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 March 31, 2022; or

 

☐ 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.

(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 May 6, 2022, Zion Oil & Gas, Inc. had outstanding 469,022,602 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 – March 31, 2022 and December 31, 2021   1
     
Consolidated Condensed Statements of Operations for the three months ended March 31, 2022 and 2021   2
     
Consolidated Condensed Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2022 and 2021   3
     
Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2022 and 2021   4
     
Notes to Consolidated Condensed Financial Statements   6
     
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations   33
     
Item 3 – Quantitative and Qualitative Disclosures About Market Risk   44
     
Item 4 – Controls and Procedures   45
     
PART II — OTHER INFORMATION
     
Item 1 – Legal Proceedings   46
     
Item 1A – Risk Factors   46
     
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds   46
     
Item 3 – Defaults upon Senior Securities   46
     
Item 4 – Mine Safety Disclosures   46
     
Item 5 – Other Information   46
     
Item 6 – Exhibits   46
     
Exhibit Index   47
     
SIGNATURES   48

 

i

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Balance Sheets as of

 

    March 31,
2022
    December 31,
2021
 
    US$
thousands
    US$
thousands
 
    (Unaudited)          
Current assets                
Cash and cash equivalents     8,221       4,683  
Fixed short term bank and escrow deposits – restricted     1,269       1,269  
Prepaid expenses and other     1,264       689  
Other deposits     605       617  
Governmental receivables     338       900  
Other receivables     2,376       483  
Total current assets     14,073       8,641  
                 
Unproved oil and gas properties, full cost method (see Note 4)     48,099       46,950  
                 
Property and equipment at cost                
Drilling rig and related equipment, net of accumulated depreciation of $887 and $704 (see note 2I)     6,759       6,834  
Property and equipment, net of accumulated depreciation of $615 and $604     139       138  
      6,898       6,972  
                 
Right of Use Lease Assets (see Note 5)     263       327  
                 
Other assets                
Assets held for severance benefits     553       541  
Total other assets     553       541  
                 
Total assets     69,886       63,431  
                 
Liabilities and Stockholders’ Equity                
                 
Current liabilities                
Accounts payable     1,167       2,783  
Lease obligation – current (see Note 5)     169       203  
Asset retirement obligation     571       571  
Accrued liabilities     437       1,781  
Total current liabilities     2,344       5,338  
                 
Long-term liabilities                
Lease obligation – non-current (see Note 5)     129       169  
Provision for severance pay     560       548  
Total long-term liabilities     689       717  
                 
Total liabilities     3,033       6,055  
                 
Commitments and contingencies (see Note 6)    
 
     
 
 
                 
Stockholders’ equity                
Common stock, par value $.01; Authorized: 800,000,000 shares at March 31, 2022: Issued and outstanding: 466,593,391 and 364,322,883 shares at March 31, 2022 and December 31, 2021, respectively     4,666       3,643  
Additional paid-in capital     287,878       277,258  
Accumulated deficit     (225,691 )     (223,525 )
Total stockholders’ equity     66,853       57,376  
                 
Total liabilities and stockholders’ equity     69,886       63,431  

 

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
 
    March 31,  
    2022     2021  
    US$
thousands
    US$
thousands
 
    (Unaudited)     (Unaudited)  
General and administrative     1,435       1,971  
Other     711       792  
Loss from operations     (2,146 )     (2,763 )
                 
Other expense, net                
Gain on derivative liability    
-
      426  
Foreign exchange (loss)     (9 )     (63 )
Financial (expenses), net     (11 )     (160 )
                 
Loss, before income taxes     (2,166 )     (2,560 )
Income taxes    
-
     
-
 
                 
Net loss     (2,166 )     (2,560 )
                 
Net loss, per share of common stock                
Basic and diluted (in US$)     (0.01 )     (0.01 )
                 
Weighted-average shares outstanding                
Basic and diluted (in thousands)     404,817       238,941  

 

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 months ended March 31, 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     102,219       1,022       10,405      
      11,427  
Funds received from option exercises     50       1      
     
      1  
Value of options granted to employees, directors and others as non-cash compensation          
      215      
      215  
Net loss          
     
      (2,166 )     (2,166 )
Balances as of March 31, 2022     466,593       4,666       287,878       (225,691 )     66,853  

 

For the three months ended March 31, 2021

 

    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, 2020     237,382       2,374       245,539       (212,804 )     35,109  
Funds received from sale of DSPP units and shares and exercise of warrants     3,848       39       2,810      
      2,849  
Value of bonds converted to shares     4      
*
     
     
     
 
Funds received from option exercises     117       1            
      1  
Value of options granted to employees, directors and others as non-cash compensation          
      821      
      821  
Net loss          
     
      (2,560 )     (2,560 )
Balances as of March 31, 2021     241,351       2,414       249,170       (215,364 )     36,220  

 

 
* Less than one thousand.

 

The accompanying notes are an integral part of the unaudited interim consolidated condensed financial statements.

 

3

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Statements of Cash Flows (Unaudited)

 

    For the
three months ended
March 31,
 
    2022     2021  
    US$
thousands
    US$
thousands
 
    (Unaudited)     (Unaudited)  
Cash flows from operating activities            
Net loss     (2,166 )     (2,560 )
Adjustments required to reconcile net loss to net cash used in operating activities:                
Depreciation     195       179  
Cost of options issued to employees, directors and others as non-cash compensation     208       821  
Amortization of debt discount related to convertible bonds    
-
      141  
Change in derivative liability    
-
      (426 )
Change in assets and liabilities, net:                
Other deposits     12       21  
Prepaid expenses and other     (575 )     530  
Governmental receivables     562       355  
Lease obligation – current     (34 )     (35 )
Lease obligation – non current     (40 )     (45 )
Right of use lease assets     64       56  
Other receivables     107     105  
Severance payable, net    
-
      (45 )
Accounts payable     (331 )     (150 )
Accrued liabilities     (93 )     (1,088 )
Net cash used in operating activities     (2,091 )     (2,141 )
                 
Cash flows from investing activities                
Acquisition of property and equipment     (12 )     (20 )
Acquisition of drilling rig and related equipment     (122 )     (76 )
Investment in unproved oil and gas properties     (3,665 )     (7,028 )
Net cash used in investing activities     (3,799 )     (7,124 )
                 
Cash flows from financing activities                
Proceeds from exercise of stock options     1       1  
Proceeds from issuance of stock and exercise of warrants     9,427       2,849  
Net cash provided by financing activities     9,428       2,850  
                 
Net (decrease)/increase in cash, cash equivalents and restricted cash     3,538     (6,415 )
Cash, cash equivalents and restricted cash – beginning of period     5,952       14,662  
Cash, cash equivalents and restricted cash – end of period     9,490       8,247  
                 
Supplemental schedule of cash flow information                
                 
Non-cash investing and financing activities:                
Non-cash equity receivables     2,000       -  
Unpaid investments in oil & gas properties     1,130       2,363  
Capitalized convertible bond interest attributed to oil and gas properties    
-
      79  
Cost of options issued to employees attributed to oil and gas properties     7      
-
 

 

The accompanying notes are an integral part of the unaudited interim consolidated condensed financial statements.

