Delaware
(State
or other Jurisdiction
of
Incorporation or Organization)
|
20-0065053
(I.R.S.
Employer Identification No.)
|
|
6510
Abrams Rd., Suite 300
Dallas,
TX
(Address
of Principal Executive Offices)
|
75231
(Zip
Code)
|
Common
Stock, par value $0.01 per share
|
American
Stock Exchange
|
(Title
of Class)
|
(Name
of each exchange on which
registered)
|
PART
I
|
||||
Item
1
|
Description
of Business
|
4
|
||
Item
2
|
Description
of Property
|
23
|
||
Item
3
|
Legal
Proceedings
|
24
|
||
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
24
|
||
PART
II
|
||||
Item
5
|
Market
for the Company's Common Stock, Related Stockholder Matters and Small
Business Issuer Purchases of Securities
|
24
|
||
Item
6
|
Management's
Discussion and Analysis or Plan of Operation
|
26
|
||
Item
7
|
Financial
Statements
|
32
|
||
Item
8
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
32
|
||
Item
8A(T)
|
Controls
and Procedures
|
32
|
||
Item
8B
|
Other
Information
|
33
|
||
PART
III
|
||||
Item
9
|
Directors,
Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance with Section 16(a) of the Exchange Act
|
33
|
||
Item
10
|
Executive
Compensation
|
42
|
||
Item
11
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
47
|
||
Item
12
|
Certain
Relationships and Related Transactions and Director
Independence
|
51
|
||
Item
13
|
Exhibits
|
54
|
||
Item
14
|
Principal
Accountant Fees and Services
|
55
|
|
·
|
|
our
growth strategies;
|
|
·
|
|
our
ability to explore for and develop natural gas and oil resources
successfully and economically;
|
|
·
|
|
our
estimates of the timing and number of wells we expect to drill and
other
exploration activities;
|
|
·
|
|
anticipated
trends in our business;
|
|
·
|
|
our
future results of operations;
|
|
·
|
|
our
liquidity and our ability to finance our exploration and development
activities;
|
|
·
|
|
our
capital expenditure program;
|
|
·
|
|
the
impact of governmental regulation.
|
|
2007
|
2006
|
2005
|
|||||||
$
(in thousands)
|
||||||||||
Ma'anit-Joseph
and Joseph Licenses
|
|
|||||||||
Geological
& Geophysical Operations
|
140
|
81
|
54
|
|||||||
Exploratory
Drilling Operations
|
3,271
|
495
|
6,188
|
|||||||
|
||||||||||
|
||||||||||
Asher
Permit and Asher-Menashe License
|
||||||||||
Geological
& Geophysical Operations
|
177
|
227
|
54
|
|||||||
Total
|
$
|
3,588
|
$
|
803
|
$
|
6,296
|
· |
control
the vote of most matters submitted to our shareholders, including
any
merger, consolidation or sale of all or substantially all of our
assets;
|
· | elect all of the members of our board of directors; |
· | prevent or cause a change in control of our company; and |
· | decide whether to issue additional common stock or other securities or declare dividends. |
|
· |
|
actual
or anticipated quarterly variations in our operating results,
|
|
· |
|
changes
in expectations as to our future financial performance or changes
in
financial estimates, if any,
|
|
· |
|
announcements
relating to our business or the business of our competitors,
|
|
· |
|
conditions
generally affecting the oil and natural gas industry,
|
|
· |
|
the
success of our operating strategy, and
|
|
· |
|
the
operating and stock performance of other comparable companies.
|
Type
of Right
|
Name
|
Area
(Acres)
|
Working
Interest
|
Expiration
Date
|
|||||
License
|
Asher-Menashe
|
78,824
|
100%
(1)
|
June
9, 2010(2) (3)
|
|||||
License
|
Joseph
|
83,272
|
100%
(1)
|
October
10, 2010(2) (3)
|
ITEM 3. |
LEGAL
PROCEEDINGS
|
ITEM 4. |
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
ITEM 5. |
MARKET
FOR THE COMPANY'S
COMMON STOCK, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
PURCHASES OF
SECURITIES
|
High
|
Low
|
||||||
Fiscal
Year
|
|||||||
2007:
|
|||||||
First
Quarter
|
$
|
14.05
|
$
|
7.05
|
|||
Second
Quarter
|
8.50
|
4.02
|
|||||
Third
Quarter
|
7.00
|
4.99
|
|||||
Fourth
Quarter
|
7.50
|
5.28
|
|
In
US$ (000)
|
|||
Underwriting
Commissions
|
$
|
653
|
||
Expenses
Paid to Underwriter
|
326
|
|||
Other
expenses as follows:
|
|
|||
Accounting
Fees and Expenses
|
111
|
|||
Legal
Fees and Expenses
|
167
|
|||
Printing
Fees and Advertising
|
207
|
|||
Listing
Fees (including SEC filing fees)
|
82
|
|||
Transfer
and Escrow Agent Fees
|
42
|
|||
Other
Expenses
|
120
|
|||
TOTAL
EXPENSES
|
$
|
1,708
|
In
US$
|
||||||||
a.
Completion
of Ma'anit #1 well
|
$
|
1,242
|
(1)
|
|||||
b.
Preparation
for drilling of Ma'anit-Rehoboth #2 well
|
$
|
2,029
|
(2)
|
|||||
c.
Exploration
Costs
|
$
|
317
|
(3)
|
|||||
d.
Compensation
to officers and directors
|
$
|
2,139
|
(4)(5)
|
|||||
e.
Repayment
of indebtedness
|
$
|
144
|
(6)
|
|||||
f.
Temporary
investments
|
$
|
4,466
|
(7)
|
|||||
g.
Other
|
$
|
476
|
(8)(5)
|
(1)
|
The
$900,000 (exclusive of contingencies) originally estimated for the
Ma'anit
#1 well completion costs was exceeded as a result of the loss and
partial
recovery of tubing and an isolation packer that were stuck in the
well.
|
(2)
|
The
extent to which net public offering proceeds used for this purpose
are
lower at this time than originally projected results from the fact
that
there is currently no drilling rig in Israel which is capable of
drilling
the proposed well, as a result of which we have as yet not signed
a
drilling contract. Discussions are underway with a potential drilling
contractor to bring an appropriate drilling rig into Israel to drill
the
planned well.
|
(3)
|
Originally
estimated exploration costs of $500,000 will be exceeded as a result
of
the decision to conduct an expanded geophysical (seismic, gravimetric
and
magnetic) survey in order to develop two promising leads in the
Asher-Menashe License to drillable prospects and locate the drill
site to
drill the commitment well required by the terms of that license on
one of
the prospects. The total exploration costs to be covered by the net
public
offering proceeds are now estimated at $925,000.
|
(4)
|
Includes
repayment of indebtedness in an amount of $1,053 thousand, including
$434
thousand of previously deferred compensation paid to the company's
former
Chief Executive Officer (in the amount of $352 thousand) and to the
company's former Chief Financial Officer (in the amount of $82 thousand)
in connection with their retirement and resignation, respectively.
