ZION OIL & GAS INC - FORM 10-Q

Attached files

file	filename
EX-10.1 - ZION OIL & GAS INC	v221159_ex10-1.htm
EX-31.1 - ZION OIL & GAS INC	v221159_ex31-1.htm
EX-32.1 - ZION OIL & GAS INC	v221159_ex32-1.htm
EX-31.2 - ZION OIL & GAS INC	v221159_ex31-2.htm
EX-32.2 - ZION OIL & GAS INC	v221159_ex32-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

MARK ONE

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period ended March 31, 2011; or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________ to ________

COMMISSION FILE NUMBER: 001-33228

ZION OIL & GAS, INC.

(Exact name of registrant as specified in its charter)

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

6510 Abrams Rd., Suite 300 Dallas, Texas		75231
(Address of principal executive offices)		Zip Code

(214) 221-4610

(Registrant's telephone number, including area code)

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 x 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer x
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of May 4, 2011, Zion Oil & Gas, Inc. had outstanding 25,076,518 shares of common stock, par value $0.01 per share.

INDEX PAGE

PART 1 – FINANCIAL INFORMATION

	Page
Item 1 - Financial Statements – Unaudited

Balance Sheets - March 31, 2011 and December 31, 2010	1

Statements of Operations for the three month period ended March 31, 2011 and 2010 and the period from April 6, 2000 (inception) to March 31, 2011	2

Statements of Changes in Stockholders' Equity for the three month period ended March 31, 2011 and the period from April 6, 2000 (inception) to March 31, 2011	3

Statements of Cash Flows for the three month period ended March 31, 2011 and 2010 and the period from April 6, 2000 (inception) to March 31, 2011	14

Notes to Unaudited Interim Financial Statements	16

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3 – Quantitative and Qualitative Disclosures About Market Risk	41

Item 4 - Controls and Procedures	41

PART II — OTHER INFORMATION

Item 1 – Legal Proceedings	42

Item A – Risk Factors	42

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 3 - Defaults upon Senior Securities	43

Item 4 – (Removed and Reserved)	43

Item 5 - Other Information	43

Item 6 – Exhibits	43

SIGNATURES	44

Zion Oil & Gas, Inc.

(A Development Stage Company)

Balance Sheets as of

	March 31			December 31
	2011			2010
	US$ thousands			US$ thousands

Current assets
Cash and cash equivalents		15,542			21,243
Short term bank deposits		238			250
Prepaid expenses and other		774			876
Refundable value-added tax		1,339			801
Total current assets		17,893			23,170

Unproved oil and gas properties, full cost method (See Note 2A)		33,139			25,882

Property and equipment
Net of accumulated depreciation of $124,000 and $116,000		152			159

Other assets
Assets held for severance benefits		108			92

Total assets		51,292			49,303

Liabilities and Stockholders’ Equity

Current liabilities
Accounts payable		217			388
Asset retirement obligation		50			50
Accrued liabilities		4,536			2,136
Deferred officers’ compensation		0			21
Total current liabilities		4,803			2,595

Provision for severance pay		401			339

Total liabilities		5,204			2,934

Commitments and contingencies (See Note 5)

Stockholders’ equity
Common stock, par value $0.01; Authorized: 50,000,000: Issued and outstanding : March 31, 2011 - 25,068,645 and 24,867,218 shares at December 31, 2010.		250			248
Additional paid-in capital		104,746			102,608
Deficit accumulated in development stage		(58,908	)		(56,487	)
Total stockholders’ equity		46,088			46,369

Total liabilities and stockholders' equity		51,292			49,303

The accompanying Notes are an integral part of the Interim Financial Statements.

- 1 -

Zion Oil & Gas, Inc.