 

4

 

 

Cash, cash equivalents and restricted cash, are comprised as follows:

 

    March 31,
2022
    December 31,
2021
 
    US$ thousands     US$ thousands  
Cash and cash equivalents     8,221       4,683  
Restricted cash included in fixed long-term bank deposits     1,269       1,269  
      9,490       5,952  

 

5

 

 

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 22 years of oil & gas exploration in Israel. As of March 31, 2022, 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

 

Megiddo-Jezreel Petroleum License, No. 401 (“MJL 401”) and New Megiddo License 428 (“NML 428”)

 

The Megiddo-Jezreel License 401 was awarded on December 3, 2013 for a three-year primary term through December 2, 2016 with the possibility of additional one-year extensions up to a maximum of seven years. The Megiddo-Jezreel License 401 lies onshore, south and west of the Sea of Galilee, and 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.

 

The NML 428 (covering the same area as MJ-01) was awarded on December 3, 2020 for a six-month term with the possibility of an additional six-month extension. On April 29, 2021, Zion submitted a request to the Ministry of Energy for a six-month extension to December 2, 2021. On May 30, 2021, the Ministry of Energy approved our request for extension to December 2, 2021. On November 29, 2021, the Ministry of Energy approved our request for extension to August 1, 2022, This license effectively replaced the Megiddo-Jezreel License 401 as it has the same area and coordinates.

 

The MJ-02 drilling plan was approved by the Ministry of Energy on July 29, 2020. On January 6, 2021, Zion spudded its MJ-02 exploratory well. On November 23, 2021, Zion announced via a press release that it completed drilling the MJ-02 well to a total depth of 5,531 meters (~18,141 feet) with a 6 inch open hole at that depth.

 

A full set of detailed and comprehensive tests including neutron-density, sonic, gamma, and resistivity logs were acquired in December 2021, as a result of which we identified an encouraging zone of interest. All of the well testing equipment and personnel are secured for the MJ-02 well. We have re-entered our MJ-02 wellbore and are progressing to production testing. This work is expected to take several weeks.

 

6

 

 

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, 2021. 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 months ended March 31, 2022 are not necessarily indicative of the operating results for the year ending December 31, 2022 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. 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 three months ended March 31, 2022, the Company incurred a net loss of approximately $2.2 million and had an accumulated deficit of approximately $225.7 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

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 

 

7

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 2 - Summary of Significant Accounting Policies

 

A. Net Gain (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 23,144,603 and 10,969,456 Common Stock equivalents in 2022, and 2021 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, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity, foreign currency, 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 environment will be reflected in the consolidated financial statements in future periods.

 

The full extent to which the COVID-19 pandemic may directly or indirectly impact our business, results of operations and financial condition, will depend on future developments that are uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international markets. We have made estimates of the impact of COVID-19 within our consolidated financial statements, and although there is currently no major impact, there may be changes to those estimates in future periods. Actual results may differ from these estimates.

 

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.

 

8

 

 

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 three months ended March 31, 2022, and 2021, respectively, 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 $48,099,000 and $46,950,000 as of March 31, 2022 and December 31, 2021, 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 March 31, 2022, and December 31, 2021, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments. Derivative instruments are carried at fair value, generally estimated using the Binomial Model. 

 

9

 

 

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 505-50, “Equity – Based Payments to Non-Employees.” 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 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, with the exception of recurring monthly consulting fees paid to certain management personnel.

 

10

 

 

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

 

ASU 2016-02 – Leases (Topic 842)

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. Zion adopted ASU 2016-02 in the first quarter of 2019. Presently, Zion has operating leases for office space in Dallas, Texas and in Caesarea, Israel plus various leases for motor vehicles. These leases have been accounted for under ASU 2016-02 in 2020, 2021 and 2022 by establishing a right-of-use asset and a corresponding current lease liability and non-current lease liability. Zion is not subject to any loan covenants and therefore, the increase in assets and liabilities does not have a material impact on its business.

 

ASU 2020-03, “Codification Improvements to Financial Instruments”

 

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. The Company is currently evaluating the impact the adoption of this guidance may have on its consolidated financial statements.

 

In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas. The ASU is effective for annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company does not believe that this ASU will have any impact on its consolidated financial statements.

 

The Company does not believe that the adoption of any of the recently issued accounting pronouncements had a significant impact on our consolidated financial position, results of operations, or cash flow, except for ASC Update No. 2016-02—Leases, which requires organizations to recognize lease assets and lease liabilities on the balance sheet for leases classified as operating leases under previous GAAP. See Note 5 for more complete details on balances at March 31, 2022 and December 31, 2021.

 

11

 

 

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

 

On March 12, 2020, Zion entered into a Purchase and Sale Agreement with Central European Drilling kft (“CED”), a Hungarian corporation, to purchase an onshore oil and gas drilling rig, drilling pipe, related equipment and spare parts for a purchase price of $5.6 million in cash, subject to acceptance testing and potential downward adjustment. We remitted to the Seller $250,000 on February 6, 2020 as earnest money towards the purchase price. The Closing anticipated by the Agreement took place on March 12, 2020 by the Seller’s execution and delivery of a Bill of Sale to us. On March 13, 2020, the Seller retained the earnest money deposit, and the Company remitted $4,350,000 to the seller towards the purchase price and $1,000,000 (the “Holdback Amount”) was deposited in escrow with American Stock Transfer and Trust Company LLC, as escrow agent, through November 30, 2020, or as extended by mutual agreement of the parties, pending a determination, if any, by us of any operating deficiency in the drilling rig. On January 6, 2021, Zion completed its acceptance testing of the I-35 drilling rig and the Holdback Amount was remitted to Central European Drilling on January 8, 2021.

 

Since the rig was purchased and closed during March 2020, this purchase was recorded on Zion’s books as a long-term fixed asset as a component of Property and Equipment. The full purchase price of the drilling rig was $5.6 million, 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.