Also
includes conversions of deferred compensation into shares by certain
officers in the IPO in an amount of $204 thousand, along with normal
payments to officers in the amount of $755 thousand and to directors
in an
amount of $127 thousand.
|
(5)
|
Compensation
and working capital (general and administrative) expenses are greater
than
originally estimated due to the delay in the commencement of the
second
well as a result of the unavailability of adequate drilling rigs
in
Israel.
|
(6)
|
Does
not include repayment of indebtedness to officers and directors which
is
included in note (4) above. Does include conversions of certain debts
(other than those in note (4) above) into shares in the
IPO.
|
(7)
|
U.S.
investment account balance at December 31, 2007.
|
(8)
|
Including
a $60,000 financial advisory and investment banking fee to the underwriter
of the 2006 Public Offering pursuant to an investment banking/consulting
agreement entered into pursuant to the Underwriting Agreement and
working
capital (general and
administrative.
|
ITEM 6. |
MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
|
ITEM
7.
|
FINANCIAL
STATEMENTS
|
ITEM 8. |
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL
DISCLOSURE
|
ITEM 8A(T). |
CONTROLS
AND PROCEDURES
|
ITEM 8B. |
OTHER
INFORMATION
|
ITEM 9. |
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934.
|
Name
|
Age
|
Position
|
||||
John
M. Brown
|
68
|
Founder,
Chairman of the Board
|
||||
Richard
J. Rinberg
|
55
|
Director,
Chief Executive Officer
|
||||
Glen
H. Perry
|
65
|
Director,
Chief Operating Officer and President
|
||||
Philip
Mandelker
|
61
|
Director,
Executive Vice President and Secretary
|
||||
William
H. Avery
|
60
|
Director,
Executive Vice President and Treasurer
|
||||
Martin
Van Brauman
|
60
|
Chief
Financial Officer and Senior Vice President
|
||||
Paul
Oroian
|
58
|
Director
|
||||
Kent
S. Siegel
|
52
|
Director
|
||||
Robert
Render
James
Barron
Yehezkel
Druckman
|
78
47
69
|
Director
Director
Director
|
||||
Forrest
A. Garb
|
78
|
Director
|
||||
Sandra
Green
|
44
|
Chief
Accounting Officer and Vice President
|
||||
Elisha
Roih
|
81
|
Vice
President - Administration of Israeli Operations
|
||||
Eliezer
L. Kashi
Stephen
E. Pierce
|
85
65
|
Vice
President - Israeli Exploration
Exploration
Manager
|
Reporting
Person
|
Form
Type
|
Transaction
|
Form
Due Date
|
Form
Filed
Date
|
|||||
Edwin
L. Johnson
|
3
|
Initial
|
Dec.29,
2006
|
Feb.
14, 2008 (1)
|
|||||
Ronald
Lichtman (2)
|
3
|
Initial
|
Dec.29,
2006
|
-
|
|||||
Jean
Bowles (2)
|
3
|
Initial
|
Dec.29,
2006
|
-
|
|||||
Carla
Moore (2)
|
3
|
Initial
|
Dec.29,
2006
|
-
|
|||||
Karen
Soltero
|
4
|
Sale
of 7,000
|
Jan.13,
2007
|
Feb.14,
2007
|
|||||
4
|
Sale
of 6,000
|
Jan.14,
2007
|
Feb.14,
2007
|
||||||
4
|
Sale
of 9,755
|
Jan.31,
2007
|
Feb.14,
2007
|
||||||
Mike
Berger
|
4
|
Sale
of 700
|
Jan.12,
2007
|
Feb.14,
2007
|
|||||
4
|
Purchase
of 200
|
Jan.21,
2007
|
Feb.14,
2007
|
||||||
4
|
Purchase
of 600
|
Feb.
6, 2007
|
Feb.14,
2007
|
||||||
Marsha
Coleman
|
4
|
Sale
of 1,500
|
Jan.12,
2007
|
Feb.15,
2007
|
|||||
Glen
Perry
|
4
|
Purchase
of 22,500
|
May
15, 2007
|
May
23, 2007
|
|||||
William
H. Avery
|
4
|
Option
Award
|
Dec.
6, 2007
|
Dec.
7, 2007
|
|||||
Sandra
Green
|
3
|
Initial
|
July10,
2007
|
July19,
2007
|
|||||
4
|
Option
Award
|
Dec.
6, 2007
|
Dec.7,
2007
|
||||||
David
Patir
|
4
|
Sale
of 100
|
Nov.
9, 2007
|
Nov.14,
2007
|
|||||
4
|
Sale
of 2,322
|
Nov.12,
2007
|
Nov.14,
2007
|
||||||
4
|
Sale
of 528
|
Nov.13,
2007
|
Nov.14,
2007
|
||||||
Martin
Van Brauman
|
3
|
Initial
|
July10,
2007
|
July
19, 2007
|
|||||
Darwin
K. Pratt
|
4
|
Sale
of 15,000
|
June19,
2007
|
June20,
2007
|
|||||
Jane
Anderson & Tamara Trzcinski
|
4
|
Sale
of 18,200
|
June25,
2007
|
July
3, 2007
|
|||||
Eliezer
Kashai
|
4
|
Sale
of 2,420
|
Nov.30,
2007
|
Jan.9,2008(3)
|
|||||
4
|
Sale
of 1,692
|
Dec.
3, 2007
|
Jan.9,
2008(3)
|
||||||
4
|
Sale
of 2,598
|
Dec.
4, 2007
|
Jan.9,2008(3)
|
||||||
4
|
Sale
of 2,535
|
Dec.
5, 2007
|
Jan.9,
2008(3)
|
||||||
James
A. Barron
|
4
|
Purchase
of 572
|
May
25, 2007
|
Jan.
