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purchased an onshore oil and gas drilling rig, drilling pipe, related equipment and spare parts for a purchase price of $ 5.6 million |
in cash, inclusive of approximately $ 540,000 allocated in spare parts and $ 48,000 allocated in additional separate assets. The value |
of the spare parts and separate assets are captured in separate ledger accounts, but reported as one line item with the drilling rig |
on the balance sheet. Zion determined that the life of the I-35 drilling rig (the rig Zion purchased), is 10 years. Zion is depreciating |
the rig on a straight-line basis. Zion |
uses the First In First Out (“FIFO”) method of accounting for the inventory of spare parts, meaning that the earliest items |
purchased will be the first item charged to the well in which the inventory of spare parts gets consumed. It |
is also noteworthy that various components and systems on the rig will be subject to certifications by the manufacturer to ensure that |
the rig is maintained at optimal levels. Per standard practice in upstream oil and gas, each certification performed on our drilling |
rig increases the useful life of the rig by five years. The costs of each certification will be added to the drilling rig account, and |
our straight-line amortization will be adjusted accordingly. See |
the table below for a reconciliation of the rig-related activity during the nine months ended September 30, 2023: I-35 |
Drilling Rig & Associated Equipmen As of September 30, 2023 I-35 Drilling Rig Rig Spare Parts Other Drilling Assets Total US$ thousands US$ thousands US$ thousands US$ thousands December 31, 2022 5,225 619 437 6,281 Asset Additions - - - - Asset Depreciation ( 476 ) - ( 94 ) ( 570 ) Asset Disposals for Self-Consumption - ( 11 ) - ( 11 ) September 30, 2023 4,749 608 343 5,700 During |
the nine months ended September 30, 2023 and 2022, the Company had depreciation expense of $ 570,000 and $ 560,000 , respectively. During the three months ended September 30, 2023 and 2022, the Company |
had depreciation expense of $ 190,000 and $ 189,000 , respectively. The asset |
disposal due to self-consumption was not material during the periods. 13 Zion |
Oil & Gas, Inc. Consolidated |
Condensed Notes to Financial Statements (Unaudited) Note |
3 - Stockholders’ Equity The |
Company’s shareholders approved the amendment of the Company’s Amended and Restated Certificate of Incorporation to increase |
the number of shares of common stock, par value $ 0.01 , that the Company is authorized to issue from 800,000,000 shares to 1,200,000,000 shares, effective June 7, 2023. A. |
2021 Omnibus Incentive Stock Option Plan Effective |
June 9, 2021, the Company’s shareholders authorized the adoption of the Zion Oil & Gas, Inc. 2021 Omnibus Incentive Stock Option |
Plan (“Omnibus Plan”) for employees, directors and consultants, initially reserving for issuance thereunder 38,000,000 shares |
of common stock. The |
Omnibus Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, |
bonus stock, awards in lieu of cash obligations, other stock-based awards and performance units. The plan also permits cash payments |
under certain conditions. The |
compensation committee of the Board of Directors (comprised of independent directors) is responsible for determining the type of award, |
when and to whom awards are granted, the number of shares and the terms of the awards and exercise prices. The options are exercisable |
for a period not to exceed ten years from the date of grant. During |
the nine months ended September 30, 2023, the Company granted the following options from the 2021 Equity Omnibus Plan for employees, |
directors and consultants, to purchase shares of common stock as non-cash compensati i. Options to purchase 175,000 shares of Common Stock to five senior officers and one staff member at an exercise price of $ 0.0615 per share. The options vested upon grant and are exercisable through January 4, 2033. The fair value of the options at the date of grant amounted to approximately $ 9,000 . ii. Options to purchase 25,000 shares of Common Stock to one senior officer at an exercise price of $ 0.01 per share. The options vested upon grant and are exercisable through January 4, 2033. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $ 1,500 . iii. Options to purchase 25,000 shares of Common Stock to one board member, at an exercise price of $ 0.07 per share. The options vested upon grant and are exercisable through June 8, 2033. The fair value of the options at the date of grant amounted to approximately $ 1,500 . iv. Options to purchase 10,000 shares of Common Stock to one staff member at an exercise price of $ 0.01 per share. The options vested upon grant and are exercisable through September 1, 2033 . These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $ 600 . v. Options to purchase 895,000 shares of Common Stock to five staff members and one senior officer at an exercise price of $ 0.01 per share. The options vested upon grant and are exercisable through September 23, 2033. