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our expenditures are approximately $600,000 per month excluding exploratory operational activities. However, when we are actively |
drilling a well, we estimate an additional minimum expenditure of approximately $2,500,000 per month. The above estimates are subject |
to change. Subject to the qualifications specified below, management believes that our existing cash balance, coupled with anticipated |
proceeds under the DSPP, will be sufficient to finance our plan of operations through February 2023. The recent outbreak of the |
coronavirus has to date significantly disrupted business operations and resulted in significantly increased unemployment in the general |
economy. The extent to which the coronavirus impacts our operations, specifically our capital raising efforts, as well as our ability |
to continue our exploratory efforts, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, |
including the duration of the outbreak, new information which may emerge concerning the severity of the coronavirus and the actions to |
contain the coronavirus or treat its impact, among others. No assurance can be provided |
that we will be able to raise the needed operating capital. 46 Even if we raise the needed |
funds, there are factors that can nevertheless adversely impact our ability to fund our operating needs, including (without limitation), |
unexpected or unforeseen cost overruns in planned non-drilling exploratory work in existing license areas, the costs associated with extended |
delays in undertaking the required exploratory work, and plugging and abandonment activities which is typical of what we have experienced |
in the past. The financial information |
contained in these consolidated financial statements has been prepared on a basis that assumes that we will continue as a going concern, |
which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. This |
financial information and these consolidated financial statements do not include any adjustments that may result from the outcome of this |
uncertainty. Off-Balance Sheet Arrangements We do not currently use any |
off-balance sheet arrangements to enhance our liquidity or capital resource position, or for any other purpose. Recently Issued Accounting Pronouncements The Company does not believe |
that the adoption of any recently issued accounting pronouncements in 2022 had a significant impact on our financial position, results |
of operations, or cash flow. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES |
ABOUT MARKET RISK 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 September 30, 2022, the USD has fluctuated by approximately |
13.9% 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 September 30, 2022, we had cash, cash equivalents and short-term bank deposits |
(including restricted deposits) of approximately $4,373,000. The weighted average annual interest rate related to our cash and cash equivalents |
for the three and nine months ended September 30, 2022, exclusive of funds at US banks that earn no interest, was approximately .86% and |
.45%, 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 excess cash in short-term bank deposits and money market funds that may invest in high quality debt instruments. ITEM 4. CONTROLS AND PROCEDURES We maintain disclosure controls |
and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities |
Exchange Act of 1934, is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. |
As of September 30, 2022, our chief executive officer and our chief financial officer conducted an evaluation of the effectiveness of |
our disclosure controls and procedures. Based on this evaluation, our chief executive officer and our chief financial officer concluded |
that our disclosure controls and procedures were effective as of September 30, 2022. Changes in Internal Control over Financial |
Reporting There were no changes in internal |
controls over financial reporting that occurred during the quarter ended September 30, 2022 that have materially affected, or are reasonably |
likely to materially affect, our internal controls over financial reporting. 47 PART II—OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 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. 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. ITEM 1A. RISK FACTORS During |
the quarter ended September 30, 2022, there were no material changes to the risk factors previously reported in our Annual Report on Form |
10-K for the year ended December 31, 2021. ITEM 2. UNREGISTERED SALES OF SECURITIES AND |
USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES None. ITEM 5. OTHER INFORMATION : None. 48 ITEM 6. EXHIBITS Exhibit Index : 10.2 Extension of New Megiddo 428 License to February 1, 2023 (incorporated by reference to our Form 10-Q filing on August 10, 2022) 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 under the Exchange Act 31.2 Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 under the Exchange Act 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished only) 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished only) 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) 49 SIGNATURES Pursuant to the requirements |
