UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

MARK ONE

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

for the Quarterly Period ended September 30, 2023;

 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

for the transition period from ________ to ________

 

ZION OIL & GAS, INC. – File Number 001-33228

(Exact name of registrant as specified in its charter)

 

Delaware   20-0065053
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

12655 N Central Expressway, Suite 1000, Dallas, TX   75243
(Address of principal executive offices)   Zip Code

 

(214) 221-4610

(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
N/A   N/A   N/A

 

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 ☒ No ☐

 

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). Yes ☒ No ☐

 

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
Non-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 605,319,057 shares of common stock, par value $0.01 per share.

 

 

 

 

 

 

INDEX PAGE

 

   Page
PART I — FINANCIAL INFORMATION   
    
Item 1 – Financial Statements – Unaudited   
    
Consolidated Condensed Balance Sheets – September 30, 2023 and December 31, 2022  1
    
Consolidated Condensed Statements of Operations for the three and nine months ended September 30, 2023 and 2022  2
    
Consolidated Condensed Statement of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022  3
    
Consolidated Condensed Statements of Cash Flows for the nine months ended September 30, 2023 and 2022  5
    
Notes to Consolidated Condensed Financial Statements  7
    
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations  35
    
Item 3 – Quantitative and Qualitative Disclosures About Market Risk  43
    
Item 4 – Controls and Procedures  43
    
PART II — OTHER INFORMATION   
    
Item 1 – Legal Proceedings  44
    
Item 1A – Risk Factors  44
    
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds  44
    
Item 3 – Defaults upon Senior Securities  44
    
Item 4 – Mine Safety Disclosures  44
    
Item 5 – Other Information  44
    
Item 6 – Exhibits  45
    
Exhibit Index  45
    
SIGNATURES  46

 

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   510    1,735 
Fixed short term bank and escrow deposits – restricted   1,020    1,379 
Prepaid expenses and other current assets   233    600 
Other deposits   
-
    483 
Governmental receivables   10    267 
Other receivables   156    143 
Total current assets   1,929    4,607 
           
Unproved oil and gas properties, full cost method (see Note 4)   16,342    15,889 
           
Property and equipment at cost          
Drilling rig and related equipment, net of accumulated depreciation of $2,025 and $1,455 (see note 2I)   5,700    6,281 
Property and equipment, net of accumulated depreciation of $678 and $647   81    112 
    5,781    6,393 
           
Right of Use Lease Assets (see Note 5)   246    202 
           
Other assets          
Assets held for severance benefits   436    424 
Total other assets   436    424 
           
Total assets   24,734    27,515 
           
Liabilities and Stockholders’ Equity          
           
Current liabilities          
Accounts payable   862    2,147 
Lease obligation – current (see Note 5)   192    196 
Asset retirement obligation   571    571 
Accrued liabilities   412    1,032 
Total current liabilities   2,037    3,946 
           
Long-term liabilities          
Lease obligation – non-current (see Note 5)   53    12 
Provision for severance pay   467    457 
Total long-term liabilities   520    469 
           
Total liabilities   2,557    4,415 
           
Commitments and contingencies (see Note 6)   
 
    
 
 
           
Stockholders’ equity          
Common stock, par value $.01; Authorized: 1,200,000,000  shares at September 30, 2023: Issued and outstanding: 602,554,266 and 524,231,493 shares at September 30, 2023 and December 31, 2022, respectively   6,026    5,242 
Additional paid-in capital   300,969    296,460 
Accumulated deficit   (284,818)   (278,602)
Total stockholders’ equity   22,177    23,100 
           
Total liabilities and stockholders’ equity   24,734    27,515 

 

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   1,332    1,636    4,106    4,621 
Post impairment of unproved oil and gas properties   36    
-
    129    
-
 
Other   379    719    1,978    2,376 
Loss from operations   (1,747)   (2,355)   (6,213)   (6,997)
                     
Other income (expense), net                    
Foreign exchange gain (loss)   2    (2)   (2)   (92)
Financial income (expenses), net   2    (17)   (1)   (48)
                     
Loss, before income taxes   (1,743)   (2,374)   (6,216)   (7,137)
Income taxes   
-
    
-
    
-
    
-
 
                     
Net loss   (1,743)   (2,374)   (6,216)   (7,137)
                     
Net loss per share of common stock                    
Basic and diluted (in US$)
   (0.003)   (0.01)   (0.011)   (0.02)
                     
Weighted-average shares outstanding                    
Basic and diluted (in thousands)
   578,497    484,678    551,551    454,890 

 

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   524,231    5,242    296,460    (278,602)   23,100 
Funds received from sale of DSPP units and shares and exercise of warrants   78,173    782    4,186    
    4,968 
Funds received from option exercises   150    2    10    
    12 
Costs associated with the issuance of shares       
    (610)   
    (610)
Value of options granted to employees, directors and others as non-cash compensation       
    923    
    923 
Net loss       
    
    (6,216)   (6,216)
Balances as of September 30, 2023   602,554    6,026    300,969    (284,818)   22,177 

 