(A Development Stage Company)

Statements of Operations

							Period from
							April 6, 2000
	For the 3 month period ended March 31,						(inception) to March 31
	2011			2010			2011
	US$ thousands			US$ thousands			US$ thousands

Revenues		-			-			-

General and administrative expenses
Legal and professional		213			352			7,063
Salaries		1,502			686			11,963
Other		741			319			8,105
Impairment of unproved oil and gas properties		-			-			31,516
Loss from operations		(2,456	)		(1,357	)		(58,647	)

Other expense, net
Termination expenses of offerings		-			-			(527	)
Other income, net		-			-			80
Interest income ( expenses) , net		35			(3	)		186

Loss before income taxes		(2,421	)		(1,360	)		(58,908	)

Income taxes		-			-			-

Net loss		(2,421	)		(1,360	)		(58,908	)

Net loss per share of common stock - basic and diluted (in US$)		(0.10	)		(0.07	)		(5.44	)

Weighted-average shares outstanding – basic and diluted (in thousands)		24,933			20,061	*		10,829	*

* Adjusted to reflect bonus element in rights offering, see note 2B.

The accompanying Notes are an integral part of the Interim Financial Statements.

- 2 -

Zion Oil & Gas, Inc.

(A Development Stage Company)

Statements of Changes in Stockholders' Equity

												Deficit
									Additional			Accumulated
	Preferred Stock				Common Stock				Paid-in			in development
	Shares		Amount		Shares		Amount		capital			stage			Total
	Thousands		US$ thousands		Thousands		US$ thousands		US$ thousands			US$ thousands			US$ thousands

Balances on April 6, 2000		-		-		-		-		-			-			-

Issued for cash ($0.001 per share)		-		-		2,400		* -		2			-			2

Issuance of shares and warrants in a private offering ($1 per share)		-		-		100		* -		100			-			100

Costs associated with the issuance of shares		-		-		-		-		(24	)		-			(24	)

Waived interest on conversion of debt		-		-		-		-		* -			-			* -

Value of warrants granted to employees		-		-		-		-		2			-			2
Net loss		-		-		-		-		-			(5	)		(5	)
Balances as of December 31, 2000		-		-		2,500		* -		80			(5	)		75

Issuance of shares and warrants in a private offering in January 2001 ($1 per share)		-		-		135		* -		135			-			135

Issuance of shares and warrants in a private offering which closed in September 2001 ($1 per share)		-		-		125		* -		125			-			125

Payment of accounts payable through issuance of shares and warrants		-		-		40		* -		40			-			40

Payment of note payable through issuance of shares and warrants		-		-		25		* -		25			-			25

Issuance of shares and warrants in a private offering which closed in November 2001 ($1 per share)		-		-		175		* -		175			-			175

Costs associated with the issuance of shares		-		-		-		-		(85	)		-			(85	)
Waived interest on conversion of debt		-		-		-		-		1			-			1
Value of warrants granted to employees		-		-		-		-		37			-			37
Value of warrants granted to directors and consultants		-		-		-		-		3			-			3
Net loss		-		-		-		-		-			(207	)		(207	)
Balances as of December 31, 2001		-		-		3,000		* -		536			(212	)		324

* Represents an amount less than US$ 1 thousand.

The accompanying Notes are an integral part of the Interim Financial Statements.

- 3 -

Zion Oil & Gas, Inc.

(A Development Stage Company)

Statements of Changes in Stockholders' Equity (cont’d)

												Deficit
												Accumulated
	Preferred Stock				Common Stock				Additional Paid-in			in Development
	Shares		Amount		Shares		Amount		Capital			Stage			Total
	Thousands		US$ thousands		Thousands		US$ thousands		US$ thousands			US$ thousands			US$ thousands

Change in par value of common shares from $0.0001 per share to $0.01 per share		-		-		-		30		(30	)		-			-

Issuance of shares and warrants in a private offering which closed in January 2002 ($1 per share)		-		-		20		* -		20			-			20

Issuance of shares and warrants in a private offering which closed in November 2002 ($10 per share)		25		* -		22		* -		254			-			254