 

In accordance with GAAP accounting rules, per the matching principle, monthly depreciation begins the month following when the asset is “placed in service.” The rig was placed in service in December 2020 with January 2021 representing the first month of depreciation. Zion determined that the life of the I-35 drilling rig (the rig Zion purchased), is 10 years. Zion will depreciate the rig on a straight-line basis.

 

The $540,000 in spare parts was the original cost to CED. These items were received and counted by Zion upon receipt. All records and files are maintained by Zion. Zion plans to obtain a physical count of the equipment items at the end of each quarter, or as close to such date as practical, in accordance with our normal procedures.

 

Zion uses the First In First Out (“FIFO”) method of accounting for the inventory 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 quarter ended March 31, 2022:

 

I-35 Drilling Rig & Associated Equipment:

 

    Three-month period ended March 31, 2022  
    I-35
Drilling Rig
    Rig
Spare Parts
    Other
Drilling Assets
    Total  
    US$ thousands     US$ thousands     US$ thousands     US$ thousands  
December 31, 2021     5,859       643       332       6,834  
Asset Additions    
-
      5       117       122  
Asset Depreciation     (159 )    
-
      (25 )     (184 )
Asset Disposals for Self-Consumption    
-
      (13 )    
-
      (13 )
March 31, 2022     5,700       635       424       6,759  

 

12

 

 

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 400,000,000 shares to 800,000,000 shares, effective June 9, 2021.

 

A. 2011 Equity Incentive Stock Option Plan

 

During the three months ended March 31, 2022, the Company did not grant any options from the 2011 Equity Incentive Plan for employees, directors and consultants.

 

During the three months ended March 31, 2021, the Company granted the following options from the 2011 Equity Incentive Plan for employees, directors and consultants, to purchase shares of common stock as non-cash compensation:

 

  i. Options to purchase 600,000 shares of Common Stock to six senior officers and three staff members at an exercise price of $0.915 per share. The options vested upon grant and are exercisable through January 4, 2031. The fair value of the options at the date of grant amounted to approximately $456,000.

 

  ii. Options to purchase 75,000 shares of Common Stock were granted to one senior officer at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through January 6, 2031. The fair value of the options at the date of grant amounted to approximately $68,000.

 

B. 2011 Non-Employee Directors Stock Option Plan 

 

During the three months ended March 31, 2022, the Company did not grant any qualified (market value) options from the 2011 Non-Employee Directors Stock Option Plan to its directors.

 

During the three months ended March 31, 2021, the Company granted the following qualified (market value) and non-qualified options from the 2011 Non-Employee Directors Stock Option Plan for directors to purchase shares of common stock as non-cash compensation:

 

  i.

Options to purchase 350,000 shares of Common Stock to seven board members at an exercise price of $0.915 per share. The options vested upon grant and are exercisable through January 4, 2027. The fair value of the options at the date of grant amounted to approximately $252,000.

 

  ii. Options to purchase 50,000 shares of Common Stock were granted to one board member at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through January 4, 2027. The fair value of the options at the date of grant amounted to approximately $45,000.

 

C. 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.

 

13

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 3 - Stockholders’ Equity (cont’d)

 

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 three months ended March 31, 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 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.

 

During the three months ended March 31, 2021, the Company did not grant any options from the 2021 Equity Omnibus Plan for employees, directors and consultants (as the Plan was not in existence during that period).

 

14

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 3 - Stockholders’ Equity (cont’d)

 

D. Stock Options

 

The stock option transactions since January 1, 2022 are shown in the table below:

 

    Number of
shares
    Weighted
Average
exercise
price
 
          US$  
Outstanding, December 31, 2021     9,741,750       0.64  
                 
Changes during 2022 to:                
Granted to employees, officers, directors and others     4,100,000       0.13  
Expired/Cancelled/Forfeited    
-
     
-
 
Exercised     (50,000 )     0.01  
Outstanding, March 31, 2022     13,791,750       0.49  
Exercisable, March 31, 2022     10,551,750       0.60  

 

15

 

 

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 March 31, 2022:

 

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$  
  0.14       240,000       9.81       0.14       0.01       10,000       1.62       0.01  
  0.15       3,000,000       9.77       0.15       0.01       5,000       2.20       0.01  
       
     
     
      0.01       20,000       4.17       0.01  
       
     
     
      0.01       130,000       4.75       0.01  
       
     
     
      0.01       50,000       4.76       0.01  
       
     
     
      0.01       60,000       5.04       0.01  
       
     
     
      0.01       200,000       5.13       0.01  
       
     
     
      0.01       40,000       5.50       0.01  
       
     
     
      0.01       85,000       5.75       0.01  
       
     
     
      0.01       25,000       5.76       0.01  
       
     
     
      0.01       30,000       5.91       0.01  
       
     
     
      0.01       4,000       6.01       0.01  
       
     
     
      0.01       25,000       6.77       0.01  
       
     
     
      0.01       85,000       7.46       0.01  
       
     
     
      0.01       205,000       7.63       0.01  
       
     
     
      0.01       35,000       7.76       0.01  
       
     
     
      0.01       75,000       8.76       0.01  
       
     
     
      0.01       200,000       9.14       0.01  
       
     
     
      0.01       355,000       9.29       0.01  
       
     
     
      0.01       10,000       9.42       0.01  
       
     
     
      0.01       500,000       9.76       0.01  
       
     
     
      0.01       110,000       9.80       0.01  
       
     
     
      0.15       200,000       9.76       0.15  
       
     
     
      0.16       340,000       7.69       0.16  
       
     
     
      0.16       75,000       3.69       0.16  
       
     
     
      0.18       25,000       3.67       0.18  
       
     
     
      0.25       50,000       9.42       0.25  
       
     
     
      0.25       363,000       9.42       0.25  
       
     
     
      0.28       25,000       3.42       0.28  
       
     
     
      0.28       25,000       7.42       0.28  
       
     
     
      0.29       25,000       5.20       0.29  
       
     
     
      0.39       1,510,000       9.27       0.39  
       
     
     
      0.59       1,400,000       5.13       0.59  
       
     
     
      0.59       1,800,000       9.14       0.59  
       
     
     
      0.92       350,000       4.76       0.92  
       
     
     
      0.92       600,000       8.76       0.92  
       
     
     
      1.33       25,000       1.07       1.33  
       
     
     
      1.38       105,307       2.76       1.38  
       
     
     
      1.55       200,000       0.18       1.55  
       
     
     
      1.67       405,943       2.51       1.67  
       
     
     
      1.70       218,500       0.72       1.70  
       
     
     