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $ 60,000 . vi. Options to purchase 3,350,000 shares of Common Stock to four senior officers and nine staff members at an exercise price of $ 0.0676 per share. The options vest on September 23, 2024 (one year from the date of grant) and are exercisable through September 23, 2033. The fair value of the options at the date of grant amounted to approximately $ 211,000 , and will be recognized during the years 2023 and 2024. vii. Options to purchase 3,600,000 shares of Common Stock to nine board members at an exercise price of $ 0.0676 per share. The options vest on September 23, 2024 (one year from the date of grant) and are exercisable through September 23, 2033. The fair value of the options at the date of grant amounted to approximately $ 227,000 , and will be recognized during the years 2023 and 2024. viii. Options to purchase 55,000 shares of Common Stock to three consultants at an exercise price of $ 0.0676 per share. The options vest on September 23, 2024 (one year from the date of grant) and are exercisable through September 23, 2033. The fair value of the options at the date of grant amounted to approximately $ 3,000 , and will be recognized during the years 2023 and 2024. 14 Zion |
Oil & Gas, Inc. Consolidated |
Condensed Notes to Financial Statements (Unaudited) Note |
3 - Stockholders’ Equity (cont’d) During |
the nine months ended September 30, 2022, the Company granted the following options from the 2021 Equity Omnibus Plan for employees, |
directors and consultants, to purchase shares of common stock as non-cash compensati i. Options to purchase 175,000 shares of Common Stock to six senior officers and one staff member at an exercise price of $ 0.1529 per share. The options vested upon grant and are exercisable through January 4, 2032. The fair value of the options at the date of grant amounted to approximately $ 22,000 . ii. Options to purchase 25,000 shares of Common Stock to one senior officer at an exercise price of $ 0.01 per share. The options vested upon grant and are exercisable through January 4, 2032. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $ 4,000 . iii. Options to purchase 300,000 shares of Common Stock to one senior officer and one staff member at an exercise price of $ 0.01 per share. The options vested upon grant and are exercisable through January 5, 2032. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $ 39,000 . iv. Options to purchase 200,000 shares of Common Stock to one board member at an exercise price of $ 0.01 per share. The options vested upon grant and are exercisable through January 5, 2032. These options were granted per the provisions under the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $ 29,000 . v. Options to purchase 1,600,000 shares of Common Stock to five senior officers and four staff members at an exercise price of $ 0.1529 per share. The options vest on January 5, 2023 (one year from the date of grant) and are exercisable through January 5, 2032. The fair value of the options at the date of grant amounted to approximately $ 209,000 , and will be recognized during the years 2022 and 2023. vi. Options to purchase 1,400,000 shares of Common Stock to seven board members, at an exercise price of $ 0.1529 per share. The options vest on January 5, 2023 (one year from the date of grant) and are exercisable through January 5, 2032. The fair value of the options at the date of grant amounted to approximately $ 182,000 , and will be recognized during the years 2022 and 2023. vii. Options to purchase 160,000 shares of Common Stock to four staff members, at an exercise price of $ 0.01 per share. The options vested upon grant and are exercisable through January 17, 2032. These options were granted per the provisions under the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $ 23,000 . viii. Options to purchase 200,000 shares of Common Stock to six staff members at an exercise price of $ 0.14 per share. The options vest on January 17, 2023 (one year from the date of grant) and are exercisable through January 17, 2032. The fair value of the options at the date of grant amounted to approximately $ 26,000 , and will be recognized during the years 2022 and 2023. ix. Options to purchase 40,000 shares of Common Stock to two consultants at an exercise price of $ 0.14 per share. The options vest on January 17, 2023 (one year from the date of grant) and are exercisable through January 17, 2032. The fair value of the options at the date of grant amounted to approximately $ 5,000 , and will be recognized during the years 2022 and 2023. 15 Zion |
Oil & Gas, Inc. Consolidated |
Condensed Notes to Financial Statements (Unaudited) Note |