of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly |
authorized. ZION OIL & GAS, INC. (Registrant) By: /s/ Robert W.A. Dunn By: /s/ Michael B. Croswell Jr. Robert W. A. Dunn Michael B. Croswell Jr. Chief Executive Officer Chief Financial Officer (Principal Executive Officer) (Principal Financial and Accounting Officer) Date: November 10, 2022 Date: November 10, 2022 50 0.01 0.01 0.02 0.03 258442000 286390000 454890000 484678000 On December 4, 2018, the Company extended the expiration date of the Warrants by one (1) year. These warrants were issued on May 5, 2022, and on May 17, 2022, the Company extended the expiration date of the Warrants by one (1) year. On May 29, 2019, the Company extended the expiration date of the Warrants by one (1) year. Zion’s ZNWAB Warrants expired on May 2, 2017, and the ZNWAC Warrants expired on May 2, 2018 These warrants will be exercisable beginning on November 15, 2023 and expire on December 31, 2023. These warrants will be issued in November 2023. On September 15, 2020, the Company extended the expiration date of the Warrants by two (2) years. On March 21, 2022, the Company extended the expiration date of the Warrants by one (1) year. 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UNITED |
STATES SECURITIES |
AND EXCHANGE COMMISSION WASHINGTON, |
D.C. 20549 FORM 10-Q MARK |
ONE ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for |
the Quarterly Period ended September 30, 2023 ; ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for |
the transition period from ________ to ________ ZION OIL & GAS, INC. – File Number 001-33228 (Exact |
name of registrant as specified in its charter) Delaware 20-0065053 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 12655 N Central Expressway , Suite 1000 , Dallas , TX 75243 (Address of principal executive offices) Zip Code (214) 221-4610 (Registrant’s |
telephone number, including area code) Securities |
registered pursuant to Section 12(b) of the Ac Title of each class Trading Symbol(s) Name of each exchange on which registered N/A N/A N/A Indicate |
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange |
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) |
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate |
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data |
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding |
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐ Indicate |
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, |
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller |
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☒ Emerging growth company ☐ If |
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying |
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate |
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of November 7, 2023, Zion Oil & Gas, Inc. had outstanding 605,319,057 shares of common stock, par value $0.01 per share. INDEX |
PAGE Page PART I — FINANCIAL INFORMATION Item 1 – Financial Statements – Unaudited Consolidated Condensed Balance Sheets – September 30, 2023 and December 31, 2022 1 Consolidated Condensed Statements of Operations for the three and nine months ended September 30, 2023 and 2022 2 Consolidated Condensed Statement of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022 3 Consolidated Condensed Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 5 Notes to Consolidated Condensed Financial Statements 7 Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations 35 Item 3 – Quantitative and Qualitative Disclosures About Market Risk 43 Item 4 – Controls and Procedures 43 PART II — OTHER INFORMATION Item 1 – Legal Proceedings 44 Item 1A – Risk Factors 44 Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds 44 Item 3 – Defaults upon Senior Securities 44 Item 4 – Mine Safety Disclosures 44 Item 5 – Other Information 44 Item 6 – Exhibits 45 Exhibit Index 45 SIGNATURES 46 i Zion |
Oil & Gas, Inc. Consolidated |