* 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   560,449    5,604    299,321    (283,075)   21,850 
Funds received from sale of DSPP units and shares and exercise of warrants   42,105    422    1,820    
    2,242 
Funds received from option exercises       
    
    
    
 
Costs associated with the issuance of shares       
    (437)   
    (437)
Value of options granted to employees, directors and others as non-cash compensation       
    265    
    265 
Net loss       
    
    (1,743)   (1,743)
Balances as of September 30, 2023   602,554    6,026    300,969    (284,818)   22,177 

 

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   364,324    3,643    277,258    (223,525)   57,376 
Funds received from sale of DSPP units and shares and exercise of warrants   132,451    1,325    15,145    
    16,470 
Funds received from option exercises   325    3    
    
    3 
Value of options granted to employees, directors and others as non-cash compensation       
    1,154    
    1,154 
Net loss       
    
    (7,137)   (7,137)
Balances as of September 30, 2022   497,100    4,971    293,557    (230,662)   67,866 

 

   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   473,778    4,738    289,792    (228,288)   66,242 
Funds received from sale of DSPP units and shares and exercise of warrants   23,102    231    3,246    
    3,477 
Funds received from option exercises   220    2    
    
    2 
Value of options granted to employees, directors and others as non-cash compensation       
    519    
    519 
Net loss       
    
    (2,374)   (2,374)
Balances as of September 30, 2022   497,100    4,971    293,557    (230,662)   67,866 

 

* 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   (6,216)   (7,137)
Adjustments required to reconcile net loss to net cash used in operating activities:          
Depreciation   601    593 
Cost of options issued to employees, directors and others as non-cash compensation   923    1,137 
Post impairment of unproved oil and gas properties   129    
-
 
Change in assets and liabilities, net:          
Other deposits   483    73 
Prepaid expenses and other   367    196 
Governmental receivables   257    631 
Lease obligation – current   (256)   (112)
Lease obligation – non current   41    (122)
Right of use lease assets   208    194 
Other receivables   (13)   95 
Severance payable, net   (2)   24 
Accounts payable   (300)   (350)
Accrued liabilities   (131)   59 
Net cash used in operating activities   (3,909)   (4,719)
           
Cash flows from investing activities          
Acquisition of property and equipment   
-
    (17)
Acquisition of drilling rig and related equipment   
-
    (373)
Investment in unproved oil and gas properties   (2,045)   (12,943)
Net cash used in investing activities   (2,045)   (13,333)
           
Cash flows from financing activities          
Proceeds from exercise of stock options   12    3 
Costs paid related to the issuance of new shares   (610)   
-
 
Proceeds from issuance of stock and exercise of warrants   4,968    16,470 
Net cash provided by financing activities   4,370    16,473 
           
Net (decrease)/increase in cash, cash equivalents and restricted cash   (1,584)   (1,579)
Cash, cash equivalents and restricted cash – beginning of period   3,114    5,952 
Cash, cash equivalents and restricted cash – end of period   1,530    4,373 
           
Supplemental schedule of cash flow information          
           
Non-cash investing and financing activities:          
Unpaid investments in oil & gas properties   677    2,723 
Cost of options issued to employees attributed to oil and gas properties   
-
    17 
New lease accounted for as a right of use lease asset   252    136 

 

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   510    3,079 
Restricted cash included in fixed short-term bank deposits   1,020    1,294 
    1,530    4,373 

 

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 $6.2 million and had an accumulated deficit of approximately $285 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date the financials were issued.

 

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 $0.01 per share (“Common Stock”) is presented in conformity with ASC 260-10 “Earnings Per Share.” Diluted net loss per share is the same as basic net loss per share as the inclusion of 53,556,910 and 56,438,572 and 53,985,877 and 41,395,169 Common Stock equivalents in the three and nine-month period ended September 30, 2023 and 2022 respectively, would be anti-dilutive.

 

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 $45,615,000.

 

During the three and nine months ended September 30, 2023, the Company recorded post-impairment charges of $36,000 and $129,000, respectively. During the three and nine months ended September 30, 2022, the Company did not record any post-impairment charges.

 

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 $16,342,000 and $15,889,000 as of September 30, 2023 and December 31, 2022, respectively.

 

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 $5.6 million in cash, inclusive of approximately $540,000 allocated in spare parts and $48,000 allocated in additional separate assets. The value of the spare parts and separate assets are captured in separate ledger accounts, but reported as one line item with the drilling rig on the balance sheet. Zion determined that the life of the I-35 drilling rig (the rig Zion purchased), is 10 years. Zion is depreciating the rig on a straight-line basis.

 

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:

 

I-35 Drilling Rig & Associated Equipment:

 

   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   5,225    619    437    6,281 
Asset Additions   
-
    
-
    
-
    
-
 
Asset Depreciation   (476)   
-
    (94)   (570)
Asset Disposals for Self-Consumption   
-
    (11)   
-
    (11)
September 30, 2023   4,749    608    343    5,700 

 

During the nine months ended September 30, 2023 and 2022, the Company had depreciation expense of $570,000 and $560,000, respectively. During the three months ended September 30, 2023 and 2022, the Company had depreciation expense of $190,000 and $189,000, respectively. The asset disposal due to self-consumption was not material during the periods.