30, 2008
|
|||||
Nicole
Ramdeen
|
4
|
Sale
of 5,000
|
Jan.
11, 2007
|
Feb.
11, 2008
(1)
|
|||||
4
|
Sale
of 1,000
|
Feb
13, 2007
|
Feb.
11, 2008 (1)
|
||||||
4
|
Sale
of 1,000
|
Mar.
21, 2007
|
Feb.
11, 2008 (1)
|
||||||
4
|
Sale
of 1,500
|
Apr.
3, 2007
|
Feb.
11, 2008 (1)
|
||||||
Roger
Pratt
|
4
|
Sale
of 3,300
|
Mar.
26, 2007
|
Feb.
11, 2008 (1)
|
|||||
4
|
Sale
of 100
|
Aug.
2, 2007
|
Feb.
11, 2008 (1)
|
||||||
4
|
Sale
of 582
|
Aug.
3, 2007
|
Feb.
11, 2008 (1)
|
||||||
4
|
Sale
of 1,500
|
Aug.
8, 2007
|
Feb.
11, 2008
(1)
|
||||||
4
|
Sale
of 900
|
Aug.
10, 2007
|
Feb.
11, 2008 (1)
|
||||||
4
|
Sale
of 3,500
|
Aug.
21, 2007
|
Feb.
11, 2008
(1)
|
(1) |
Filed
on Form 5
|
(2) |
As
of the date hereof, a Form 3 has not been filed with the
SEC.
|
(3) |
These
sales were initially reported by the end of the second business day
following the transaction, except that due of Nov. 30, 2007 which
was
reported on the next following business day. The transactions, however,
were inadvertently reported in the name of a person other than the
beneficial owner of the shares. The mistake was corrected on January
9,
2008.
|
ITEM
10.
|
EXECUTIVE
COMPENSATION
|
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
All
Other
Compensation
|
Total
|
|||||||||||
US$
(thousands)
|
||||||||||||||||
Richard
J. Rinberg, Chief Executive Officer
|
2007
|
254(1
|
)
|
—
|
—
|
254
|
||||||||||
2006
|
250(2
|
)
|
6(3
|
)
|
250
|
|||||||||||
Glen
H. Perry, President and Chief Operating Officer
|
2007
|
204(4
|
)
|
—
|
203(5
|
)
|
407
|
|||||||||
2006
|
200(4
|
)
|
24(6
|
)
|
224
|
|||||||||||
Philip
Mandelker, Executive Vice President and Secretary
|
2007
|
200(7
|
)
|
100(8
|
)
|
62(9
|
)
|
376
|
||||||||
2006
|
150(8
|
)
|
12(10
|
)
|
162
|
|||||||||||
Eugene
A. Soltero , Chief Executive Officer (11)
|
2007
|
63
|
—
|
357(12
|
)
|
420
|
||||||||||
2006
|
250(13
|
)
|
24(14
|
)
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of Securities
Underlying
Unexercised Unearned Options (#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
|||||||||||
Richard
J. Rinberg
|
-
|
40,000
|
40000
|
$
|
0.01
|
10/31/17
|
||||||||||
Glen
H. Perry
|
-
|
-
|
-
|
-
|
-
|
|||||||||||
Philip
Mandelker
|
-
|
-
|
-
|
-
|
-
|
|||||||||||
Eugene
A. Soltero
|
-
|
-
|
-
|
-
|
-
|
Name
|
Fees
Earned or Paid
in
Cash
|
Stock
Awards
|
Option
Awards
|
All
Other Compensation
|
Total
|
|||||||||||
US$
(thousands)
|
||||||||||||||||
James
A. Barron
|
16
|
—
|
—
|
—
|
16
|
|||||||||||
Yehezkel
Druckman
|
16
|
—
|
—(1
|
)
|
—
|
16
|
||||||||||
Forrest
A. Garb
|
16
|
—
|
—(2
|
)
|
—
|
16
|
||||||||||
Paul
Oroian
|
18
|
—
|
—(3
|
)
|
—
|
18
|
||||||||||
Robert
Render
|
16
|
—
|
—
|
—
|
16
|
|||||||||||
Kent
S. Siegel
|
18
|
—
|
—(4
|
)
|
—
|
18
|
(1) |
Mr.
Druckman holds a director’s stock option under our 2005 Stock Option Plan
to purchase 25,000 shares of Common Stock at $5.00 per share through
December 31, 2008. These options were authorized and their terms,
including exercise price, fixed on October 27, 2005 in connection
with
services commencing November 2005 and, accordingly, the options were
valued in December 2005, notwithstanding that the award agreement
was
signed only in July 2006. The options became exercisable on July
1, 2007.
The rights underlying the options vested on November 1,
2005.
|
(2) |
Mr.
Garb holds director’s stock option under our 2005 Stock Option Plan to
purchase 25,000 shares of Common Stock at $5.00 per share through
December
31, 2008. These options were authorized and their terms, including
exercise price, fixed on October 27, 2005 in connection with services
commencing November 2005 and, accordingly, the options were valued
in
December 2005, notwithstanding that the award agreement was signed
only in
July 2006. The options became exercisable on July 1, 2007. The rights
underlying the options vested on November 1,
2005.
|
(3) |
Mr.
Oroian holds a warrant, granted on October 27, 2005, exercisable
commencing July 1, 2007 to purchase 25,000 shares of Common Stock
through
December 31, 2008 at $5.00 per share. The warrant vested on the grant
date.
|
(7) |
Mr.