Payment of accounts payable through issuance of preferred shares and warrants		13		* -		-		-		127			-			127

Payment of accounts payable through issuance of common shares and warrants		-		-		111		1		131			-			132

Payment of note payable through issuance of shares and warrants		5		* -		-		-		50			-			50

Payment of accounts payable to employee through issuance of shares upon exercise of warrants		-		-		400		4		76			-			80

Costs associated with the issuance of shares		-		-		-		-		(160	)		-			(160	)

Waived interest on conversion of debt		-		-		-		-		3			-			3

Deferred financing costs on debt conversions / modifications		-		-		-		-		21			-			21

Value of warrants granted to employees		-		-		-		-		1			-			1

Value of warrants granted to directors and consultants		-		-		-		-		13			-			13

Net loss		-		-		-		-		-			(403	)		(403	)

Balances as of December 31, 2002		43		* -		3,553		35		1,042			(615	)		462

* Represents an amount less than US$ 1 thousand.

The accompanying Notes are an integral part of the Interim Financial Statements.

- 4 -

Zion Oil & Gas, Inc.

(A Development Stage Company)

Statements of Changes in Stockholders' Equity (cont’d)

														Deficit
														Accumulated
	Preferred Stock						Common Stock				Additional Paid-in			in Development
	Shares			Amount			Shares		Amount		Capital			Stage			Total
	Thousands			US$ thousands			Thousands		US$ thousands		US$ thousands			US$ thousands			US$ thousands

Issuance of shares in connection with executive employment		-			-			50		1		49			-			50

Issuance of share on warrants exercise		-			-			165		2		31			-			33

Issuance of dividend shares to record holders as of December 31, 2002		4			* -			-		-		* -			-			-

Issuance of shares and warrants in a private offering which closed in February 2003 ($10 per share):
for cash consideration		10			* -			-		-		105			-			105
for reduction of accounts payable		5			* -			-		-		45			-			45

Issuance of shares and warrants as compensation for extension of $100,000 line of credit		1			* -			-		-		10			-			10

Payment of account payable through issuance of shares and warrants		* -			* -			-		-		1			-			1

Conversion of preferred shares to common shares in reincorporation merger		(63	)		*(-	)		763		7		(7	)		-			-

Issuance of shares in a private offering which closed in July 2003 ($3 per share):
for cash consideration		-			-			33		* -		99			-			99
for reduction of accounts payable		-			-			3		* -		9			-			9

Issuance of shares upon exercise of warrants:
for cash consideration		-			-			25		* -		25			-			25
for reduction of accounts payable		-			-			124		1		142			-			143

Issuance of shares upon exercise of warrants for cash consideration		-			-			63		1		82			-			83

Payment of account payable through issuance of shares		-			-			80		1		139			-			140

Costs associated with the issuance of shares		-			-			-		-		(58	)		-			(58	)

Value of warrants granted to employees		-			-			-		-		47			-			47

Deferred financing costs on debt conversions / modifications		-			-			-		-		(10	)		-			(10	)

Net loss		-			-			-		-		-			(873	)		(873	)

Balances as of December 31, 2003		-			-			4,859		48		1,751			(1,488	)		311

* Represents an amount less than US$ 1 thousand.

The accompanying Notes are an integral part of the Interim Financial Statements.

- 5 -

Zion Oil & Gas, Inc.