 

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 $0.01, that the Company is authorized to issue from 800,000,000 shares to 1,200,000,000 shares, effective June 7, 2023.

 

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 38,000,000 shares of common stock.

 

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 ten years from the date of grant.

 

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 175,000 shares of Common Stock to five senior officers and one staff member at an exercise price of $0.0615 per share. The options vested upon grant and are exercisable through January 4, 2033. The fair value of the options at the date of grant amounted to approximately $9,000.

 

  ii. Options to purchase 25,000 shares of Common Stock to one senior officer at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through January 4, 2033. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $1,500.

 

  iii.

Options to purchase 25,000 shares of Common Stock to one board member, at an exercise price of $0.07 per share. The options vested upon grant and are exercisable through June 8, 2033. The fair value of the options at the date of grant amounted to approximately $1,500.

 

  iv. Options to purchase 10,000 shares of Common Stock to one staff member at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through September 1, 2033. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $600.

 

  v. Options to purchase 895,000 shares of Common Stock to five staff members and one senior officer at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through September 23, 2033. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $60,000.
     
  vi. Options to purchase 3,350,000 shares of Common Stock to four senior officers and nine staff members at an exercise price of $0.0676 per share. The options vest on September 23, 2024 (one year from the date of grant) and are exercisable through September 23, 2033. The fair value of the options at the date of grant amounted to approximately $211,000, and will be recognized during the years 2023 and 2024. 
     
  vii. Options to purchase 3,600,000 shares of Common Stock to nine board members at an exercise price of $0.0676 per share. The options vest on September 23, 2024 (one year from the date of grant) and are exercisable through September 23, 2033. The fair value of the options at the date of grant amounted to approximately $227,000, and will be recognized during the years 2023 and 2024. 
     
  viii. Options to purchase 55,000 shares of Common Stock to three consultants at an exercise price of $0.0676 per share. The options vest on September 23, 2024 (one year from the date of grant) and are exercisable through September 23, 2033. The fair value of the options at the date of grant amounted to approximately $3,000, and will be recognized during the years 2023 and 2024. 

 

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 175,000 shares of Common Stock to six senior officers and one staff member at an exercise price of $0.1529 per share. The options vested upon grant and are exercisable through January 4, 2032. The fair value of the options at the date of grant amounted to approximately $22,000.

 

  ii. Options to purchase 25,000 shares of Common Stock to one senior officer at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through January 4, 2032. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $4,000.

 

  iii. Options to purchase 300,000 shares of Common Stock to one senior officer and one staff member at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through January 5, 2032. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $39,000

 

  iv. Options to purchase 200,000 shares of Common Stock to one board member at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through January 5, 2032. These options were granted per the provisions under the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $29,000

 

  v. Options to purchase 1,600,000 shares of Common Stock to five senior officers and four staff members at an exercise price of $0.1529 per share. The options vest on January 5, 2023 (one year from the date of grant) and are exercisable through January 5, 2032. The fair value of the options at the date of grant amounted to approximately $209,000, and will be recognized during the years 2022 and 2023.

 

  vi. Options to purchase 1,400,000 shares of Common Stock to seven board members, at an exercise price of $0.1529 per share. The options vest on January 5, 2023 (one year from the date of grant) and are exercisable through January 5, 2032. The fair value of the options at the date of grant amounted to approximately $182,000, and will be recognized during the years 2022 and 2023.
     
  vii. Options to purchase 160,000 shares of Common Stock to four staff members, at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through January 17, 2032. These options were granted per the provisions under the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $23,000.
     
  viii. Options to purchase 200,000 shares of Common Stock to six staff members at an exercise price of $0.14 per share. The options vest on January 17, 2023 (one year from the date of grant) and are exercisable through January 17, 2032. The fair value of the options at the date of grant amounted to approximately $26,000, and will be recognized during the years 2022 and 2023.
     
  ix. Options to purchase 40,000 shares of Common Stock to two consultants at an exercise price of $0.14 per share. The options vest on January 17, 2023 (one year from the date of grant) and are exercisable through January 17, 2032. The fair value of the options at the date of grant amounted to approximately $5,000, and will be recognized during the years 2022 and 2023.

 

15

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 3 - Stockholders’ Equity (cont’d)

 

  x. Options to purchase 25,000 shares of Common Stock to one board member, at an exercise price of $0.11 per share. The options vested upon grant and are exercisable through April 1, 2032. The fair value of the options at the date of grant amounted to approximately $2,000.

 

  xi. Options to purchase 3,210,000 shares of Common Stock to five senior officers, two consultants and ten staff members at an exercise price of $0.15 per share. The options vested on April 15, 2023 (in one year) and are exercisable through April 15, 2032. The fair value of the options at the date of grant amounted to approximately $394,000, and will be recognized during the years 2022 and 2023.

 

  xii. Options to purchase 1,090,000 shares of Common Stock to one senior officer, one board member and five staff members at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through April 15, 2032. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $149,000.

 

  xiii.