Siegel holds a warrant, granted on October 27, 2005, exercisable
commencing July 1, 2007 to purchase 25,000 shares of Common Stock
through
December 31, 2008 at $5.00 per share. The warrant vested on the grant
date.
|
ITEM 11. |
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
Name
and Address of Beneficial Owner
|
Amount
and Nature
of
Beneficial Ownership
|
Percent
of Class
|
||||||
John
M. Brown
|
3,526,565
|
(1
|
)
|
34.8
|
%
|
|||
Richard
J. Rinberg
|
361,833
|
(2
|
)
|
3.6
|
%
|
|||
Glen
H. Perry
|
568,333
|
(3
|
)
|
5.6
|
%
|
|||
Philip
Mandelker
|
502,583
|
(4
|
)
|
5.0
|
%
|
|||
William
Avery
|
281,334
|
(5
|
)
|
2.8
|
%
|
|||
Martin
Van Brauman
|
27,820
|
(6
|
)
|
*
|
||||
Sandra
Green
|
7,882
|
(7
|
)
|
*
|
||||
Robert
Render
|
103,000
|
(8
|
)
|
1.0
|
%
|
|||
James
A. Barron
|
135,572
|
(9
|
)
|
1.3
|
%
|
|||
Kent
S. Siegel
|
41,225
|
(10
|
)
|
*
|
||||
Paul
Oroian
|
32,471
|
(11
|
)
|
*
|
||||
Yehezkel
Druckman
|
25,000
|
(12
|
)
|
*
|
||||
Forrest
A. Garb
|
25,000
|
(12
|
)
|
*
|
||||
Eugene
A. Soltero
|
465,439
|
(13
|
)
|
4.6
|
%
|
|||
Ralph
F. DeVore
|
698,280
|
(14
|
)
|
6.9
|
%
|
|||
All
directors and executive officers as a group (13
members)
|
4,368,618
|
(15
|
)
|
42.5
|
%
|
(1)
|
Includes
2,949,065 shares of common stock owned by others for which Mr. Brown
holds
voting proxies, including 100,000 shares owned by his wife, 364,031
shares
owned by Mr. Soltero, 460,000 shares owned by Mr. Mandelker and a
trust
for his family, 400,000 shares owned by Mr. Perry, 210,000 shares
owned by
Mr. Avery, 50,000 shares owned by Mr. DeVore and 200,000 shares issued
to
a trust company for the benefit of Mr. Rinberg.
|
(2)
|
Includes
(a) 10,000 shares owned by Mr. Rinberg's wife; (b) 200,000 shares
issued
to a trust company for the benefit of Mr. Rinberg; and (c) employee
stock
options awarded under the Zion 2005 Stock Option Plan to purchase
40,000
shares of common stock at $0.01 par share through Dec. 3,
2017.
|
(3)
|
Includes
(a) 124,833 of shares owned by a person with whom Mr. Perry shares
a
residence, of which Mr. Perry disclaims beneficial ownership and
over
50,000 of which Mr. Brown has voting control; and (b) 400,000 shares
over
which Mr. Brown has voting control.
|
(4)
|
Includes
(a) 1,500 shares owned by Mr. Mandelker's wife; (b) 2,000 shares
in the
aggregate owned by Mr. Mandelker's adult children sharing his residence;
(c) 400,000 shares owned by a trust for Mr. Mandelker and his family
over
which Mr. Brown has voting control; and (c) 60,000 additional shares
over
which Mr. Brown has voting control.
|
(5)
|
Includes
(a) 12,000 shares owned by Mr. Avery's mother over which Mr. Avery
holds a
power of attorney and of which Mr. Avery disclaims beneficial ownership;
(b) 210,000 shares over which Mr. Brown has voting control; and (c)
employee stock options awarded under Zion’s 2005 Stock Option Plan to
purchase 40,000 shares of common stock at $0.01 per share through
Dec. 3,
2017.
|
(6)
|
Includes
1,000 shares owned by Mr. Van Brauman’s adult child who shares his
residence, in which Mr. Van Brauman disclaims beneficial interest
and
employee stock options awarded under Zion’s 2005 Stock Option Plan to
purchase 50,000 shares of common stock at $5.60 per share through
June 30,
2012.
|
(7)
|
Includes
employee stock options awarded under Zion’s 2005 Stock Option Plan to
purchase 3,882 shares of common stock at $0.01 per share through
Dec. 3,
2017.
|
(8)
|
Includes
(a) 96,000 shares owned by a trust controlled by Mr. Render (the
"Render
Trust"); and (b) 7,000 shares owned by Mr. Render's
wife.
|
(9)
|
Includes
(a) 45,000 shares held by trusts for Dr. Barron's children, in which
shares Dr. Barron disclaims beneficial interest; and (b) 46,000 shares
owned by a ministry of which Dr. Barron is president and a director,
and
in which shares Dr. Barron disclaims any beneficial
interest.
|
(10)
|
Includes
(a) a warrant to purchase 25,000 shares of common stock through December
31, 2008 at $5.00 per share; and (b) 7,725 shares held by Mr. Siegel's
wife, of which Mr. Siegel disclaims ownership.
|
(11)
|
Includes
a warrant to purchase 25,000 shares of common stock through December
31,
2008 at $5.00 per share.
|
(12)
|
Includes
a director’s stock option, awarded under the Zion 2005 Stock Option Plan
to purchase 25,000 shares of common stock at $5.00 per share through
December 31, 2008.
|
(13)
|
Includes
364,031 shares over which Mr. Brown has voting control. In March
2007, Mr.
Soltero who had been our CEO, resigned from all positions held with
our
company.
|
(14)
|
Based
on information in Schedule 13G filed on February 14, 2008. Includes
(a)
493,264 shares owned by others for which Mr. DeVore holds voting
proxies;
and (b) 50,000 shares over which Mr. Brown has voting control.
|
(15)
|
Includes
all shares noted in notes 1-10 above;
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and
rights
(b)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
|||||||
Equity
compensation plans approved by security holders:
-
Stock Options
|
250,549
|
$
|
3.45
|
749,451
|
||||||
Equity
compensation plans not approved by security holders:
-
Directors Warrants (1)
|
85,000
|
$
|
5.00
|
0
|
||||||
-
Service Warrants (2)
|
10,000
|
$
|
5.00
|
0
|
||||||
-
Underwriter’s Warrants (3)
|
46,621
|
$
|
8.75
|
0
|
||||||
TOTAL
|
392,170
|
$
|
4.24
|
749,451
|
(1)
|
In
October 2005, warrants to purchase 85,000 common shares of our stock
at
$5.00 per share were issued to four directors and former directors
for
services rendered to Zion as directors during the period 2003-2005.
These
warrants are exercisable at any time commencing July 1, 2007 through
December 31, 2008.
|
(2)
|
In
October 2005, a warrant to purchase 10,000 common shares of our stock
at
$5.00 per share was authorized for issuance to a financial institution
for
financial consulting services rendered. The warrant is exercisable
at any
time commencing July 1, 2007 through December 31,
2008.
|
(3)
|
Warrants
issued to Network 1 Financial Securities, Inc. pursuant to the terms
of an
underwriting agreement in connection with our public offering which
was
subject of the 2006 Registration Statement. The warrants provide
for the
right to purchase 46,621 shares of our common stock at $8.75 per
share.