      1.75       250,000       1.27       1.75  
       
     
     
      1.78       25,000       2.43       1.78  
       
     
     
      2.31       250,000       1.76       2.31  
       
     
     
      4.15       25,000       2.26       4.15  
  0.14-0.15        3,240,000               0.15       0.01-4.15       10,551,750               0.60  

 

16

 

 

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
three months ended
March 31,
 
    2022     2021  
Weighted-average fair value of underlying stock at grant date   $ 0.15     $ 0.92  
Dividend yields            
Expected volatility     127%-133 %     121%-143 %
Risk-free interest rates     1.37%-1.55 %     0.16%-0.38 %
Expected lives (in years)     5.00-5.50       3.00-5.00  
Weighted-average grant date fair value   $ 0.13     $ 0.77  

 

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
three months ended
March 31,
 
    2022     2021  
Weighted-average fair value of underlying stock at grant date   $ 0.15     $  
Dividend yields            
Expected volatility     103 %      
Risk-free interest rates     1.78 %      
Expected lives (in years)     10        
Weighted-average grant date fair value   $ 0.14     $  

 

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.

 

17

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 3 - Stockholders’ Equity (cont’d)

 

E. 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 March 31,  
2022     2021  
US$ thousands     US$ thousands  
  214       821  

 

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

 

For the three months ended March 31,  
2022     2021  
US$ thousands     US$ thousands  
  1      
 

 

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 March 31,  
2022     2021  
US$ thousands     US$ thousands  
  7      
 

 

As of March 31, 2022, there was $325,000 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 2022 and 2023.

 

18

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 3 - Stockholders’ Equity (cont’d)

 

F. Dividend Reinvestment and Stock Purchase Plan (“DSPP”)

 

On March 13, 2014 Zion filed a registration statement on Form S-3 that is 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.

 

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.

 

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.

 

19

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 3 - Stockholders’ Equity (cont’d)

 

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

 

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.

 

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.

 

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 per share exercise price of $1.00. 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.

 

20

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 3 - Stockholders’ Equity (cont’d)

 

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 19, 2018 and continued to be exercisable through April 19, 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 19, 2019 to April 19, 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 19, 2020 to April 19, 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 19, 2021 to April 19, 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, 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) is 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.”

 

21

 

 

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.

 

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.

 

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 continue to be exercisable through July 15, 2022 at a per share exercise price of $1.00.

 

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. 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.

 

22

 

 

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 continue to be exercisable through May 16, 2023 at a per share exercise price of $1.00.

 

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 continue to be exercisable through June 12, 2023 at a per share exercise price of $.25.

 

Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet for a unit program consisting of units of shares and warrants to a participant. After conclusion of the program on May 28, 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 has the company notation of “ZNWAP.” The warrants will not be registered for trading on the OTCQX or any other stock market or trading market. The warrants were issued and became exercisable on June 2, 2021 and continue to be exercisable through June 2, 2022 at a per share exercise price of $.25.

 

On March 21, 2022, the Company extended the termination date of the ZNWAP Warrant by one (1) year from the expiration date of June 2, 2022 to June 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.

 

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 are exercisable through July 6, 2022 at a per share exercise price of $.25.

 

23

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 3 - Stockholders’ Equity (cont’d)

 

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 “ZNWAR.” The warrants will not be registered for trading on the OTCQX or any other stock market or trading market. The warrants were issued and became exercisable on June 22, 2021 and continue to be exercisable through June 22, 2022 at a per share exercise price of $.25. Additionally, Zion incurred $115,000 in equity issuance costs to an outside party related to this waiver program.

 

On March 21, 2022, the Company extended the termination date of the ZNWAR Warrant by one (1) year from the expiration date of June 22, 2022 to June 22, 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 ofunits of shares of stock and warrants to a participant. After conclusion of the program on November 15, 2021, the participant’s Plan account will be 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 exercisable on November 15, 2023 and continue to be exercisable through December 31, 2023 at a per share exercise price of $1.00.

 

During 2021, two participants who participated in the “Request for Waiver” aspect of the DSPP contributed approximately 67% of the cash raised through the DSPP. During the three months ended March 31, 2022, one participant in the “Request for Waiver” aspect of the DSPP contributed approximately 85% of the cash raised through the DSPP.

 

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.

 

For the three months ended March 31, 2022, and 2021, approximately $11,427,000, and $2,849,000 were raised under the DSPP program, respectively.

 

The company raised approximately $2,585,000 from the period April 1, 2022 through May 6, 2022, 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-K, are not tradeable and are used internally for classification and accounting purposes only.

 

24

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 3 - Stockholders’ Equity (cont’d)

 

G. Subscription Rights Offering

 

On April 2, 2018 the Company announced an offering (“2018 Subscription Rights Offering”) through American Stock Transfer & Trust Company, LLC (the “Subscription Agent”), at no cost to the shareholders, of non-transferable Subscription Rights (each “Right” and collectively, the “Rights”) to purchase its securities to persons who owned shares of our Common Stock on April 13, 2018 (“the Record Date”). Pursuant to the 2018 Subscription Rights Offering, each holder of shares of common stock on the Record Date received non-transferable Subscription Rights, with each Right comprised of one share of the Company Common Stock, par value $0.01 per share (the “Common Stock”) and one Common Stock Purchase Warrant to purchase an additional one share of Common Stock. Each Right could be exercised or subscribed at a per Right subscription price of $5.00. Each Warrant affords the investor the opportunity to purchase one share of the Company Common Stock at a warrant exercise price of $3.00. The warrant is referred to as “ZNWAI.”

 

The warrants became exercisable on June 29, 2018 and continued to be exercisable through June 29, 2020 at a per share exercise price of $3.00, after the Company, on December 4, 2018, extended the termination date of the Warrant by one (1) year from the expiration date of June 29, 2019 to June 29, 2020.

 

On May 29, 2019, the Company extended the termination date of the ZNWAI Warrant by one (1) year from the expiration date of June 29, 2020 to June 29, 2021.

 

On September 15, 2020, the Company extended the termination date of the ZNWAI Warrant by two (2) years from the expiration date of June 29, 2021 to June 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.

 

Each shareholder received .10 (one tenth) of a Subscription Right (i.e. one Subscription Right for each 10 shares owned) for each share of the Company’s Common Stock owned on the Record Date.

 

The 2018 Subscription Rights Offering terminated on May 31, 2018. The Company raised net proceeds of approximately $3,038,000, from the subscription of Rights, after deducting fees and expenses of $243,000 incurred in connection with the rights offering.