Condensed Balance Sheets as of September 30, 2023 December 31, 2022 US$ thousands US$ thousands (Unaudited) Current assets Cash and cash equivalents 510 1,735 Fixed short term bank and escrow deposits – restricted 1,020 1,379 Prepaid expenses and other current assets 233 600 Other deposits - 483 Governmental receivables 10 267 Other receivables 156 143 Total current assets 1,929 4,607 Unproved oil and gas properties, full cost method (see Note 4) 16,342 15,889 Property and equipment at cost Drilling rig and related equipment, net of accumulated depreciation of $ 2,025 and $ 1,455 (see note 2I) 5,700 6,281 Property and equipment, net of accumulated depreciation of $ 678 and $ 647 81 112 5,781 6,393 Right of Use Lease Assets (see Note 5) 246 202 Other assets Assets held for severance benefits 436 424 Total other assets 436 424 Total assets 24,734 27,515 Liabilities and Stockholders’ Equity Current liabilities Accounts payable 862 2,147 Lease obligation – current (see Note 5) 192 196 Asset retirement obligation 571 571 Accrued liabilities 412 1,032 Total current liabilities 2,037 3,946 Long-term liabilities Lease obligation – non-current (see Note 5) 53 12 Provision for severance pay 467 457 Total long-term liabilities 520 469 Total liabilities 2,557 4,415 Commitments and contingencies (see Note 6) Stockholders’ equity Common stock, par value $ .01 ; Authoriz 1,200,000,000 shares at September 30, 2023: Issued and outstandin 602,554,266 and 524,231,493 shares at September 30, 2023 and December 31, 2022, respectively 6,026 5,242 Additional paid-in capital 300,969 296,460 Accumulated deficit ( 284,818 ) ( 278,602 ) Total stockholders’ equity 22,177 23,100 Total liabilities and stockholders’ equity 24,734 27,515 The |
accompanying notes are an integral part of the unaudited interim consolidated condensed financial statements. 1 Zion |
Oil & Gas, Inc. C onsolidated |
Condensed Statements of Operations (Unaudited) For the three months ended For the nine months ended September 30, September 30, 2023 2022 2023 2022 US$ thousands US$ thousands US$ thousands US$ thousands (Unaudited) (Unaudited) (Unaudited) (Unaudited) General and administrative 1,332 1,636 4,106 4,621 Post impairment of unproved oil and gas properties 36 - 129 - Other 379 719 1,978 2,376 Loss from operations ( 1,747 ) ( 2,355 ) ( 6,213 ) ( 6,997 ) Other income (expense), net Foreign exchange gain (loss) 2 ( 2 ) ( 2 ) ( 92 ) Financial income (expenses), net 2 ( 17 ) ( 1 ) ( 48 ) Loss, before income taxes ( 1,743 ) ( 2,374 ) ( 6,216 ) ( 7,137 ) Income taxes - - - - Net loss ( 1,743 ) ( 2,374 ) ( 6,216 ) ( 7,137 ) Net loss per share of common stock Basic and diluted (in US$) ( 0.003 ) ( 0.01 ) ( 0.011 ) ( 0.02 ) Weighted-average shares outstanding Basic and diluted (in thousands) 578,497 484,678 551,551 454,890 The |
accompanying notes are an integral part of the unaudited interim consolidated condensed financial statements. 2 Zion |
Oil & Gas, Inc. Consolidated |
Condensed Statement of Changes in Stockholders’ Equity (Unaudited) For |
the three and nine months ended September 30, 2023 Common Stock Additional paid-in Accumulated Shares Amounts Capital deficit Total thousands US$ thousands US$ thousands US$ thousands US$ thousands Balances as of December 31, 2022 524,231 5,242 296,460 ( 278,602 ) 23,100 Funds received from sale of DSPP units and shares and exercise of warrants 78,173 782 4,186 — 4,968 Funds received from option exercises 150 2 10 — 12 Costs associated with the issuance of shares — — ( 610 ) — ( 610 ) Value of options granted to employees, directors and others as non-cash compensation — — 923 — 923 Net loss — — — ( 6,216 ) ( 6,216 ) Balances as of September 30, 2023 602,554 6,026 300,969 ( 284,818 ) 22,177 * Less |
than one thousand. Common Stock Additional paid-in Accumulated Shares Amounts Capital deficit Total thousands US$ thousands US$ thousands US$ thousands US$ thousands Balances as of June 30, 2023 560,449 5,604 299,321 ( 283,075 ) 21,850 Funds received from sale of DSPP units and shares and exercise of warrants 42,105 422 1,820 — 2,242 Funds received from option exercises — — — — — Costs associated with the issuance of shares — — ( 437 ) — ( 437 ) Value of options granted to employees, directors and others as non-cash compensation — — 265 — 265 Net loss — — — ( 1,743 ) ( 1,743 ) Balances as of September 30, 2023 602,554 6,026 300,969 ( 284,818 ) 22,177 3 For |
the three and nine months ended September 30, 2022 Common Stock Additional paid-in Accumulated Shares Amounts Capital deficit Total thousands US$ thousands US$ thousands US$ thousands US$ thousands Balances as of December 31, 2021 364,324 3,643 277,258 ( 223,525 ) 57,376 Funds received from sale of DSPP units and shares and exercise of warrants 132,451 1,325 15,145 — 16,470 Funds received from option exercises 325 3 — — 3 Value of options granted to employees, directors and others as non-cash compensation — — 1,154 — 1,154 Net loss — — — ( 7,137 ) ( 7,137 ) Balances as of September 30, 2022 497,100 4,971 293,557 ( 230,662 ) 67,866 Common Stock Additional paid-in Accumulated Shares Amounts Capital deficit Total thousands US$ thousands US$ thousands US$ thousands US$ thousands Balances as of June 30, 2022 473,778 4,738 289,792 ( 228,288 ) 66,242 Funds received from sale of DSPP units and shares and exercise of warrants 23,102 231 3,246 — 3,477 Funds received from option exercises 220 2 — — 2 Value of options granted to employees, directors and others as non-cash compensation — — 519 — 519 Net loss — — — ( 2,374 ) ( 2,374 ) Balances as of September 30, 2022 497,100 4,971 293,557 ( 230,662 ) 67,866 * Less |