Company: ZNOG
Filing Date: 2025-11-10
Form Type: 10-Q
Source: 0001437749-25-034113
Chunk: 9

Company: ZION OIL & GAS INC
Filing Date: 2025-11-10
Form: 10-Q
Item: Item 3
Chunk 9
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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, 2025 through September 30, 2025, the USD has fluctuated by approximately 9.4% against the NIS (the USD weakened relative to the NIS). In the contrast, during the period January 1, 2024 through December 31, 2024, the USD fluctuated by approximately 3.1% against the NIS (the USD strengthened relative to the NIS). Continued weakening of the US dollar against the NIS will result in higher 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 September 30, 2025 we had cash, cash equivalents, and restricted cash of approximately $11,457,000. The weighted average annual interest rate related to our cash and cash equivalents for the three and nine months ended September 30, 2025, exclusive of funds at US banks that earn no interest, was approximately 3.0% and 2.9%, respectively.

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