The warrants are exercisable for a period beginning November 25,
2007 and
have an expiration date of September 26,
2009.
|
ITEM
12.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR
INDEPENDENCE
|
ITEM 13. |
EXHIBITS
|
Exhibit
Number
|
Description
|
|
3.2*
|
Amended
and Restated Bylaws of Zion Oil & Gas, Inc. (amended as of March 29,
2007)
|
|
9.1
|
Stockholders’
and Voting Agreement (with John M. Brown), filed as Exhibit 9.1 to
Zion’s
Form 10-KSB for the year ended December 31, 2005 and incorporated
herein
by reference
|
|
9.2
|
Stockholders’
and Voting Agreement (with Ralph Devore), filed as Exhibit 9.2 to
Zion’s
Form 10-KSB for the year ended December 31, 2005 and incorporated
herein
by reference
|
|
9.3
|
Rinberg-Brown
Voting Agreement, filed as Exhibit 9.4 to Zion’s Form 10-KSB for the year
ended December 31, 2005 and incorporated herein by
reference
|
|
10.1
|
Joseph
License, filed as Exhibit 10.1 to Zion’s Form 8-K filed on October 16,
2007 and incorporated herein by reference
|
|
10.2
|
Asher
-Menashe License, filed as Exhibit 10-2 to Zion’s Form 10-QSB for the
quarter ended June 30, 2007 and incorporated herein by
referenceMemorandum
|
|
10.3
|
Workover
and Completion Services Agreement, dated March 15, 2007, between
Zion Oil
& Gas, Inc. and Lapidoth - Israel Oil Prospectors Corp., Inc. relating
to performance of remedial workover, completion and testing services
on
the Ma’anit #1 well, filed as Exhibit 10.1 to Zion’s Form 8-K filed on
March 20, 2007 and incorporated herein by reference
|
|
10.4
|
Agreement,
dated September 17, 2007, between Zion Oil & Gas, Inc. and the
Geophysical Institute of Israel, filed as Exhibit 10.1 to Zion’s Form 8-K
dated September 18, 2007 and incorporated herein by reference
|
|
10.5
|
Executive
Employment and Retention Agreements (Management
Agreements)
|
|
(i)
Employment Agreement dated as of January 1, 2004, between Zion Oil
&
Gas, Inc. and John M. Brown, filed as Exhibit 10.4(i) to Zion’s Form
10-KSB for the year ended December 31, 2005, and incorporated herein
by
reference
|
||
(ii)
Retention Agreement dated as of January 18, 2008, between Zion Oil
&
Gas, Inc. and John M. Brown, filed as Exhibit 10.1 to Zion’s Form 8-K
dated January 24, 2008 and incorporated herein by
reference
|
||
(iii)
Employment Agreement dated as of January 1, 2004, between Zion Oil
&
Gas, Inc. and Glen H. Perry, filed as Exhibit 10.4(iv) to Zion’s Form
10-KSB for the year ended December 31, 2005 and incorporated herein
by
reference
|
||
(iv)
Retention Agreement dated as of January 1, 2004, between Zion Oil
&
Gas, Inc. and Philip Mandelker, filed as Exhibit 10.4(v) to Zion’s Form
10-KSB for the year ended December 31, 2005 and incorporated herein
by
reference
|
||
(v)
Employment Agreement dated as of June 1, 2007, between Zion Oil & Gas,
Inc. and Philip Mandelker, filed as Exhibit 10.1 to Zion’s Form 10-QSB for
the quarter ended June 30, 2007 and incorporated herein by
reference
|
||
(vi)
Employment Agreement dated as of July 3, 2007, between Zion Oil & Gas,
Inc. and Martin M. Van Brauman, filed as Exhibit 10.3 to Zion’s Form
10-QSB for the quarter ended June 30, 2007 and incorporated herein
by
reference
|
||
(vii)
Retention and Management Services Agreement dated as of November
1, 2005,
between Zion Oil & Gas and Richard Rinberg, filed as Exhibit 10.4(vii)
to Zion’s Form 10-KSB for the year ended December 31, 2005 and
incorporated herein by reference
|
||
(viii)
Employment Agreement dated as of November 1, 2007, between Zion Oil
&
Gas, Inc. and Richard J. Rinberg, filed as Exhibit 10.1 to Zion’s Form 8-K
dated December 10, 2007 and incorporated herein by
reference
|
(ix)
Employment Agreement dated as of December 1, 2007, between Zion Oil
&
Gas, Inc. and William H. Avery, filed as Exhibit 10.2 to Zion’s Form 8-K
dated December 10, 2007 and incorporated herein by
reference
|
||
(x)
Employment Agreement dated as of January 1, 2004, between Zion Oil
&
Gas, Inc. and Eugene A. Soltero, filed as Exhibit 10.4(ii) to Zion’s Form
10-KSB for the year ended December 31, 2005 and incorporated herein
by
reference
|
||
Resignation
and Settlement Agreement, dated March 28, 2007, between Zion Oil
& Gas
and Eugene A. Soltero, filed as Exhibit 10.1 to Zion’s Form 8-K filed on
March 30, 2007, and incorporated herein by reference
|
||
10.6
|
2005
Stock Option Plan, filed as Exhibit 10.5 to Zion’s Form 10-KSB for the
year ended December 31, 2005 and incorporated herein by
reference
|
|
14.1
|
Code
of Ethics, filed as Exhibit 14.1 to Zion’s Form 8-K dated December 10,
2007 and incorporated herein by reference
|
|
24.1*
|
Power
of Attorney
|
|
31.1*
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2*
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
32.1*
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to
Section
906 of the Sarbanes-Oxley Act of 2002 (furnished
only)
|
ITEM 14. |
PRINCIPAL
ACCOUNTANT FEES AND
SERVICES
|
ZION
OIL & GAS, INC.
