit. This
Unit Option had up to three tranches of investment, in which the second and third tranches were each subject to termination upon a total
of $
The
Unit Option consisted of Units of our securities where each Unit (priced at $
Plan
participants, who enrolled into the Unit Program with the purchase of at least one Unit and enrolled in the separate Automatic Monthly
Investments (“AMI”) program at a minimum of $
The
ZNWAV warrants became exercisable on March 31, 2023 and continued to be exercisable through June 28, 2023 at a per share exercise price
of $
As of June 28, 2023, any outstanding ZNWAV warrants expired.
The
ZNWAW warrants became exercisable on April 14, 2023 and continued to be exercisable through July 13, 2023 at a per share exercise price
of $
As of July 13, 2023, any outstanding ZNWAW warrants expired.
The
ZNWAX warrants became exercisable on May 2, 2023 and continued to be exercisable through July 31, 2023 at a per share exercise price
of $
On July 31, 2023, any outstanding ZNWAX warrants expired.
The
ZNWAY warrants became exercisable on June 12, 2023 and continued to be exercisable through September 10, 2023 at a per share exercise
price of $
On September 10, 2023, any outstanding ZNWAY warrants expired.
Amendment No. 3 – New Unit Option under the Unit Program
Under our Plan, provided a Unit Option under Amendment No. 3. This Unit Option period began on May 15, 2023 and terminated on June 15, 2023.
Our
Unit Program consisted of the combination of Common Stock and warrants with basic Unit Program features, conditions and terms outlined
in the Original Prospectus Supplement and Amendment No. 1 and Amendment No.2. Amendment No. 3 provided the option period, unit price
and the determination of the number of shares of Common Stock and warrants per unit. As mentioned above, this Unit Option began on May
15, 2023 and terminated on June 15, 2023. The Unit Option consisted of Units of our securities where each Unit (priced at $
27
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
Plan
participants, who enrolled into the Unit Program with the purchase of at least one Unit and enrolled in the separate Automatic Monthly
Investments (“AMI”) program at a minimum of $
The ZNWAZ warrants became exercisable on July
17, 2023 and continue to be exercisable through July 17, 2024 at a per share exercise price of $
Amendment No. 4 – New Unit Option under the Unit Program
Under our Plan, we are providing a Unit Option under our Unit Program with this Amendment No. 4. This Unit Option period began on November 6, 2023 and terminates on December 31, 2023.
Our Unit Program consists of the combination of
Common Stock and warrants with basic Unit Program features, conditions and terms outlined in the Original Prospectus Supplement and Amendment
No. 1. Amendment No. 4 provides the option period, unit price and the determination of the number of shares of Common Stock and warrants
per unit. This Unit Option began on November 6, 2023 and is scheduled to terminate on December 31, 2023, unless extended at the sole discretion
of Zion Oil & Gas, Inc. The Unit Option consists of Units of our securities where each Unit (priced at $
Plan participants, who enroll into the Unit Program
with the purchase of at least one Unit and enroll in the separate Automatic Monthly Investments (“AMI”) program at a minimum
of $ per month, will receive an additional fifty (50) warrants at an exercise price of $
The ZNWBA warrants will become exercisable on
January 15, 2024, unless extended, and continue to be exercisable through January 14, 2025, unless extended, at a per share exercise price
of $
For
the three and nine months ended September 30, 2023, approximately $
For
the three and nine months ended September 30, 2022, approximately $
The company raised approximately $
The warrants represented by the company notation ZNWAA are tradeable on the OTCQX market under the symbol ZNOGW. However, all of the other warrants characterized above, in the table below, and throughout this Form 10-Q, are not tradeable and are used internally for classification and accounting purposes only.