Options to purchase 3,200,000 shares of Common Stock to eight board members at an exercise price of $0.15 per share. The options vested on April 15, 2023 (in one year) and are exercisable through April 15, 2023. The fair value of the options at the date of grant amounted to approximately $393,000.

 

  xiv.

Options to purchase 25,000 shares of Common Stock to one board member, at an exercise price of $0.2350 per share. The options vested upon grant and are exercisable through August 1, 2032. The fair value of the options at the date of grant amounted to approximately $5,000

 

  xv. Options to purchase 118,000 shares of Common Stock to two senior officers and four staff members at an exercise price of $0.2350 per share. The options vested upon grant and are exercisable through August 12, 2032. The fair value of the options at the date of grant amounted to approximately $29,000
     
  xvi. Options to purchase 75,000 shares of Common Stock to four staff members and one consultant at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through August 12, 2032. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $13,000
     
  xvii. Options to purchase 10,000 shares of Common Stock to one staff member at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through September 01, 2032. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $2,000
     
  xviii. Options to purchase 2,455,000 shares of Common Stock to four senior officers and thirteen staff members at an exercise price of $0.1797 per share. The options vest on September 23, 2023 (one year from the date of grant) and are exercisable through September 23, 2032. The fair value of the options at the date of grant amounted to approximately $396,000, and will be recognized during the years 2022 and 2023. 
     
  xix.  Options to purchase 2,700,000 shares of Common Stock to nine board members at an exercise price of $0.1797 per share. The options vest on September 23, 2023 (one year from the date of grant) and are exercisable through September 23, 2023. The fair value of the options at the date of grant amounted to approximately $436,000, and will be recognized during the years 2022 and 2023. 
     
  xx. Options to purchase 845,000 shares of Common Stock to one senior officer, one board member and four staff members at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through September 23, 2032. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $149,000.

 

16

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 3 - Stockholders’ Equity (cont’d)

 

B. Stock Options 

 

The stock option transactions since January 1, 2023 are shown in the table below:

 

   Number of
shares
   Weighted
Average
exercise
price
 
       US$ 
Outstanding, December 31, 2022   26,391,250    0.30 
           
Changes during 2023 to:          
Granted to employees, officers, directors and others   8,135,000    0.07 
Expired/Cancelled/Forfeited   (275,000)   1.71 
Exercised   (150,000)   0.07 
Outstanding, September 30, 2023   34,101,250    0.23 
Exercisable, September 30, 2023   27,096,250    0.27 

 

17

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 3 - Stockholders’ Equity (cont’d)

 

The following table summarizes information about stock options outstanding as of September 30, 2023:

 

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$  
  0.07       7,005,000       9.99       0.07       0.01       10,000       0.12       0.01  
                          0.01       5,000       0.70       0.01  
                          0.01       20,000       2.68       0.01  
                          0.01       130,000       3.26       0.01  
                          0.01       50,000       3.27       0.01  
                          0.01       60,000       3.55       0.01  
                          0.01       200,000       3.64       0.01  
                          0.01       40,000       4.01       0.01  
                          0.01       70,000       4.26       0.01  
                          0.01       25,000       4.27       0.01  
                          0.01       30,000       4.42       0.01  
                          0.01       4,000       4.52       0.01  
                          0.01       25,000       5.27       0.01  
                          0.01       35,000       5.97       0.01  
                          0.01       150,000       6.14       0.01  
                          0.01       35,000       6.27       0.01  
                          0.01       75,000       7.27       0.01  
                          0.01       200,000       7.64       0.01  
                          0.01       300,000       7.80       0.01  
                          0.01       10,000       7.93       0.01  
                          0.01       500,000       8.27       0.01  
                          0.01       55,000       8.30       0.01  
                          0.01       960,000       8.55       0.01  
                          0.01       75,000       8.87       0.01  
                          0.01       10,000       8.93       0.01  
                          0.01       795,000       8.99       0.01  
                          0.01       25,000       9.27       0.01  
                          0.01       10,000       9.93       0.01  
                          0.01       895,000       9.99       0.01  
                          0.06       50,000       9.27       0.06  
                          0.07       25,000       9.70       0.07  
                          0.14       240,000       8.31       0.14  
                          0.15       3,200,000       8.27       0.15  
                          0.15       6,410,000       8.55       0.15  
                          0.16       340,000       2.20       0.16  
                          0.16       75,000       6.20       0.16  
                          0.18       25,000       2.18       0.18  
                          0.18       5,155,000       8.99       0.18  
                          0.24       25,000       8.84       0.24  
                          0.24       118,000       8.87       0.24  
                          0.25       50,000       7.93       0.25  
                          0.25       363,000       7.93       0.25  
                          0.28       25,000       1.93       0.28  
                          0.28       25,000       5.93       0.28  
                          0.29       25,000       3.71       0.29  
                          0.39       1,435,000       7.78       0.39  
                          0.59       1,400,000       3.64       0.59  
                          0.59       1,600,000       7.64       0.59  
                          0.92       350,000       3.27       0.92  
                          0.92       550,000       7.27       0.92  
                          1.38       105,307       1.26       1.38  
                          1.67       405,943       1.01       1.67  
                          1.78       25,000       0.93       1.78  
                          2.31       250,000       0.25       2.31  
                          4.15       25,000       0.76       4.15  
  0.07       7,005,000      
 
