0001144204-11-061653.txt : 20111107 0001144204-11-061653.hdr.sgml : 20111107 20111107163032 ACCESSION NUMBER: 0001144204-11-061653 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20110930 FILED AS OF DATE: 20111107 DATE AS OF CHANGE: 20111107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZION OIL & GAS INC CENTRAL INDEX KEY: 0001131312 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 200065053 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-33228 FILM NUMBER: 111184991 BUSINESS ADDRESS: STREET 1: 6510 ABRAMS RD STREET 2: SUITE 300 CITY: DALLAS STATE: TX ZIP: 75231 BUSINESS PHONE: 2142214610 MAIL ADDRESS: STREET 1: 6510 ABRAMS RD STREET 2: SUITE 300 CITY: DALLAS STATE: TX ZIP: 75231 10-Q 1 v238990_10q.htm 10-Q Unassociated Document
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 September 30, 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
(I.R.S. Employer Identification No.)
organization)
 
 
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 x 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 October 27, 2011, Zion Oil & Gas, Inc. had outstanding 30,432,360 shares of common stock, par value $0.01 per share.
 
 
 

 

 
INDEX PAGE
PART 1 – FINANCIAL INFORMATION

 
 
Page
   
Item 1 - Financial Statements – Unaudited
1
 
 
Balance Sheets  - September 30, 2011 and December 31, 2010
2
 
 
Statements of Operations for the three and nine months ended September 30, 2011 and 2010 and the period from April 6, 2000 (inception) to September 30, 2011
3
 
 
Statements of Changes in Stockholders' Equity for the nine months ended  September  30, 2011 and the period from April 6, 2000 (inception) to September 30, 2011
4
 
 
Statements of Cash Flows for the nine months ended  September  30, 2011 and 2010 and the period from April 6, 2000 (inception) to September 30, 2011
15
 
 
Notes to Unaudited Interim Financial Statements
17
 
 
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
36
   
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 A – Risk Factors
44
   
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
44
 
 
Item 3 - Defaults upon Senior Securities
44
 
 
Item 4 – (Removed and Reserved)
44
   
Item 5 - Other Information
44
 
 
Item 6 – Exhibits
44
 
 
SIGNATURES
46

 
1

 

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

   
September 30
   
December 31
 
   
2011
   
2010
 
   
US$ thousands
   
US$ thousands
 
             
Current assets
           
Cash and cash equivalents
    24,909       21,243  
Short term bank deposits
    274       250  
Prepaid expenses and other
    63       876  
Refundable value-added tax
    752       801  
Total current assets
    25,998       23,170  
                 
Unproved oil and gas properties, full cost method (see Note 2A)
    3,324       25,882  
                 
Property and equipment at cost
               
Net of accumulated depreciation of $148,000 and $116,000
    227       159  
                 
Other assets
               
Assets held for severance benefits
    133       92  
                 
Total assets
    29,682       49,303  
                 
Liabilities and Stockholders’ Equity
               
                 
Current liabilities
               
Accounts payable
    252       388  
Asset retirement obligation
    870       50  
Accrued liabilities
    3,050       2,136  
Deferred officers compensation
    -       21  
Total current liabilities
    4,172       2,595  
                 
Provision for severance pay
    422       339  
                 
Total liabilities
    4,594       2,934  
                 
Commitments and contingencies (see Note 5)
               
                 
Stockholders’ equity
               
Common stock, par value $.01; Authorized:
               
September 30, 2011 - 100,000,000; December 31, 2010 – 50,000,000 Issued and outstanding:
               
September 30, 2011 – 30,426,454; December 31, 2010 - 24,867,218 shares
    304       248  
Additional paid-in capital
    130,248       102,608  
Deficit accumulated in development stage
    (105,464 )     (56,487 )
Total stockholders’ equity
    25,088       46,369  
                 
Total liabilities and stockholders' equity
    29,682       49,303  

The accompanying notes are an integral part of the interim financial statements.
 
 
2

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

               
Period from
 
               
April 6, 2000
 
   
For the three month period
   
For the nine month period
   
(inception) to
 
   
ended September 30
   
ended September 30
   
September 30
 
   
2011
   
2010
   
2011
   
2010
   
2011
 
   
US$ thousands
   
US$ thousands
   
US$ thousands
   
US$ thousands
   
US$ thousands
 
                               
Revenues
    -       -       -       -       -  
                                         
General and administrative expenses
                                       
Legal and professional
    260       138       840       633       7,690  
Salaries
    592       651       2,657       2,090       13,118  
Other
    1,204       746       2,963       1,591       10,327  
Impairment of unproved oil and gas properties
    42,488       -       42,488       22,022       74,004  
Loss from operations
    (44,544 )     (1,535 )     (48,948 )     (26,336 )     (105,139 )
                                         
Other expense, net
                                       
Termination of initial public offering
    -       -       -       -       (527 )
Other income, net
    -       -       -       -       80  
Interest income (expenses), net
    (102 )     102       (29 )     17       122  
                                         
Loss before income taxes
    (44,646 )     (1,433 )     (48,977 )     (26,319 )     (105,464 )
Income taxes
    -       -       -       -       -  
                                         
Net loss
    (44,646 )     (1,433 )     (48,977 )     (26,319 )     (105,464 )
                                         
Net loss per share of common stock - basic and diluted (in US$)
    (1.52 )     (0.06 )     (1.81 )     (1.22 )     (8.45 )
                                         
Weighted-average shares outstanding – basic and diluted (in thousands)
    *29,315       *22,914       *27,110       *21,522       *12,478  

* Adjusted to reflect bonus element in rights offering. (See note 2B)
The accompanying notes are an integral part of the interim financial statements.
 
 
3

 

 
Zion Oil & Gas, Inc.
(A Development Stage Company)
Statement 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 at 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$ 1,000.
The accompanying notes are an integral part of the interim financial statements.

 
4

 

 
Zion Oil & Gas, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (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 as of December 31, 2002
    43       * -       3,553       35       1,042       (615 )     462  

* Represents an amount less than US$ 1,000.
The accompanying notes are an integral part of the interim financial statements.
 
 
5

 

Zion Oil & Gas, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (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 of December 31, 2003
    -       -       4,859       48       1,751       (1,488 )     311  
 
·
Represents an amount less than US$ 1,000
 
·
The accompanying notes are an integral part of the interim financial statements.
 
 
6

 
 
Zion Oil & Gas, Inc.
(A Development Stage Company)
Statement 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$ 1,000.
The accompanying notes are an integral part of the interim financial statements.
 
7

 

Zion Oil & Gas, Inc.
(A Development Stage Company)
Statement 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$ 1,000.
The accompanying notes are an integral part of the interim financial statements.
 
 
8

 
 
Zion Oil & Gas, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (cont’d)
 
               
Deficit
       
         
Additional
   
accumulated
       
   
Common Stock
   
paid-in
   
in development
       
   
Shares
   
Amounts
   
capital