28
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 3 - Stockholders’ Equity (cont’d)
E. Warrant Table
| Warrants | Exercise Price | Warrant Termination Date | Outstanding Balance, 12/31/2022 | Warrants Issued | Warrants Exercised | Warrants Expired | Outstanding Balance, 9/30/2023 | |||||||||||||||||||
| ZNWAA | $ | |||||||||||||||||||||||||
| ZNWAD | $ | ( | ) | |||||||||||||||||||||||
| ZNWAE | $ | ( | ) | |||||||||||||||||||||||
| ZNWAF | $ | ( | ) | |||||||||||||||||||||||
| ZNWAG | $ | |||||||||||||||||||||||||
| ZNWAH | $ | ( | ) | |||||||||||||||||||||||
| ZNWAI | $ | ( | ) | ( | ) | |||||||||||||||||||||
| ZNWAJ | $ | |||||||||||||||||||||||||
| ZNWAK | $ | ( | ) | ( | ) | |||||||||||||||||||||
| ZNWAL | $ | ( | ) | |||||||||||||||||||||||
| ZNWAM | $ | |||||||||||||||||||||||||
| ZNWAN | $ | ( | ) | ( | ) | |||||||||||||||||||||
| ZNWAO | $ | ( | ) | |||||||||||||||||||||||
| ZNWAQ | $ | |||||||||||||||||||||||||
| ZNWAV | $ | ( | ) | ( | ) | |||||||||||||||||||||
| ZNWAW | $ | ( | ) | ( | ) | |||||||||||||||||||||
| ZNWAX | $ | ( | ) | ( | ) | |||||||||||||||||||||
| ZNWAY | $ | ( | ) | ( | ) | |||||||||||||||||||||
| ZNWAZ | $ | |||||||||||||||||||||||||
| Outstanding warrants | ( | ) | ( | ) | ||||||||||||||||||||||
F. Warrant Descriptions of Current Warrants
| Period of Grant | US$ | Expiration Date | ||||||||
| ZNWAA Warrants | A,B,E | |||||||||
| ZNWAG Warrants | B,E | |||||||||
| ZNWAJ Warrants | A,B | |||||||||
| ZNWAM Warrants | C,F | | ||||||||
| ZNWAQ Warrants | C,F | |||||||||
| ZNWAS Warrants | D | |||||||||
| ZNWAT Warrants | D | |||||||||
| ZNWAU Warrants | D | |||||||||
| ZNWAZ Warrants | G | |||||||||
| ZNWBA Warrants | H | |||||||||
| A | |
| B | |
| C | |
| D | |
| E | |
| F | |
| G | |
| H |
29
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 4 - Unproved Oil and Gas Properties, Full Cost Method
| September 30, 2023 | December 31, 2022 | |||||||
| US$ thousands | US$ thousands | |||||||
| Excluded from amortization base: | ||||||||
| Drilling costs, and other operational related costs | ||||||||
| Capitalized salary costs | ||||||||
| Capitalized interest costs | ||||||||
| Legal and seismic costs, license fees and other preparation costs | ||||||||
| Other costs | ||||||||
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| US$ thousands | US$ thousands | US$ thousands | US$ thousands | |||||||||||||
| Excluded from amortization base: | ||||||||||||||||
| Drilling costs, and other operational related costs | ||||||||||||||||
| Capitalized salary costs | ||||||||||||||||
| Capitalized interest costs | ||||||||||||||||
| Legal costs, license fees and other preparation costs | ||||||||||||||||
| Other costs | ||||||||||||||||
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| US$ thousands | US$ thousands | US$ thousands | US$ thousands | |||||||||||||
| Excluded from amortization base: | ||||||||||||||||
| Drilling costs, and other operational related costs | ||||||||||||||||
| Capitalized salary costs | ||||||||||||||||
| Capitalized interest costs | ||||||||||||||||
| Legal costs, license fees and other preparation costs | ||||||||||||||||
| Other costs | ||||||||||||||||
| Impairment of unproved oil and gas properties | ( | ) | ( | ) | ||||||||||||
| * | * | |||||||||||||||
| * | |
| * |
Please refer to Footnote 1 – Nature of Operations and Going Concern for more information about Zion’s exploration activities.
30
Zion Oil & Gas, Inc.
Consolidated Condensed Notes to Financial Statements (Unaudited)
Note 5 - Right of use lease assets and lease obligations
The Company is a lessee in several non-cancellable operating leases for transportation and office space.
| September 30, 2023 | December 31, 2022 | |||||||
| US$ thousands | US$ thousands | |||||||
| Operating lease assets | $ | $ | ||||||
| Operating lease liabilities: | ||||||||
| Current operating lease liabilities | $ | $ | ||||||