 

25

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 3 - Stockholders’ Equity (cont’d)

 

H. Warrant Table

 

The warrants balances at December 31, 2021 and transactions since January 1, 2022 are shown in the table below:

 

Warrants   Exercise
Price
    Warrant
Termination Date
  Outstanding Balance, 12/31/2021     Warrants
Issued
    Warrants
Exercised
    Warrants
Expired
    Outstanding Balance, 03/31/2022  
ZNWAA   $ 2.00     01/31/2023     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     01/08/2023     240,068      
-
     
-
     
-
      240,068  
ZNWAH   $ 5.00     04/19/2023     372,400      
-
     
-
     
-
      372,400  
ZNWAI   $ 3.00     06/29/2023     640,730      
-
     
-
     
-
      640,730  
ZNWAJ   $ 1.00     10/29/2023     545,900      
-
     
-
     
-
      545,900  
ZNWAK   $ 0.01     02/25/2023     431,655      
-
      (1,750 )     -       429,905  
ZNWAL   $ 2.00     08/26/2023     517,875      
-
     
-
     
-
      517,875  
ZNWAM   $ 1.00     07/15/2023     4,376,000      
-
     
-
     
-
      4,376,000  
ZNWAN   $ 1.00     05/16/2023     267,660      
-
     
-
     
-
      267,660  
ZNWAO   $ 0.25     06/12/2023     174,970      
-
     
-
     
-
      174,970  
ZNWAP   $ 0.25    

06/02/2023

    439,916      
-
     
-
     
-
      439,916  
ZNWAR   $ 0.25     06/23/2023     1,020,000      
-
     
-
     
-
      1,020,000  
Outstanding warrants                 13,273,365       -       (1,750 )     -       13,271,615  

 

 

26

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 3 - Stockholders’ Equity (cont’d)

 

I. Warrant Descriptions

 

The price and the expiration dates for the series of warrants to investors are as follows *:

 

        Period of Grant     US$     Expiration Date  
ZNWAA Warrants   B,C   March 2013 – December 2014       2.00     January 31, 2023  
ZNWAD Warrants   A,B,C   January 2015 – March 2016       1.00     May 02, 2023  
ZNWAE Warrants   B,C   November 2016 – March 2017       1.00     May 01, 2023  
ZNWAF Warrants   A,B,C   May 2017 – July 2017       1.00     August 14, 2023  
ZNWAG Warrants   C   October 2017 – December 2017       1.00     January 08, 2023  
ZNWAH Warrants   A,B,C   February 2018       5.00     April 19, 2023  
ZNWAI Warrants   A,B,C   April 2018 – May 2018       3.00     June 29, 2023  
ZNWAJ Warrants   B,C   August 2018 – September 2018       1.00     October 29, 2023  
ZNWAK Warrants   B,C   December 2018 – January 2019       0.01     February 25, 2023  
ZNWAL Warrants   C   July 2019 – August 2019       2.00     August 26, 2023  
ZNWAM Warrants     January 2021 – March 2021       1.00     July 15, 2023  
ZNWAN Warrants       May – June 2021       1.00     May 16, 2023  
ZNWAO Warrants       June 2021       0.25     June 12, 2023  
ZNWAP Warrants   D   June 2021       0.25     June 03, 2023  
ZNWAQ Warrants     June 2021       0.25     July 6, 2022  
ZNWAR Warrants   D   June 2021       0.25     June 23, 2023  
ZNWAS Warrants   F   August 2021 – March 2022       1.00     December 31, 2023  

 

 
* Zion’s ZNWAB Warrants expired on May 2, 2017, and the ZNWAC Warrants expired on May 2, 2018

 

A On December 4, 2018, the Company extended the termination date of the Warrants by one (1) year.
B On May 29, 2019, the Company extended the termination date of the Warrants by one (1) year.
C On September 15, 2020, the Company extended the termination date of the Warrants by two (2) years.
D On March 21, 2022, the Company extended the termination date of the Warrants by one (1) year.
E These warrants were issued on May 5, 2022.
F These warrants will be exercisable beginning on November 15, 2023 and terminate on December 31, 2023. These warrants will be issued in November 2023.

 

27

 

 

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:

 

    March 31,
2022
    December 31,
2021
 
    US$ thousands     US$ thousands  
Excluded from amortization base:                
Drilling costs, and other operational related costs     32,703       32,075  
Capitalized salary costs     2,210       2,158  
Capitalized interest costs     1,418       1,418  
Legal and seismic costs, license fees and other preparation costs     11,729       11,260  
Other costs     39       39  
      48,099       46,950  

 

Changes in Unproved oil and gas properties during the three months ended March 31, 2022 and 2021 are as follows:

 

    March 31,
2022
    March 31,
2021
 
    US$ thousands     US$ thousands  
Excluded from amortization base:                
Drilling costs, and other operational related costs     628       7,002  
Capitalized salary costs     52       61  
Capitalized interest costs    
-
      79  
Legal and seismic costs, license fees and other preparation costs     469       1,034  
Other costs    
-
     
-
 
      *1,149       *8,176  

 

 
* Inclusive of non-cash amounts of approximately $1,137,000, and $2,442,000 during the three months ended March 31, 2022, and 2021, respectively

 

Please refer to Footnote 1 – Nature of Operations and Going Concern for more information about Zion’s exploration activities.

 

28

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 5 - Right of use leases assets and lease obligations

 

The Company is a lessee in several non-cancellable operating leases, primarily for transportation and office space.

 

The table below presents the operating lease assets and liabilities recognized on the balance sheets as of March 31, 2022 and December 31, 2021: 

 

    March 31,
2022
    December 31,
2021
 
    US$ thousands     US$ thousands  
Operating lease assets   $ 263     $ 327  
                 
Operating lease liabilities:                
Current operating lease liabilities   $ 169     $ 203  
Non-current operating lease liabilities   $ 129     $ 169  
Total operating lease liabilities   $ 298     $ 372  

 

The depreciable lives of operating lease assets and leasehold improvements are limited by the expected lease term.

 

The Company’s leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. The Company used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date.

 

The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of March 31, 2022 are:

 

    March 31,
2022
 
Weighted average remaining lease term (years)     1.75  
Weighted average discount rate     5.9 %

 

29

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 5 - Right of use leases assets and leases obligations (cont’d)

 

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under non-cancellable operating leases with terms of more than one year to the total operating lease liabilities recognized on the condensed balance sheets as of March 31, 2022:

 

    US$ thousands  
2022     142  
2023     158  
2024     13  
2025    
-
 
2026    
-
 
Thereafter    
-
 
Total undiscounted future minimum lease payments     313  
Less: portion representing imputed interest     (15 )
Total undiscounted future minimum lease payments     298  

 

Operating lease costs were $68,000 and $63,000 for the three months ended March 31, 2022, and 2021, respectively. Operating lease costs are included within general and administrative expenses on the statements of income.