(Registrant)
|
|||
By:
/s/
Richard J. Rinberg
|
By:
/s/
Martin M. Van Brauman
|
||
Richard
J. Rinberg
|
Martin
M. Van Brauman,
|
||
Chief
Executive Officer
(Principal
Executive Officer)
|
Senior
Vice-President
(Principal
Financial Officer)
|
||
Date:
March
28, 2008
|
Date:
March
28, 2008
|
*
|
Chairman
of the Board
|
March
28, 2008
|
||||
John
M. Brown
|
||||||
*
|
Chief
Executive Officer and Director
|
March
28, 2008
|
||||
Richard
J. Rinberg
|
||||||
*
|
President,
Chief Operating Officer and Director
|
March
28, 2008
|
||||
Glen
H. Perry
|
||||||
*
|
Executive
Vice President, Secretary and Director
|
March
28, 2008
|
||||
Philip
Mandelker
|
||||||
*
|
Executive
Vice President, Treasurer and Director
|
March
28, 2008
|
||||
William
H. Avery
|
||||||
*
|
Director
|
March
28, 2008
|
||||
Robert
Render
|
||||||
*
|
Director
|
March
28, 2008
|
||||
Yehezkel
Druckman
|
||||||
*
|
Director
|
March
28, 2008
|
||||
Forrest
A. Garb
|
||||||
*
|
Director
|
March
28, 2008
|
||||
Paul
Oroian
|
||||||
*
|
Director
|
March
28, 2008
|
||||
Kent
S. Siegel
|
||||||
*
|
Director
|
March
28, 2008
|
||||
James
(Andy) Barron
|
*
By: /s/
Richard J. Rinberg
|
|||
Richard
J. Rinberg, Attorney-in-Fact
|
|||
Page
|
||
Report
of Independent Registered Public Accounting Firm - Somekh
Chaikin
|
F-2
|
|
Report
of Independent Registered Public Accounting Firm - Lane Gorman Trubitt,
L.L.P.
|
F-3
|
|
Balance
Sheets
|
F-4
|
|
Statements
of Operations
|
F-5
|
|
Statements
of Changes in Stockholders' Equity
|
F-6
|
|
Statements
of Cash Flows
|
F-13
|
|
Notes
to Financial Statements
|
F-15
to F-36
|
December
31
|
December
31
|
||||||
2007
|
2006
|
||||||
US$
thousands
|
US$
thousands
|
||||||
Current
assets
|
|||||||
Cash
and cash equivalents
|
4,590
|
3,370
|
|||||
Inventories
|
-
|
150
|
|||||
Prepaid
expenses and other
|
61
|
21
|
|||||
Refundable
Value-Added Tax
|
65
|
10
|
|||||
Total
current assets
|
4,716
|
3,551
|
|||||
Unproved
oil and gas properties, full cost method
|
2,590
|
8,496
|
|||||
Property
and equipment
|
|||||||
Net
of accumulated depreciation of $33 thousand and $21 thousand
|
73
|
45
|
|||||
Other
assets
|
|||||||
Assets
held for severance benefits
|
42
|
12
|
|||||
Total
other assets
|
42
|
12
|
|||||
Total
assets
|
7,421
|
12,104
|
|||||
Liabilities
and Stockholders’ Equity
|
|||||||
Current
liabilities
|
|||||||
Notes
payable to related parties
|
-
|
107
|
|||||
Accounts
payable
|
128
|
262
|
|||||
Accrued
liabilities
|
172
|
502
|
|||||
Deferred
officers compensation
|
1,017
|
498
|
|||||
Total
current liabilities
|
1,317
|
1,369
|
|||||
Provision
for severance pay
|
316
|
63
|
|||||
Deferred
officers' compensation
|
-
|
1,053
|
|||||
Total
liabilities
|
1,633
|
2,485
|
|||||
Commitments
and contingencies
|
-
|
-
|
|||||
Stockholders’
equity
|
|||||||
Common
stock, par value $.01; 20,000,000 shares authorized:
|
|||||||
2007
- 10,120,893 shares and 2006 - 8,747,002 shares
|
|||||||
issued
and outstanding
|
101
|
87
|
|||||
Additional
paid-in capital
|
26,074
|
16,872
|
|||||
Deficit
accumulated in development stage
|
(20,387
|
)
|
(7,340
|
)
|
|||
Total
stockholders’ equity
|
5,788
|
9,619
|
|||||
Total
liabilities and stockholders' equity
|
7,421
|
12,104
|
Period
from
|
||||||||||
April
6, 2000
|
||||||||||
(inception)
to
|
||||||||||
For
the year ended December 31
|
December
31
|
|||||||||
2007
|
2006
|
2007
|
||||||||
US$
thousands
|
US$
thousands
|
US$
thousands
|
||||||||
Revenues
|
-
|
-
|
-
|
|||||||
General
and administrative expenses
|
||||||||||
Legal
and professional
|
1,209
|
875
|
4,079
|
|||||||
Salaries
|
1,475
|
1,108
|
4,045
|
|||||||
Other
|
1,074
|
475
|
2,257
|
|||||||
Impairment
of unproved oil and gas properties
|
9,494
|
-
|
9,494
|
|||||||
Loss
from operations
|
(13,252
|
)
|
(2,458
|
)
|
(19,875
|
)
|
||||
Other
expense, net
|
||||||||||
Termination
of initial public offering
|
-
|
-
|
(507
|
)
|
||||||
Other
income, net
|
4
|
-
|
4
|
|||||||
Interest
income (expense), net
|
201
|
(52
|
)
|
(9
|
)
|
|||||
Loss
before income taxes
|
(13,047
|
)
|
(2,510
|
)
|
(20,387
|
)
|
||||
Income
taxes
|
-
|
-
|
-
|
|||||||
Net
loss
|
(13,047
|
)
|
(2,510
|
)
|
(20,387
|
)
|
||||
Net
loss per share of common stock - basic
and diluted (in US$)
|
(1.34
|
) |
(0.32
|
)
|
(4.04
|
|||||
Weighted-average
shares outstanding - basic
and diluted (in thousands)
|
9,712
|
7,942
|
5,042
|
Deficit
|
||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||
Additional
|
in
|
|||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Paid-in
|
development
|
|||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
stage
|
Total
|
||||||||||||||||
Thousands
|
US$
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
($1 per share)
|
-
|
-
|
175
|
*
-
|
175
|
-
|
175
|
|||||||||||||||
Costs
associated with the issuance of shares
|
-
|
-
|
-
|
-
|
(85
|
)
|
-
|
(85
|
)
|
|||||||||||||
Waived
interest on conversion of debt
|
-
|
-
|
-
|
-
|
1
|
-
|
1
|
|||||||||||||||
Value
of warrants granted to employees
|
-
|
-
|
-
|
-
|
37
|
-
|
37
|
|||||||||||||||
Value
of warrants granted to directors and consultants
|
-
|
-
