10-Q 1 v149541_10q.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, 2009; or
 
o 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, including 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 o

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 o No o
 
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 ¨
   
Non-accelerated filer ¨ (Do not check if a smaller reporting company)
Smaller reporting company x

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
 
As of May 13, 2009, Zion Oil & Gas, Inc. had outstanding 10,850,553 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, 2009 and December 31, 2008
 
1
     
Statements of Operations for the three months ended March 31, 2009 and 2008 and the period from April 6, 2000 (inception) to March 31, 2009
 
2
     
Statements of Changes in Stockholders' Equity for the three months ended March 31, 2009 and the period from April 6, 2000 (inception) to March 31, 2009
 
3
     
Statements of Cash Flows for the three months ended March 31, 2009 and 2008 and the period from April 6, 2000 (inception) to March 31, 2009
 
12
     
Notes to Unaudited Interim Financial Statements
 
14
     
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
 
41
     
Item 4(T) - Controls and Procedures
 
46
     
PART II — OTHER INFORMATION
   
     
Item 1 – Legal Proceedings
 
47
     
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
 
47
     
Item 3 - Defaults upon Senior Securities
 
48
     
Item 4 – Submission of Matters to a Vote of Security Holders
 
48
     
Item 5 - Other Information
 
48
     
Item 6 – Exhibits
 
48
     
SIGNATURES
 
49

 
 

 

Zion Oil & Gas, Inc.
(A Development Stage Company)
Balance Sheets (unaudited) as of


   
March 31
   
December 31
 
   
2009
   
2008
 
   
US$ thousands
   
US$ thousands
 
             
Current assets
           
Cash and cash equivalents
    2,425       1,726  
Prepaid expenses and other
    639       523  
Prepaid offering costs
    29       14  
Refundable Value-Added Tax
    262       26  
Total current assets
    3,355       2,289  
                 
Unproved oil and gas properties, full cost method
    5,830       5,246  
                 
Property and equipment
               
Net of accumulated depreciation of $65,000 and $60,000
    79       83  
                 
Other assets
               
Assets held for severance benefits
    58       58  
Total other assets
    58       58  
                 
Total assets
    9,322       7,676  
                 
Liabilities and Stockholders’ Equity
               
                 
Current liabilities
               
Accounts payable
    125       117  
Accrued liabilities
    197       223  
Deferred officers compensation
    1,506       1,487  
Total current liabilities
    1,828       1,827  
                 
Provision for severance pay
    172       174  
                 
Deferred officers’ compensation
    100       120  
                 
Total liabilities
    2,100       2,121  
                 
Commitments and contingencies (see Note 5)
               
                 
Stockholders’ equity
               
Common stock, par value $.01; 30,000,000 shares authorized: 2009 – 10,825,589 shares and 2008 – 10,541,563 shares issued and outstanding
    108       105  
Additional paid-in capital
    32,435       29,855  
Deficit accumulated in development stage
    (25,321 )     (24,405 )
Total stockholders’ equity
    7,222       5,555  
                 
Total liabilities and stockholders' equity
    9,322       7,676  

The accompanying notes are an integral part of the unaudited interim financial statements.

 
1

 

Zion Oil & Gas, Inc.
(A Development Stage Company)
Statements of Operations (unaudited)


               
Period from
 
               
April 6, 2000
 
   
For the three month period
   
(inception) to
 
   
ended March 31
   
March 31
 
   
2009
   
2008
   
2009
 
   
US$ thousands
   
US$ thousands
   
US$ thousands
 
                   
Revenues
    -       -       -  
                         
General and administrative expenses
                       
Legal and professional
    234       323       5,328  
Salaries
    500       454       6,208  
Other
    261       293       3,915  
Impairment of unproved oil and gas properties
    -       -       9,494  
Loss from operations
    (995 )     (1,070 )     (24,945
                         
Other expense, net
                       
Termination of initial public offering
    -       -       (527 )
Other income, net
    76       -       80  
Interest income, net
    3       31       71  
                         
Loss before income taxes
    (916 )     (1,039 )     (25,321 )
Income taxes
    -       -       -  
                         
Net loss
    (916 )     (1,039 )     (25,321 )
                         
Net loss per share of common stock - basic and diluted (in US$)
    (0.08 )     (0.10 )     (4.28 )
                         
Weighted-average shares outstanding – basic and diluted (in thousands)
    10,800       10,121       5,917  

The accompanying notes are an integral part of the unaudited interim financial statements.

 
2

 

Zion Oil & Gas, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (unaudited)


                                 
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 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, 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, December 31, 2001
    -       -       3,000       * -       536       (212 )     324  

*  Represents an amount less than US$ 1 thousand.

 
3

 

Zion Oil & Gas, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (unaudited)(cont’d)


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

*  Represents an amount less than US$ 1 thousand.

 
4

 

Zion Oil & Gas, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (unaudited) (cont’d)


                     
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
 
                                           
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 at December 31, 2003
    -       -       4,859       48       1,751       (1,488 )     311  
*  Represents an amount less than US$ 1 thousand.

 
5

 

Zion Oil & Gas, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (unaudited)(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, December 31, 2004
    5,538       55       3,882       (3,225 )     712  

*  Represents an amount less than US$ 1 thousand.

 
6

 

Zion Oil & Gas, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (unaudited) (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, December 31, 2005
    7,705       76       11,992       (4,830 )     7,238  

*  Represents an amount less than US$ 1 thousand.

 
7

 

Zion Oil & Gas, Inc.
(A Development Stage Company)

Statement of Changes in Stockholders' Equity (unaudited) (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       -