 

Cash paid for amounts included in the measurement of operating lease liabilities was $72,000 and $71,000 for the three months ended March 31, 2022, and 2021, respectively, and this amount is included in operating activities in the statements of cash flows.

 

Right-of-use assets obtained in exchange for new operating lease liabilities were $nil and $nil for the three months ended March 31, 2022, and 2021, respectively.

 

30

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 6 - Commitments and Contingencies

 

A. Securities and Exchange Commission (“SEC”) Investigation

 

As previously disclosed by the Company, on June 21, 2018, the Fort Worth Regional Office of the SEC informed Zion that it was conducting a formal, non-public investigation and asked that we provide certain information and documents in connection with its investigation. Since that date, we have fully cooperated with the SEC on an on-going basis in connection with its investigation. Investigations of this nature are inherently uncertain and their results cannot be predicted with certainty. Regardless of the outcome, an SEC investigation could have an adverse impact on us because of legal costs, diversion of management resources, and other factors. The investigation could also result in reputational harm to Zion and may have a material adverse effect on Zion’s current and future business and exploratory activities and its ability to raise capital to continue our oil and gas exploratory activities.

 

B. Litigation

 

From time to time, the Company may be subject to routine litigation, claims or disputes in the ordinary course of business. The Company defends itself vigorously in all such matters. However, we cannot predict the outcome or effect of any of the potential litigation, claims or disputes. 

 

The Company is not subject to any litigation at the present time. 

 

C. Recent Market Conditions – Coronavirus Pandemic

 

During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (“COVID-19”). The pandemic has significantly impacted the economic conditions in the United States and Israel, as federal, state and local governments react to the public health crisis, creating significant uncertainties in the United States, Israel and world economies. In the interest of public health and safety, jurisdictions (international, national, state and local) where we have operations, restricted travel and required workforces to work from home. As of the date of this report, many of our employees are working from home. However, while there are various uncertainties to navigate, the Company’s business activities are continuing. The situation is rapidly changing and additional impacts to the business may arise that we are not aware of currently. We cannot predict whether, when or the manner in which the conditions surrounding COVID-19 will change including the timing of lifting any restrictions or work from home arrangements.

 

The full extent of COVID-19’s impact on our operations and financial performance depends on future developments that are uncertain and unpredictable, including the duration and spread of the pandemic, its impact on capital and financial markets and any new information that may emerge concerning the severity of the virus, its spread to other regions as well as the actions taken to contain it, among others.

 

D. Environmental and Onshore Licensing Regulatory Matters

 

The Company is engaged in oil and gas exploration and production and may become subject to certain liabilities as they relate to environmental clean-up of well sites or other environmental restoration procedures and other obligations as they relate to the drilling of oil and gas wells or the operation thereof. Various guidelines have been published in Israel by the State of Israel’s Petroleum Commissioner and Energy and Environmental Ministries as it pertains to oil and gas activities. Mention of these older guidelines was included in previous Zion filings.

 

The Company believes that these regulations will result in an increase in the expenditures associated with obtaining new exploration rights and drilling new wells. The Company expects that an additional financial burden could occur as a result of requiring cash reserves that could otherwise be used for operational purposes. In addition, these regulations are likely to continue to increase the time needed to obtain all of the necessary authorizations and approvals to drill and production test exploration wells.

 

As of March 31, 2022, and December 31, 2021, the Company accrued $nil and $nil for license regulatory matters.

 

E. Bank Guarantees

 

As of March 31, 2022, the Company provided Israeli-required bank guarantees to various governmental bodies (approximately $1,186,000) and others (approximately $82,000) with respect to its drilling operation in an aggregate amount of approximately $1,268,000. The (cash) funds backing these guarantees are held in restricted interest-bearing accounts in Israel and are reported on the Company’s balance sheets as fixed short-term bank deposits – restricted.

 

31

 

 

Zion Oil & Gas, Inc.

 

Consolidated Condensed Notes to Financial Statements (Unaudited)

 

Note 6 - Commitments and Contingencies (cont’d)

 

F. Risks

 

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices and/or equity prices. In the normal course of doing business, we are exposed to the risks associated with foreign currency exchange rates and changes in interest rates.

 

Foreign Currency Exchange Rate Risks. A portion of our expenses, primarily labor expenses and certain supplier contracts, are denominated in New Israeli Shekels (“NIS”). As a result, we have significant exposure to the risk of fluctuating exchange rates with the U.S. Dollar (“USD”), our primary reporting currency. During the period January 1, 2022 through March 31, 2022, the USD has fluctuated by approximately 2.1% against the NIS (the USD strengthened relative to the NIS). By contrast, during the period January 1, 2021 through December 31, 2021, the USD fluctuated by approximately 3.3% against the NIS (the USD weakened relative to the NIS). Continued strengthening of the US dollar against the NIS will result in lower operating costs from NIS denominated expenses. To date, we have not hedged any of our currency exchange rate risks, but we may do so in the future.

 

Interest Rate Risk. Our exposure to market risk relates to our cash and investments. We maintain an investment portfolio of short-term bank deposits and money market funds. The securities in our investment portfolio are not leveraged, and are, due to their very short-term nature, subject to minimal interest rate risk. We currently do not hedge interest rate exposure. Because of the short-term maturities of our investments, we do not believe that a change in market interest rates would have a significant negative impact on the value of our investment portfolio except for reduced income in a low interest rate environment. At March 31, 2022, we had cash, cash equivalents and short-term bank deposits of approximately $9,490,000. The weighted average annual interest rate related to our cash and cash equivalents for the three months ended March 31, 2022, exclusive of funds at US banks that earn no interest, was approximately 0.52%.

 

The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we invest our excess cash in short-term bank deposits and money market funds that may invest in high quality debt instruments.

 

Note 7 - Subsequent Events

 

  (i) Approximately $2,585,000 was collected through the Company’s DSPP program during the period April 1 through May 6, 2022.

 

(ii) On April 1, 2022, the Company granted options under the 2021 Omnibus Incentive Plan to one board member, to purchase 25,000 shares of Common Stock at an exercise price of $0.1128 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 $2,410.