|
-
|
-
|
3
|
-
|
3
|
|||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(207
|
)
|
(207
|
)
|
|||||||||||||
Balances,
December 31, 2001
|
-
|
-
|
3,000
|
*
-
|
536
|
(212
|
)
|
324
|
Deficit
|
||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||
Additional
|
in
|
|||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Paid-in
|
development
|
|||||||||||||||||||
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
stage
|
|
|
Total
|
|
|||
|
|
|
Thousands
|
|
|
US$
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
($10 per share)
|
25
|
*
-
|
22
|
*
-
|
254
|
-
|
254
|
|||||||||||||||
Payment
of accounts payable through issuance of preferred shares and
warrants
|
13
|
*
-
|
-
|
-
|
127
|
-
|
127
|
|||||||||||||||
Payment
of accounts payable through issuance of common shares and
warrants
|
-
|
-
|
111
|
1
|
131
|
-
|
132
|
|||||||||||||||
Payment
of note payable through issuance of shares and warrants
|
5
|
*
-
|
-
|
-
|
50
|
-
|
50
|
|||||||||||||||
Payment
of accounts payable to employee through issuance of shares upon exercise
of warrants
|
-
|
-
|
400
|
4
|
76
|
-
|
80
|
|||||||||||||||
Costs
associated with the issuance of shares
|
-
|
-
|
-
|
-
|
(160
|
)
|
-
|
(160
|
)
|
|||||||||||||
Waived
interest on conversion of debt
|
-
|
-
|
-
|
-
|
3
|
-
|
3
|
|||||||||||||||
Deferred
financing costs on debt conversions / modifications
|
-
|
-
|
-
|
-
|
21
|
-
|
21
|
|||||||||||||||
Value
of warrants granted to employees
|
-
|
-
|
-
|
-
|
1
|
-
|
1
|
|||||||||||||||
Value
of warrants granted to directors and consultants
|
-
|
-
|
-
|
-
|
13
|
-
|
13
|
|||||||||||||||
|
||||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(403
|
)
|
(403
|
)
|
|||||||||||||
Balances,
December 31, 2002
|
43
|
*
-
|
3,553
|
35
|
1,042
|
(615
|
)
|
462
|
Deficit
|
||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||
Additional
|
in
|
|||||||||||||||||||||
Preferred
Stock
|
Common
Stock
|
Paid-in
|
development
|
|||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
stage
|
Total
|
||||||||||||||||
Thousands
|
US$
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 ($3 per
share):
|
||||||||||||||||||||||
for
cash consideration
|
-
|
-
|
33
|
*
-
|
99
|
-
|
99
|
|||||||||||||||
for
reduction of accounts payable
|
-
|
-
|
3
|
*
-
|
9
|
-
|
9
|
|||||||||||||||
Issuance
of shares upon exercise of warrants:
|
||||||||||||||||||||||
for
cash consideration
|
-
|
-
|
25
|
*
-
|
25
|
-
|
25
|
|||||||||||||||
for
reduction of accounts payable
|
-
|
-
|
124
|
1
|
142
|
-
|
143
|
|||||||||||||||
Issuance
of shares upon exercise of warrants for cash consideration
|
-
|
-
|
63
|
1
|
82
|
-
|
83
|
|||||||||||||||
Payment
of account payable through issuance of shares
|
-
|
-
|
80
|
1
|
139
|
-
|
140
|
|||||||||||||||
Costs
associated with the issuance of shares
|
-
|
-
|
-
|
-
|
(58
|
)
|
-
|
(58
|
)
|
|||||||||||||
Value
of warrants granted to employees
|
-
|
-
|
-
|
-
|
47
|
-
|
47
|
|||||||||||||||
Deferred
financing costs on debt conversions / modifications
|
-
|
-
|
-
|
-
|
(10
|
)
|
-
|
(10
|
)
|
|||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(873
|
)
|
(873
|
)
|
|||||||||||||
Balances
as at December 31, 2003
|
-
|
-
|
4,859
|
48
|
1,751
|
(1,488
|
)
|
311
|
Common
Stock
|
Additional
paid-in |
Deficit accumulated
|
||||||||||||||
Shares
|
|
|
Amounts
|
|
|
capital
|
|
|
stage
|
Total
|
||||||
Thousands
|
US$
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
|
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
|
|
|
|
|
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
|
|||||||||||
Costs
associated with the issuance of shares
|
-
|
-
|
(681
|
)
|
-
|
(681
|
)
|
|||||||||
Funds
received from public offering for subscription shares:
|
||||||||||||||||
For
cash
|
410
|
4
|
2,867
|
-
|
2,871
|
|||||||||||
For
debt
|
27
|
*
-
|
188
|
-
|
188
|
|||||||||||
Net
loss
|
-
|
-
|
-
|
(2,510
|
)
|
(2,510
|
)
|
|||||||||
Balances
December 31, 2006
|
8,747
|
87
|
16,872
|
(7,340
|
)
|
9,619
|
|
|
Deficit
|
|
|||||||||||||
|
|
Additional
|
accumulated
|
|
||||||||||||
|
Common
Stock
|
paid-in
|
in
development
|
|
||||||||||||
|
Shares
|
Amounts
|
capital
|
stage
|
Total
|
|||||||||||
|
Thousands
|
US$
thousands
|
US$
thousands
|
US$
thousands
|
US$
thousands
|
|||||||||||
Funds
received from public offering for subscription shares:
|
||||||||||||||||
For
cash
|
1,336
|
14
|
9,338
|
-
|
9,352
|
|||||||||||
For
debt
|
33
|
*
-
|
235
|
-
|
235
|
|||||||||||
Compensation
in respect of shares previously issued for services provided by
officer
|
-
|
-
|
208
|
-
|
208
|
|||||||||||
Value
of options granted to employees
|
-
|
-
|
337
|
-
|
337
|
|||||||||||
Value
of warrants granted to underwriter
|
-
|
-
|
79
|
-
|
79
|
|||||||||||
Value
of shares granted to employees
|
5
|
*-
|
25
|
-
|
25
|
|||||||||||
Value
of shares gifted to employees
|
-
|
-
|
7
|
-
|
7
|
|||||||||||
Costs
associated with the issuance of shares
|
-
|
-
|
(1,027
|
)
|
-
|
(1,027
|
)
|
|||||||||
Net
loss
|
-
|
-
|
-
|
(13,047
|
)
|
(13,047
|
)
|
|||||||||
Balances
December 31, 2007
|
10,121
|
101
|
26,074
|
(20,387
|
)
|
5,788
|
Period