3 - Stockholders’ Equity (cont’d) x. Options to purchase 25,000 shares of Common Stock to one board member, at an exercise price of $ 0.11 per share. The options vested upon grant and are exercisable through April 1, 2032 . The fair value of the options at the date of grant amounted to approximately $ 2,000 . xi. Options to purchase 3,210,000 shares of Common Stock to five senior officers, two consultants and ten staff members at an exercise price of $ 0.15 per share. The options vested on April 15, 2023 (in one year) and are exercisable through April 15, 2032. The fair value of the options at the date of grant amounted to approximately $ 394,000 , and will be recognized during the years 2022 and 2023. xii. Options to purchase 1,090,000 shares of Common Stock to one senior officer, one board member and five staff members at an exercise price of $ 0.01 per share. The options vested upon grant and are exercisable through April 15, 2032. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $ 149,000 . xiii. Options to purchase 3,200,000 shares of Common Stock to eight board members at an exercise price of $ 0.15 per share. The options vested on April 15, 2023 (in one year) and are exercisable through April 15, 2023. The fair value of the options at the date of grant amounted to approximately $ 393,000 . xiv. Options to purchase 25,000 shares of Common Stock to one board member, at an exercise price of $ 0.2350 per share. The options vested upon grant and are exercisable through August 1, 2032. The fair value of the options at the date of grant amounted to approximately $ 5,000 . xv. Options to purchase 118,000 shares of Common Stock to two senior officers and four staff members at an exercise price of $ 0.2350 per share. The options vested upon grant and are exercisable through August 12, 2032. The fair value of the options at the date of grant amounted to approximately $ 29,000 . xvi. Options to purchase 75,000 shares of Common Stock to four staff members and one consultant at an exercise price of $ 0.01 per share. The options vested upon grant and are exercisable through August 12, 2032. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $ 13,000 . xvii. Options to purchase 10,000 shares of Common Stock to one staff member at an exercise price of $ 0.01 per share. The options vested upon grant and are exercisable through September 01, 2032. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $ 2,000 . xviii. Options to purchase 2,455,000 shares of Common Stock to four senior officers and thirteen staff members at an exercise price of $ 0.1797 per share. The options vest on September 23, 2023 (one year from the date of grant) and are exercisable through September 23, 2032. The fair value of the options at the date of grant amounted to approximately $ 396,000 , and will be recognized during the years 2022 and 2023. xix. Options to purchase 2,700,000 shares of Common Stock to nine board members at an exercise price of $ 0.1797 per share. The options vest on September 23, 2023 (one year from the date of grant) and are exercisable through September 23, 2023. The fair value of the options at the date of grant amounted to approximately $ 436,000 , and will be recognized during the years 2022 and 2023. xx. Options to purchase 845,000 shares of Common Stock to one senior officer, one board member and four staff members at an exercise price of $ 0.01 per share. The options vested upon grant and are exercisable through September 23, 2032. These options were granted per the provisions of the Israeli Appendix to the Plan. The fair value of the options at the date of grant amounted to approximately $ 149,000 . 16 Zion |
Oil & Gas, Inc. Consolidated |
Condensed Notes to Financial Statements (Unaudited) Note |
3 - Stockholders’ Equity (cont’d) B. |
Stock Options The |
stock option transactions since January 1, 2023 are shown in the table be Number of shares Weighted Average exercise price US$ Outstanding, December 31, 2022 26,391,250 0.30 Changes during 2023 t Granted to employees, officers, directors and others 8,135,000 0.07 Expired/Cancelled/Forfeited ( 275,000 ) 1.71 Exercised ( 150,000 ) 0.07 Outstanding, September 30, 2023 34,101,250 0.23 Exercisable, September 30, 2023 27,096,250 0.27 17 Zion |
Oil & Gas, Inc. Consolidated |
Condensed Notes to Financial Statements (Unaudited) Note |
3 - Stockholders’ Equity (cont’d) The |
following table summarizes information about stock options outstanding as of September 30, 2023: Shares |
underlying outstanding options (non-vested) Shares |
underlying outstanding options (fully vested) Range |
of exercise price Number outstanding Weighted average remaining contractual life (years) Weighted Average Exercise price Range |