 

(iii) On April 15, 2022, the Company granted options under the 2021 Omnibus Incentive Plan to five senior officers and ten staff members to purchase 3,160,000 shares of Common Stock at an exercise price of $0.1451 per share. The options vest 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 $387,660, and will be recognized during the years 2022 and 2023.

 

(iv) On April 15. 2022, the Company granted options under the 2021 Omnibus Incentive Plan to five staff members, to purchase 290,000 shares of Common Stock 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 $39,594.

 

(v) On April 15, 2022, the Company granted options under the 2021 Omnibus Incentive Plan to one senior officer member to purchase 400,000 shares of Common Stock 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 $54.612.

 

(vi) On April 15. 2022, the Company granted options under the 2021 Omnibus Incentive Plan to one board member, to purchase 400,000 shares of Common Stock 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 $54,612.

 

(vii)    On April 15, 2022, the Company granted options under the 2021 Omnibus Incentive Plan to eight board members to purchase 3,200,000 shares of Common Stock at an exercise price of $.1451 per share. The options vest 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 $392,567.

 

(viii) On April 15, 2022, the Company granted options under the 2021 Omnibus Incentive Plan to two consultants to purchase 50,000 shares of Common Stock at an exercise price of $.1451 per share. The options vest 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 $6,377.

 

32

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED INTERIM FINANCIAL STATEMENTS AND THE RELATED NOTES TO THOSE STATEMENTS INCLUDED IN THIS FORM 10-Q. SOME OF OUR DISCUSSION IS FORWARD-LOOKING AND INVOLVES RISKS AND UNCERTAINTIES. FOR INFORMATION REGARDING RISK FACTORS THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, REFER TO THE DISCUSSION OF RISK FACTORS IN THE “DESCRIPTION OF BUSINESS” SECTION OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2021, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

Forward-Looking Statements

 

Certain statements made in this discussion are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may materially differ from actual results.

 

Forward-looking statements can be identified by terminology such as “may”, “should”, “expects”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, or “continue” or the negative of these terms or other comparable terminology and include, without limitation, statements regarding: 

 

  The going concern qualification in our consolidated financial statements;

 

  our liquidity and our ability to raise capital to finance our overall exploration and development activities within our license area;

 

  our ability to continue meeting the requisite continued listing requirements by OTCQX;

 

  the outcome of the current SEC investigation against us;

 

  business interruptions from COVID-19 pandemic;

 

  our ability to obtain new license areas to continue our petroleum exploration program;

 

  interruptions, increased consolidated financial costs and other adverse impacts of the coronavirus pandemic on the drilling and testing of our MJ#2 well and our capital raising efforts;

 

  our ability to explore for and develop natural gas and oil resources successfully and economically within our license area;

 

  our ability to maintain the exploration license rights to continue our petroleum exploration program;

 

  the availability of equipment, such as seismic equipment, drilling rigs, and production equipment as well as access to qualified personnel;

 

  the impact of governmental regulations, permitting and other legal requirements in Israel relating to onshore exploratory drilling;

 

  our estimates of the time frame within which future exploratory activities will be undertaken;

 

  changes in our exploration plans and related budgets;

 

33

 

 

  the quality of existing and future license areas with regard to, among other things, the existence of reserves in economic quantities;

 

  anticipated trends in our business;

 

  our future results of operations;

 

  our capital expenditure program;

 

  future market conditions in the oil and gas industry

 

  the demand for oil and natural gas, both locally in Israel and globally; and

 

  the impact of fluctuating oil and gas prices on our exploration efforts

 

Overview

 

Zion Oil and Gas, Inc., a Delaware corporation, is an oil and gas exploration company with a history of 22 years of oil and gas exploration in Israel. We were incorporated in Florida on April 6, 2000 and reincorporated in Delaware on July 9, 2003. We completed our initial public offering in January 2007. Our common stock, par value $0.01 per share (the “Common Stock”) currently trades on the OTCQX Market under the symbol “ZNOG” and our Common Stock warrant under the symbol “ZNOGW.”

 

The Company currently holds one active petroleum exploration license onshore Israel, the New Megiddo License 428 (“NML 428”), comprising approximately 99,000 acres. The NML 428 was awarded on December 3, 2020 for a six-month term with the possibility of an additional six-month extension. On April 29, 2021, Zion submitted a request to the Ministry of Energy for a six-month extension to December 2, 2021. On May 30, 2021, the Ministry of Energy approved our request for extension to December 2, 2021. On November 29, 2021, the Ministry of Energy approved our request for extension to August 1, 2022. The ML 428 lies onshore, south and west of the Sea of Galilee, and 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.

 

The Megiddo Jezreel #1 (“MJ #1”) site was completed in early March 2017, after which the drilling rig and associated equipment were mobilized to the site. Performance and endurance tests were completed, and the MJ #1 exploratory well was spud on June 5, 2017 and drilled to a total depth (“TD”) of 5,060 meters (approximately 16,600 feet). Thereafter, the Company obtained three open-hole wireline log suites (including a formation image log), and the well was successfully cased and cemented. The Ministry of Energy approved the well testing protocol on April 29, 2018.

 

During the fourth quarter of 2018, the Company testing protocol was concluded at the MJ #1 well. The test results confirmed that the MJ #1 well did not contain hydrocarbons in commercial quantities in the zones tested. As a result, in the year ended December 31, 2018, the Company recorded a non-cash impairment charge to its unproved oil and gas properties of $30,906,000. During the three months ended March 31, 2022 and 2021, respectively, the Company did not record any post-impairment charges.

 

While the well was not commercially viable, Zion learned a great deal from the drilling and testing of this well. We believe that the drilling and testing of this well carried out the testing objectives which would support further evaluation and potential further exploration efforts within our License area. Zion believed it was prudent and consistent with good industry practice to examine further these questions with a focused 3-D seismic imaging shoot of approximately 72 square kilometers surrounding the MJ#1 well. Zion completed all of the acquisition, processing and interpretation of the 3-D data and incorporated its expanded knowledge base into the drilling of our current MJ-02 exploratory well.

 

34

 

 

On March 12, 2020, Zion entered into a Purchase and Sale Agreement with Central European Drilling kft, a Hungarian corporation, to purchase an onshore oil and gas drilling rig, drilling pipe, related equipment and spare parts for a purchase price of $5.6 million in cash, subject to acceptance testing and potential downward adjustment. We remitted to the Seller $250,000 on February 6, 2020 as earnest money towards the Purchase Price. The Closing anticipated by the Agreement took place on March 12, 2020 by the Seller’s execution and delivery of a Bill of Sale to us. On March 13, 2020, the Seller retained the earnest money deposit, and the Company remitted $4,350,000 to the seller towards the purchase price, and $1,000,000 (the “Holdback Amount”) was deposited in escrow with American Stock Transfer and Trust Company LLC. On January 6, 2021, Zion completed its acceptance testing of the I-35 drilling rig and the Holdback Amount was remitted to Central European Drilling.