      0.07       0.01-4.15       27,096,250               0.27  

18

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 3 - Stockholders’ Equity (cont’d)

 

Granted to employees

 

The following table sets forth information about the weighted-average fair value of options granted to employees and directors 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  $0.07   $0.16 
Dividend yields       
 
Expected volatility   135%-137 %   127%-135 %
Risk-free interest rates   3.85%-4.61 %   1.37%-3.96 %
Expected lives (in years)   5.00-5.50     5.00-5.50  
Weighted-average grant date fair value  $0.06   $0.14 

 

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   0.07   $0.16 
Dividend yields       
 
Expected volatility   134%   103% - 104 %
Risk-free interest rates   4.61%   1.78% - 2.84%
Expected lives (in years)   10    10 
Weighted-average grant date fair value   0.06   $0.15 

 

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 

 

The following table sets forth information about the compensation cost of warrant and option issuances recognized for employees and directors:

 

For the three months ended September 30,  
2023     2022  
US$ thousands     US$ thousands  
  264       510  

 

For the nine months ended September 30,  
2023     2022  
US$ thousands     US$ thousands  
  921       1,142  

 

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  
        8  

 

For the nine months ended September 30,  
2023     2022  
US$ thousands     US$ thousands  
  2       11  

 

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  
        17  

 

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 $431,000 of unrecognized compensation cost related to non-vested stock options granted under the Company’s various stock option plans. That cost is expected to be recognized during the remaining periods of 2023 and 2024.

 

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 $4.00. Each warrant afforded the participant the opportunity to purchase the Company’s Common Stock at a warrant exercise price of $1.00. Each of the three warrants series had different expiration dates that had been extended.

 

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 $1.00.

 

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 $10. The warrant is referred to as “ZNWAE.”

 

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 $1.00.

 

On May 29, 2019, the Company extended the termination date of the ZNWAE Warrant by one (1) year from the expiration date of May 1, 2020 to May 1, 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 ZNWAE Warrant by two (2) years from the expiration date of May 1, 2021 to May 1, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

 

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 $250.00 each) was comprised of (i) the number of shares of Common Stock determined by dividing $250.00 (the price of one Unit) by the average of the high and low sale prices of the Company’s Common Stock as reported on the NASDAQ on the unit purchase date and (ii) Common Stock purchase warrants to purchase an additional 25 shares of Common Stock at a warrant exercise price of $1.00 per share. The warrant is referred to as “ZNWAF.”

 

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 $1.00.

 

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 $250.00 each) was comprised of (i) a certain number of shares of Common Stock determined by dividing $250.00 (the price of one Unit) by the average of the high and low sale prices of the Company’s Common Stock as reported on the NASDAQ on the unit purchase date and (ii) Common Stock purchase warrants to purchase an additional 15 shares of Common Stock at a warrant exercise price of $1.00 per share. The warrant is referred to as “ZNWAG.” 

 

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 $.25. The warrant terms provide that if the Company’s Common Stock trades above $5.00 per share as the closing price for 15 consecutive trading days at any time prior to the expiration date of the warrant, the Company has the sole discretion to accelerate the termination date of the warrant upon providing 60 days advanced notice to the warrant holders.

 

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 $250.00 each) was comprised of (i) 50 shares of Common Stock and (ii) Common Stock purchase warrants to purchase an additional 50 shares of Common Stock. The investor’s Plan account was credited with the number of shares of the Company’s Common Stock acquired under the Units purchased. Each warrant affords the investor the opportunity to purchase one share of Company Common Stock at a warrant exercise price of $5.00. The warrant is referred to as “ZNWAH.”

 

The warrants became exercisable on April 2, 2018 and continued to be exercisable through April 2, 2020 at a per share exercise price of $5.00, after the Company, on December 4, 2018, extended the termination date of the Warrant by one (1) year from the expiration date of April 2, 2019 to April 2, 2020.

 

On May 29, 2019, the Company extended the termination date of the ZNWAH Warrant by one (1) year from the expiration date of April 2, 2020 to April 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 ZNWAH Warrant by two (2) years from the expiration date of April 2, 2021 to April 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 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 $250.00 each) was comprised of (i) a certain number of shares of Common Stock determined by dividing $250.00 (the price of one Unit) by the average of the high and low sale prices of the Company’s publicly traded common stock as reported on the NASDAQ on the Unit Purchase Date and (ii) Common Stock purchase warrants to purchase an additional twenty-five (25) shares of Common Stock. The investor’s Plan account was credited with the number of shares of the Company’s Common Stock acquired under the Units purchased. Each warrant affords the investor the opportunity to purchase one share of Company Common Stock at a warrant exercise price of $1.00. The warrant is referred to as “ZNWAJ.”

 

The warrants became exercisable on October 29, 2018 and continued to be exercisable through October 29, 2020 at a per share exercise price of $1.00, after the Company, on December 4, 2018, extended the termination date of the Warrant by one (1) year from the expiration date of October 29, 2019 to October 29, 2020.