of exercise price Number Outstanding Weighted average remaining contractual life (years) Weighted Average Exercise price US$ US$ US$ US$ 0.07 7,005,000 9.99 0.07 0.01 10,000 0.12 0.01 — — — — 0.01 5,000 0.70 0.01 — — — — 0.01 20,000 2.68 0.01 — — — — 0.01 130,000 3.26 0.01 — — — — 0.01 50,000 3.27 0.01 — — — — 0.01 60,000 3.55 0.01 — — — — 0.01 200,000 3.64 0.01 — — — — 0.01 40,000 4.01 0.01 — — — — 0.01 70,000 4.26 0.01 — — — — 0.01 25,000 4.27 0.01 — — — — 0.01 30,000 4.42 0.01 — — — — 0.01 4,000 4.52 0.01 — — — — 0.01 25,000 5.27 0.01 — — — — 0.01 35,000 5.97 0.01 — — — — 0.01 150,000 6.14 0.01 — — — — 0.01 35,000 6.27 0.01 — — — — 0.01 75,000 7.27 0.01 — — — — 0.01 200,000 7.64 0.01 — — — — 0.01 300,000 7.80 0.01 — — — — 0.01 10,000 7.93 0.01 — — — — 0.01 500,000 8.27 0.01 — — — — 0.01 55,000 8.30 0.01 — — — — 0.01 960,000 8.55 0.01 — — — — 0.01 75,000 8.87 0.01 — — — — 0.01 10,000 8.93 0.01 — — — — 0.01 795,000 8.99 0.01 — — — — 0.01 25,000 9.27 0.01 — — — — 0.01 10,000 9.93 0.01 — — — — 0.01 895,000 9.99 0.01 — — — — 0.06 50,000 9.27 0.06 — — — — 0.07 25,000 9.70 0.07 — — — — 0.14 240,000 8.31 0.14 — — — — 0.15 3,200,000 8.27 0.15 — — — — 0.15 6,410,000 8.55 0.15 — — — — 0.16 340,000 2.20 0.16 — — — — 0.16 75,000 6.20 0.16 — — — — 0.18 25,000 2.18 0.18 — — — — 0.18 5,155,000 8.99 0.18 — — — — 0.24 25,000 8.84 0.24 — — — — 0.24 118,000 8.87 0.24 — — — — 0.25 50,000 7.93 0.25 — — — — 0.25 363,000 7.93 0.25 — — — — 0.28 25,000 1.93 0.28 — — — — 0.28 25,000 5.93 0.28 — — — — 0.29 25,000 3.71 0.29 — — — — 0.39 1,435,000 7.78 0.39 — — — — 0.59 1,400,000 3.64 0.59 — — — — 0.59 1,600,000 7.64 0.59 — — — — 0.92 350,000 3.27 0.92 — — — — 0.92 550,000 7.27 0.92 — — — — 1.38 105,307 1.26 1.38 — — — — 1.67 405,943 1.01 1.67 — — — — 1.78 25,000 0.93 1.78 — — — — 2.31 250,000 0.25 2.31 — — — — 4.15 25,000 0.76 4.15 0.07 7,005,000 0.07 0.01 - 4.15 27,096,250 0.27 18 Zion |
Oil & Gas, Inc. Consolidated |
Condensed Notes to Financial Statements (Unaudited) Note |
3 - Stockholders’ Equity (cont’d) Granted |
to employees The |
following table sets forth information about the weighted-average fair value of options granted to employees and directors during the |
year, using the Black Scholes option-pricing model and the weighted-average assumptions used for such grants: For the nine months ended September 30, 2023 2022 Weighted-average fair value of underlying stock at grant date $ 0.07 $ 0.16 Dividend yields — — Expected volatility 135 %- 137 % 127 %- 135 % Risk-free interest rates 3.85 %- 4.61 % 1.37 %- 3.96 % Expected lives (in years) 5.00 - 5.50 5.00 - 5.50 Weighted-average grant date fair value $ 0.06 $ 0.14 Granted |
to non-employees The |
following table sets forth information about the weighted-average fair value of options granted to non-employees during the year, using |
the Black Scholes option-pricing model and the weighted-average assumptions used for such grants: For the nine months ended September 30, 2023 2022 Weighted-average fair value of underlying stock at grant date 0.07 $ 0.16 Dividend yields — — Expected volatility 134 % 103 % - 104 % Risk-free interest rates 4.61 % 1.78 % - 2.84 % Expected lives (in years) 10 10 Weighted-average grant date fair value 0.06 $ 0.15 The |
risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected |
life of the options. The |
expected life represents the weighted average period of time that options granted are expected to be outstanding. The expected life of |
the options granted to employees and directors is calculated based on the Simplified Method as allowed under Staff Accounting Bulletin |
No. 110 (“SAB 110”), giving consideration to the contractual term of the options and their vesting schedules, |
as the Company does not have sufficient historical exercise data at this time. The expected life of the option granted to non-employees |
equals their contractual term. In the case of an extension of the option life, the calculation was made on the basis of the extended |
life. 19 Zion |
Oil & Gas, Inc. Consolidated |
Condensed Notes to Financial Statements (Unaudited) Note |
3 - Stockholders’ Equity (cont’d) C. |
Compensation Cost for Warrant and Option Issuances The |
following table sets forth information about the compensation cost of warrant and option issuances recognized for employees and directo For |
the three months ended September 30, 2023 2022 US$ |
thousands US$ |
thousands 264 510 For |
the nine months ended September 30, 2023 2022 US$ |
thousands US$ |
thousands 921 1,142 The |
following table sets forth information about the compensation cost of warrant and option issuances recognized for non-employe For |
the three months ended September 30, 2023 2022 US$ |
thousands US$ |
thousands — 8 For |
the nine months ended September 30, 2023 2022 US$ |
thousands US$ |
thousands 2 11 The |
following table sets forth information about the compensation cost of option issuances recognized for employees and non-employees and |
capitalized to Unproved Oil & Gas properti For |
the three months ended September 30, 2023 2022 US$ |
thousands US$ |
thousands — — For |
the nine months ended September 30, 2023 2022 US$ |
thousands US$ |
thousands — 17 The |
following table sets forth information about the compensation cost of option issuances recognized for employees and non-employees and |
capitalized to Unproved Oil & Gas properti As |
of September 30, 2023, there was $ 431,000 of unrecognized compensation cost related to non-vested stock options granted under the Company’s |