 

The MJ-02 drilling plan was approved by the Ministry of Energy on July 29, 2020. On January 6, 2021, Zion officially spudded its MJ-02 exploratory well. On November 23, 2021, Zion announced via a press release that it completed drilling the MJ-02 well to a total depth of 5,531 meters (~18,141 feet) with a 6-inch open hole at that depth.

 

A full set of detailed and comprehensive tests including neutron-density, sonic, gamma, and resistivity logs were acquired in December 2021, as a result of which we identified an encouraging zone of interest. All of the well testing equipment and personnel are secured for the MJ-02 well. We have re-entered our MJ-02 wellbore and are progressing to production testing. This work is expected to take several weeks.

 

At present, we have no revenues or operating income. Our ability to generate future revenues and operating cash flow will depend on the successful exploration and exploitation of our current and any future petroleum rights or the acquisition of oil and/or gas producing properties, and the volume and timing of such production. In addition, even if we are successful in producing oil and gas in commercial quantities, our results will depend upon commodity prices for oil and gas, as well as operating expenses including taxes and royalties.

 

Our executive offices are located at 12655 North Central Expressway, Suite 1000, Dallas, Texas 75243, and our telephone number is (214) 221-4610. Our branch office’s address in Israel is 9 Halamish Street, North Industrial Park, Caesarea 3088900, and the telephone number is +972-4-623-8500. Our website address is: www.zionoil.com.

 

Current Exploration and Operation Efforts

 

Megiddo-Jezreel Petroleum License

 

The Company currently holds one active petroleum exploration license onshore Israel, the New Megiddo License 428 (“NML 428”), comprising approximately 99,000 acres – See Map 1. Under Israeli law, Zion has an exclusive right to oil and gas exploration in our license area in that no other company may drill there. In the event we drill an oil or gas discovery in our license area, current Israeli law entitles us to convert the relevant portions of our license to a 30-year production lease, extendable to 50 years, subject to compliance with a field development work program and production.

  

35

 

 

The New Megiddo License 428 was awarded on December 3, 2020 for a six-month term with the possibility of an additional six-month extension. On May 30, 2021, the Ministry of Energy approved our request for extension to December 2, 2021. On November 29, 2021, the Ministry of Energy approved our request for extension to August 1, 2022. The New Megiddo License 428 area is the same area as the Megiddo-Jezreel License 401 area and lies onshore, south and west of the Sea of Galilee and 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. 

 

The MJ-02 drilling plan was approved by the Ministry of Energy on July 29, 2020. On January 6, 2021, Zion officially spudded its MJ-02 exploratory well. On November 23, 2021, Zion announced via a press release that it completed drilling the MJ-02 well to a total depth of 5,531 meters (~18,141 feet) with a 6-inch open hole at that depth.

 

A full set of detailed and comprehensive tests including neutron-density, sonic, gamma, and resistivity logs were acquired in December 2021, as a result of which we identified an encouraging zone of interest. All of the well testing equipment and personnel are secured for the MJ-02 well. We have re-entered our MJ-02 wellbore and are progressing to production testing. This work is expected to take several weeks.

 

I-35 Drilling Rig & Associated Equipment

 

    Three-month period ended March 31, 2022  
    I-35
Drilling Rig
    Rig
Spare Parts
    Other
Drilling Assets
    Total  
    US$ thousands     US$ thousands     US$ thousands     US$ thousands  
December 31, 2021     5,859       643       332       6,834  
Asset Additions     -       5       117       122  
Asset Depreciation     (159 )     -       (25 )     (184 )
Asset Disposals for Self-Consumption     -       (13 )     -       (13 )
March 31, 2022     5,700       635       424       6,759  

 

36

 

  

Zion’s ability to fully undertake all of these aforementioned activities is subject to its raising the needed capital from its continuing offerings, of which no assurance can be provided.

 

 

Map 1. Zion’s New Megiddo License 428 as of March 31, 2022.

 

Zion’s Former Joseph License

 

Zion has plugged all of its exploratory wells on its former Joseph License area, and the reserve pits have been evacuated, but acknowledges its obligation to complete the abandonment of these well sites in accordance with guidance from the Energy Ministry, Environmental Ministry and local officials.

 

37

 

 

Onshore Licensing, Oil and Gas Exploration and Environmental Guidelines

 

The Company is engaged in oil and gas exploration and production and may become subject to certain liabilities as they relate to environmental cleanup of well sites or other environmental restoration procedures and other obligations as they relate to the drilling of oil and gas wells or the operation thereof. Various guidelines have been published in Israel by the State of Israel’s Petroleum Commissioner, the Energy Ministry, and the Environmental Ministry in recent years as it pertains to oil and gas activities. Mention of these guidelines was included in previous Zion Oil & Gas filings.

 

We acknowledge that these new regulations are likely to increase the expenditures associated with obtaining new exploration rights and drilling new wells. The Company expects that additional financial burdens could occur as a result of the Ministry requiring cash reserves that could otherwise be used for operational purposes. 

 

Capital Resources Highlights

 

We need to raise significant funds to finance the continued exploration efforts and maintain orderly operations. To date, we have funded our operations through the issuance of our securities and convertible debt. We will need to continue to raise funds through the issuance of equity and/or debt securities (or securities convertible into or exchangeable for equity securities). No assurance can be provided that we will be successful in raising the needed capital on terms favorable to us (or at all).

 

The Dividend Reinvestment and Stock Purchase Plan

 

On March 13, 2014 Zion filed a registration statement on Form S-3 that is 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.

 

Please see Footnote 3F (“Dividend Reinvestment and Stock Purchase Plan (“DSPP”)), which is a part of this Form 10-Q filing, for details about specific unit programs, dates, and filings during the years 2016 through 2022.

 

For the three months ended March 31, 2022, and 2021, approximately $11,427,000, and $2,849,000 were raised under the DSPP program, respectively.

 

38

 

 

The warrants balances at December 31, 2021 and transactions since January 1, 2022 are shown in the table below:

 

Warrants   Exercise
Price
    Warrant
Termination Date
  Outstanding Balance, 12/31/2021     Warrants
Issued
    Warrants
Exercised
    Warrants
Expired
    Outstanding Balance, 03/31/2022  
ZNWAA   $ 2.00     01/31/2023     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