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EX-10.1 - ZION OIL & GAS INCv221159_ex10-1.htm
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EX-32.1 - ZION OIL & GAS INCv221159_ex32-1.htm
EX-31.2 - ZION OIL & GAS INCv221159_ex31-2.htm
EX-32.2 - ZION OIL & GAS INCv221159_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
 
                                         
Value of shares gifted to directors, employees and service providers
   
-
     
-
     
147
     
-
     
147