 

On May 29, 2019, the Company extended the termination date of the ZNWAJ Warrant by one (1) year from the expiration date of October 29, 2020 to October 29, 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 ZNWAJ Warrant by two (2) years from the expiration date of October 29, 2021 to October 29, 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 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 $250.00 each) was comprised of (i) two hundred and fifty (250) shares of Common Stock and (ii) Common Stock purchase warrants to purchase an additional two hundred and fifty (250) shares of Common Stock at a per share exercise price of $0.01. The investor’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants that are acquired under the Units purchased. Each warrant affords the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $0.01. The warrant is referred to as “ZNWAK.”

 

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 $0.01.

 

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 unit offering consisted of Units of the Company’s securities where each Unit (priced at $250.00 each) was comprised of (i) two hundred and fifty (250) shares of Common Stock and (ii) Common Stock purchase warrants to purchase an additional fifty (50) shares of Common Stock at a per share exercise price of $2.00. The investor’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants acquired under the Units purchased. For Plan participants who enrolled into the Unit Program with the purchase of at least one Unit and also enrolled in the separate Automatic Monthly Investments (“AMI”) program at a minimum of $50.00 per month or more, received an additional twenty-five (25) warrants at an exercise price of $2.00 during this Unit Option Program. The twenty-five (25) additional warrants were for enrolling into the AMI program. Existing subscribers to the AMI were entitled to the additional twenty-five (25) warrants once, if they purchased at least one (1) unit during the Unit program. Each warrant affords the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $2.00. The warrant is referred to as “ZNWAL.”

 

The warrants became exercisable on August 26, 2019 and continued to be exercisable through August 26, 2021 at a per share exercise price of $2.00.

 

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 $1.00. The warrant shall have the company notation of “ZNWAM.” The warrants will not be registered for trading on the OTCQX or any other stock market or trading market. The warrants became exercisable on January 15, 2021 and continued to be exercisable through July 15, 2022.

 

On March 21, 2022, the Company extended the termination date of the ZNWAM warrant by one (1) year from the expiration date of July 15, 2022 to July 15, 2023 and revised the exercise price to $0.05. 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 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 $250.00 each) was comprised of (i) the number of Common Stock shares represented by the high-low average on the purchase date and (ii) Common Stock purchase warrants to purchase an additional twenty-five (25) shares of Common Stock at a per share exercise price of $1.00. The investor’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants acquired under the Units purchased. For Plan participants who enrolled into the Unit Program with the purchase of at least one Unit or who enrolled in the separate Automatic Monthly Investments (“AMI”) program at a minimum of $50.00 per month or more, received an additional ten (10) warrants at an exercise price of $1.00 during this Unit Option Program. The ten (10) additional warrants were for enrolling into the AMI program. Existing subscribers to the AMI were also entitled to the additional ten (10) warrants once, provided that they purchased at least one (1) unit during the Unit program. 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 is referred to as “ZNWAN.

 

The warrants became exercisable on May 16, 2021 and continued to be exercisable through May 16, 2023 at a per share exercise price of $1.00.

 

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 unit offering consisted of Units of the Company’s securities where each Unit (priced at $250.00 each) was comprised of (i) the number of Common Stock shares represented by the high-low average on the purchase date and (ii) Common Stock purchase warrants to purchase an additional fifty (50) shares of Common Stock at a per share exercise price of $.25. The investor’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants acquired under the Units purchased. For Plan participants who enrolled into the unit offering with the purchase of at least one Unit or who enrolled in the separate Automatic Monthly Investments (“AMI”) program at a minimum of $50.00 per month or more, received an additional fifty (50) warrants at an exercise price of $.25 during this Unit Option Program. The fifty (50) additional warrants were for enrolling into the AMI program. Existing subscribers to the AMI were also entitled to the additional fifty (50) warrants once, provided that they purchased at least one (1) unit during the Unit program. Each warrant affords the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $.25. The warrant is referred to as “ZNWAO.”

 

The warrants became exercisable on June 12, 2021 and continued to be exercisable through June 12, 2023 at a per share exercise price of $.25.

 

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 $.05.

 

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 $.25.

 

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 $.25. The warrant shall have the company notation of “ZNWAT.” 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 per share exercise price of $.25.

 

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 $.25. The warrant shall have the company notation of “ZNWAU.” 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 per share exercise price of $.25.

 

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 $173,000 in equity issuance costs to an outside party related to this waiver program. The Company executed two additional Waiver Term Sheets with the same participant consisting of shares of stock. After conclusion of the program on December 31, 2023, the participant’s Plan account will be credited with the number of shares of the Company’s Common Stock that were acquired. During the quarter ended September 30, 2023, Zion incurred an additional $437,000 in equity issuance costs bringing the YTD total to approximately $610,000.

 

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 $7,500,000 received from participants by the Company during the first or second tranche. The first tranche period began on March 13, 2023 and terminated on March 26, 2023. The second tranche began on March 27, 2023 and terminated on April 9, 2023 and the third tranche began on April 10, 2023 and terminated on April 27, 2023.