(A Development Stage Company)

Statements of Changes in Stockholders' Equity (cont’d)

								Deficit
					Additional			Accumulated
	Common Stock				Paid-in			in Development
	Shares		Amounts		Capital			Stage			Total
	Thousands		US$ thousands		US$ thousands			US$ thousands			US$ thousands

Issuance of shares on warrants exercise		123		1		183			-			184

Issuance of shares and warrants in a private offering		251		3		1,002			-			1,005

Payment of officer salaries through issuance of shares and warrants		46		1		184			-			185

Payment of accounts payable to officers and consultants upon exercise of warrants		80		1		99			-			100

Payment of director honorariums through issuance of shares and warrants		11		* -		45			-			45

Payment of account payable through issuance of shares and warrants		13		* -		50			-			50

Payment of bridge loan through issuance of shares and warrants		125		1		499			-			500

Payment of bridge loan interest and commitment fee through issuance of shares and warrants		8		* -		30			-			30

Payment of bridge loan finders fee through issuance of shares and warrants		2		* -		7			-			7

Payment of service bonus through issuance of shares and warrants		20		* -		20			-			20

Costs associated with the issuance of shares		-		-		(59	)		-			(59	)

Value of warrants granted to employees		-		-		41			-			41

Deferred financing costs on debt conversions / modifications		-		-		30			-			30

Net loss		-		-		-			(1,737	)		(1,737	)

Balances as of December 31, 2004		5,538		55		3,882			(3,225	)		712

* Represents an amount less than US$ 1 thousand.

The accompanying Notes are an integral part of the Interim Financial Statements.

- 6 -

Zion Oil & Gas, Inc.

(A Development Stage Company)

Statements of Changes in Stockholders' Equity (cont’d)

								Deficit
					Additional			Accumulated
	Common Stock				Paid-in			in Development
	Shares		Amounts		Capital			Stage			Total
	Thousands		US$ thousands		US$ thousands			US$ thousands			US$ thousands

Issuance of shares on warrants exercised:
For cash		493		5		872			-			877
For payment of deferred officer salaries		17		* -		21			-			21
For exchange of shares of common stock		120		1		(1	)		-			-

Issuance of shares and warrants in a private offering that closed in March 2005:
For cash		519		5		2,070			-			2,075
For payment of deferred officer salaries		10		* -		40			-			40
For payment of accounts payable		6		* -		25			-			25

Issuance of shares and warrants in a private offering that closed in June 2005:
For cash		259		3		1,292			-			1,295
For payment of directors honoraria		14		* -		70			-			70
For payment of accounts payable		3		* -		15			-			15

Issuance of shares in a private offering that closed in October 2005:
For cash		584		6		2,914			-			2,920
For payment of deferred officer salaries		40		* -		200			-			200
For payment of accounts payable		22		* -		110			-			110

Issuance of shares in a private offering that closed in December 2005		80		1		439			-			440

Shares to be issued for services provided by director		-		-		42			-			42

Value of warrants and options granted to employees		-		-		216			-			216

Value of warrants granted to directors and consultants		-		-		16			-			16

Deferred financing costs on debt conversions /modifications		-		-		44			-			44

Costs associated with the issuance of shares		-		-		(275	)		-			(275	)

Net loss		-		-		-			(1,605	)		(1,605	)

Balances as of December 31, 2005		7,705		76		11,992			(4,830	)		7,238

* Represents an amount less than US$ 1 thousand.

The accompanying Notes are an integral part of the Interim Financial Statements.

- 7 -

Zion Oil & Gas, Inc.

(A Development Stage Company)

Statements of Changes in Stockholders' Equity (cont’d)

							Deficit
					Additional		Accumulated
	Common Stock				Paid-in		in Development
	Shares		Amounts		Capital		Stage		Total
	Thousands		US$ thousands		US$ thousands		US$ thousands		US$ thousands

Issuance of shares on warrants exercised:
For cash		253		3		1,151		-		1,154
For debt		60		1		276		-		277

Issuance of shares and warrants in private offering closings in first quarter 2006:
For cash		66		1		362		-		363
For payment of accounts payable		3		* -		14		-		14

Shares issued for services provided by officer		200		2		248		-		250

Issuance of shares and warrants in a private offering that closed in September 2006 for cash		23		* -		126		-		126

Value of options granted to employees		-		-		162		-		162

Value of warrants granted to underwriter		-		-		20		-		20

ZION OIL & GAS INC - FORM 10-Q - May 10, 2011

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