 

The Unit Option consisted of Units of our securities where each Unit (priced at $250.00 each) was comprised of (i) a certain number of shares of Common Stock determined by dividing $250.00 (the price of one Unit) by the average of the high and low sale prices of the Company’s publicly traded common stock as reported on the OTCQX on the Unit Purchase Date and (ii) Common Stock purchase warrants to purchase an additional five hundred (500) shares of Common Stock at a per share exercise price of $0.05. The participant’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants that were acquired under the Units purchased. Each warrant affords the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $0.05. The warrant shall have the Company notation of “ZNWAV” under the first tranche, “ZNWAW” under the second tranche and “ZNWAX” under the third tranche.

 

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 $50.00 per month, received an additional fifty (50) warrants at an exercise price of $0.05 during this Unit Option Program. The fifty (50) additional warrants were for enrolling into the AMI program and shall have the Company notation of “ZNWAY.” Existing subscribers to the AMI were entitled to the additional fifty (50) warrants, if they purchased at least one (1) Unit during the Unit program. Plan participants, who enrolled in the AMI at a minimum of $100 per month, received one hundred (100) ZNWAY warrants. Plan participants, who enrolled in the AMI at a minimum of $250 per month, received two hundred and fifty (250) ZNWAY warrants. Plan participants, who enrolled in the AMI at a minimum of $500 per month, received five hundred (500) ZNWAY warrants. The AMI program required 90 days of participation to receive the ZNWAY warrants. Existing AMI participants were entitled to participate in this monthly program by increasing their monthly amount above the minimum $50.00 per month.

 

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 $0.05.

 

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 $0.05.

 

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 $0.05.

 

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 $0.05.

 

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 $250.00 each) was comprised of (i) a certain number of shares of Common Stock determined by dividing $250.00 (the price of one Unit) by the average of the high and low sale prices of the Company’s publicly traded common stock as reported on the OTCQX on the Unit Purchase Date and (ii) Common Stock purchase warrants to purchase an additional two hundred (200) shares of Common Stock at a per share exercise price of $0.25. The participant’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants that were acquired under the Units purchased. Each warrant affords the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $0.25. The warrant shall have the Company notation of “ZNWAZ” and will not be registered for trading on the OTCQX or any other stock market or trading market.

 

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 $50.00 per month, received an additional three hundred (300) warrants at an exercise price of $0.25 during this Unit Option Program. The three hundred (300) additional warrants were for enrolling into the AMI program and received the above warrant with the Company notation of “ZNWAZ.” Existing subscribers to the AMI were entitled to the additional three hundred (300) warrants, if they purchased at least one (1) Unit during the Unit program.

 

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 $0.25.

 

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 $250.00 each) is comprised of (i) a certain number of shares of Common Stock determined by dividing $250.00 (the price of one Unit) by the average of the high and low sale prices of the Company’s publicly traded common stock as reported on the OTCQX on the Unit Purchase Date and (ii) Common Stock purchase warrants to purchase an additional fifty (50) shares of Common Stock at a per share exercise price of $0.25. The participant’s Plan account will be credited with the number of shares of the Company’s Common Stock and Warrants that are acquired under the Units purchased. Each warrant affords the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $0.25. The warrant shall have the Company notation of “ZNWBA” and will not be registered for trading on the OTCQX or any other stock market or trading market.

 

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 $50.00 per month, will receive an additional fifty (50) warrants at an exercise price of $0.25 during this Unit Option Program. The fifty (50) additional warrants are for enrolling into the AMI program and shall receive the above warrant with the Company notation of “ZNWBA.” Existing subscribers to the AMI are entitled to the additional fifty (50) warrants, if they purchase at least one (1) Unit during the Unit program.

 

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 $0.25.

 

For the three and nine months ended September 30, 2023, approximately $1,805,000, and $4,358,000 were raised under the DSPP program, respectively. The $4,358,000 figure is net of $610,000 in equity issuance costs to an outside party.

 

For the three and nine months ended September 30, 2022, approximately $3,477,000, and $16,470,000 were raised under the DSPP program, respectively.

 

The company raised approximately $391,000 from the period October 1, 2023 through November 7, 2023, under the DSPP program.

 

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 

 

The warrants balances at December 31, 2022 and transactions since January 1, 2023 are shown in the table below:

 

Warrants  Exercise
Price
   Warrant
Termination
Date
  Outstanding
Balance,
12/31/2022
   Warrants
Issued
   Warrants
Exercised
   Warrants
Expired
   Outstanding
Balance,
9/30/2023
 
ZNWAA  $2.00   01/31/2024   1,498,804    
-
    
-
    
-
    1,498,804 
ZNWAD  $1.00   05/02/2023   243,853    
-
    
-
    (243,853)   
-
 
ZNWAE  $1.00   05/01/2023   2,144,099    
-
    
-
    (2,144,099)   
-
 
ZNWAF  $1.00   08/14/2023   359,435    
-
    
-
    (359,435)   
-
 
ZNWAG  $1.00   01/08/2024   240,068    
-
    
-
    
-
    240,068 
ZNWAH  $5.00   04/19/2023   372,400    
-
    
-
    (372,400)   
-
 
ZNWAI  $3.00   06/29/2023   640,710    
-
    (100)   (640,610)   
-
 
ZNWAJ  $1.00   10/29/2023   545,900    
-
    
-
    
-
    545,900 
ZNWAK  $0.01   02/25/2023   424,225    
-
    (9,050)   (415,175)   
-
 
ZNWAL  $2.00   08/26/2023   517,875    
-
    
-
    (517,875)   
-
 
ZNWAM  $0.05   12/31/2023   4,376,000    
-
    
-
    
-
    4,376,000 
ZNWAN  $1.00   05/16/2023   267,760    
-
    (75)   (267,685)   
-
 
ZNWAO  $0.25   06/12/2023   174,660    
-
    
-
    (174,660)   
-
 
ZNWAQ  $0.05   12/31/2023   23,428,348    
-
    
-
    
-
    23,428,348 
ZNWAV  $0.05   06/28/2023   
-
    288,500    (167,730)   (120,770)   
-
 
ZNWAW  $0.05   07/13/2023   
-
    199,000    (151,500)   (47,500)   
-
 
ZNWAX  $0.05   07/31/2023   
-
    818,500    (458,750)   (359,750)   
-
 
ZNWAY  $0.05   09/10/2023   
 
    17,450    (3,700)   (13,750)   
-
 
ZNWAZ  $0.25   07/17/2024   
-
    153,500    
-
    
-
    153,500 
Outstanding warrants           35,234,137    1,476,950    (790,905)   (5,677,562)   30,242,620 

 

 

F. Warrant Descriptions of Current Warrants

 

The price and the expiration dates for the series of warrants to investors are shown in the table below. The listing contains only those warrants with an expiration date beyond the balance sheet date.

 

        Period of Grant   US$     Expiration Date
ZNWAA Warrants   A,B,E   March 2013 – December 2014     2.00     January 31, 2024
ZNWAG Warrants   B,E   October 2017 – December 2017     1.00     January 08, 2024
ZNWAJ Warrants   A,B   August 2018 – September 2018     1.00     October 29, 2023
ZNWAM Warrants   C,F   January 2021 – March 2021     0.05      December 31, 2023
ZNWAQ Warrants   C,F   June 2021     0.05     December 31, 2023
ZNWAS Warrants   D   August 2021 – March 2022     0.25     December 31, 2025
ZNWAT Warrants   D   August – September 2022     0.25     December 31, 2025
ZNWAU Warrants   D   October – November 2022     0.25     December 31, 2025
ZNWAZ Warrants   G   May – June 2023     .25     July 17, 2024
ZNWBA Warrants   H   November – December 2023     .25     January 15, 2025 

 

A On May 29, 2019, the Company extended the expiration date of the Warrants by one (1) year.
   
B On September 15, 2020, the Company extended the expiration date of the Warrants by two (2) years.
   
C On March 21, 2022, the Company extended the expiration date of the Warrants by one (1) year. On June 16, 2023, the Company extended the expiration date of the Warrants to September 6, 2023. On August 21, 2023, the Company extended the expiration date of the Warrants to October 31, 2023. On October 19, 2023, the Company extended the expiration date of the Warrants to December 31, 2023.
   
D These warrants will be issued and become exercisable beginning on November 15, 2025 and expire on December 31, 2025.
   
E On December 14, 2022, the Company extended the expiration date of the Warrants by one (1) year.
   
F The warrant exercise price was lowered to $0.05 on December 28, 2022.
   
G On May 15, 2023, the Company announced a new Unit Offering and the related ZNWAZ warrant. 
   
H

On November 6, 2023 the Company announced a new Unit Offering and the related ZNWBA warrant.

29

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 4 - Unproved Oil and Gas Properties, Full Cost Method

 

Unproved oil and gas properties, under the full cost method, are comprised as follows:

 

   September 30,
2023
   December 31,
2022
 
   US$
thousands
   US$
thousands
 
Excluded from amortization base:        
Drilling costs, and other operational related costs   2,490    2,362 
Capitalized salary costs   2,419    2,342 
Capitalized interest costs   1,418    1,418 
Legal and seismic costs, license fees and other preparation costs   9,976    9,728 
Other costs   39    39 
    16,342    15,889 

 

Post Impairment of unproved oil and gas properties are comprised as follows:

 

   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   20    
     -
    76    
       -
 
Capitalized salary costs   
-
    
-
    
-
    
-
 
Capitalized interest costs   
-
    
-
    
-
    
-
 
Legal costs, license fees and other preparation costs   16    
-
    53    
-
 
Other costs   
-
    
-
    
-
    
-
 
    36    
-
    129    
-
 

 

Changes in Unproved oil and gas properties during the three and nine months ended September 30, 2023 and 2022 are as follows:

 

   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   58    5,350    204    10,666 
Capitalized salary costs   25    30    77    151 
Capitalized interest costs   
-
    
-
    
-
    
-
 
Legal costs, license fees and other preparation costs   103    586    301    1,402 
Other costs   
-
    
-
    
-
    
-
 
Impairment of unproved oil and gas properties   (36)   
-