from
|
||||||||||
April
6, 2000
|
||||||||||
(inception)
to
|
||||||||||
For
the year ended December 31
|
December
31
|
|||||||||
2007
|
2006
|
2007
|
||||||||
US$
thousands
|
US$
thousands
|
US$
thousands
|
||||||||
Cash
flows from operating activities
|
||||||||||
Net
loss
|
(13,047
|
)
|
(2,510
|
)
|
(20,387
|
)
|
||||
Adjustments
required to reconcile net loss to net cash
|
||||||||||
used
in operating activities:
|
||||||||||
Depreciation
|
16
|
16
|
37
|
|||||||
Officer,
director and other fees, paid via common stock
|
475
|
862
|
2,139
|
|||||||
Cost
of warrants issued to employees, directors & others
|
416
|
182
|
974
|
|||||||
Interest
paid through issuance of common stock
|
-
|
-
|
17
|
|||||||
Write-off
of costs associated with public offering
|
-
|
-
|
507
|
|||||||
Loss
on disposal of equipment
|
4
|
-
|
4
|
|||||||
Impairment
of unproved oil and gas properties
|
9,494
|
-
|
9,494
|
|||||||
Change
in assets and liabilities, net:
|
||||||||||
Decrease
in inventories
|
-
|
-
|
150
|
|||||||
Prepaid
expenses and other
|
(40
|
)
|
5
|
(61
|
)
|
|||||
Increase
in deferred offering costs
|
-
|
126
|
-
|
|||||||
Refundable
value-added tax
|
(55
|
)
|
20
|
(65
|
)
|
|||||
Severance
pay, net
|
223
|
9
|
274
|
|||||||
Accounts
payable
|
(134
|
)
|
(345
|
)
|
771
|
|||||
Accrued
liabilities
|
(330
|
)
|
350
|
173
|
||||||
Increase(decrease)
in deferred officers' compensation
|
(534
|
)
|
482
|
1,017
|
||||||
Net
cash used in operating activities
|
(3,512
|
)
|
(803
|
)
|
(4,956
|
)
|
||||
Cash
flows from investing activities
|
||||||||||
Acquisition
of property and equipment
|
(48
|
)
|
(12
|
)
|
(114
|
)
|
||||
Investment
in oil and gas properties
|
(3,438
|
)
|
(803
|
)
|
(12,234
|
)
|
||||
Net
cash used in investing activities
|
(3,486
|
)
|
(815
|
)
|
(12,348
|
)
|
||||
Cash
flows from financing activities
|
||||||||||
Deferred
financing costs on debt conversions and modification
|
-
|
19
|
89
|
|||||||
Loan
proceeds - related party
|
-
|
-
|
259
|
|||||||
Loan
principal repayments - related party
|
(107
|
)
|
(5
|
)
|
(259
|
)
|
||||
Loan
proceeds - other
|
-
|
-
|
500
|
|||||||
Proceeds
from sale of stock
|
9,352
|
4,514
|
23,775
|
|||||||
Financing
costs of issuing stock
|
(1,027
|
)
|
(681
|
)
|
(2,470
|
)
|
||||
Net
cash provided by financing activities
|
8,218
|
3,847
|
21,894
|
|||||||
Net
increase in cash
|
1,220
|
2,229
|
4,590
|
|||||||
Cash
- beginning of period
|
3,370
|
1,141
|
-
|
|||||||
Cash
- end of period
|
4,590
|
3,370
|
4,590
|
Period
from
|
||||||||||
April
6, 2000
|
||||||||||
(inception)
to
|
||||||||||
For
the year ended December 31
|
December
31
|
|||||||||
2007
|
2006
|
2007
|
||||||||
US$
thousands
|
US$
thousands
|
US$
thousands
|
||||||||
Supplemental
information
|
||||||||||
Cash
paid for interest
|
1
|
16
|
58
|
|||||||
Cash
paid for income taxes
|
-
|
-
|
-
|
|||||||
Non-cash
operating, investing and financing activities:
|
||||||||||
Payment
of accounts payable through issuance
of preferred and common stock
|
235
|
14
|
1,186
|
|||||||
Payment
of note payable through issuance
of common stock
|
-
|
-
|
575
|
|||||||
Payment
of accounts payable through issuance
of note payable
|
-
|
-
|
35
|
|||||||
Financing
costs paid through issuance of common stock
|
-
|
-
|
25
|
|||||||
Increase
in accounts payable for financing costs
|
-
|
-
|
382
|
|||||||
Waived
interest on debt conversions
|
-
|
-
|
4
|
|||||||
Shares
issued for debt conversion
|
-
|
188
|
188
|
|||||||
Shares
issued for services provided by officer
|
208
|
250
|
500
|
|||||||
Value
of warrants and options granted to employees
|
337
|
162
|
842
|
|||||||
Value
of warrants granted to directors and consultants
|
-
|
-
|
33
|
|||||||
Value
of warrants granted to underwriters
|
79
|
20
|
79
|
|||||||
Value
of shares granted to employees
|
25
|
-
|
20
|
|||||||
Value
of shares gifted to directors, employees and
service providers
|
7
|
147
|
154
|
|||||||
Deferred
financing costs
|
-
|
19
|
89
|
|||||||
Transfer
of inventory to oil and gas properties
|
150
|
-
|
150
|
A.
|
Nature
of Operations
|
A.
|
Nature
of Operations (cont’d)
|
M.
|
Recent
Accounting Pronouncements
|
M.
|
Recent
Accounting Pronouncements
(cont’d)
|
A.
|
The
liability in respect of certain of the Company’s employees is discharged
in part by participating in a defined contribution pension plan
and making
regular deposits with recognized pension funds. The deposits are
based on
certain components of the salaries of the said employees. The custody
and
management of the amounts so deposited are independent of the Company’s
control and accordingly such amounts funded (included in expenses
on an
accrual basis) and related liabilities are not reflected in the
balance
sheet.
|
B.
|
Part
of the liability is discharged by deposits made with severance
pay
funds.
|
C.
|
The
liability for severance pay is calculated on the basis of the latest
salary paid to each employee multiplied by the number of years
of
employment. The liability is covered by the amounts deposited including
accumulated income thereon as well as by the unfunded
provision.
|
D.
|
The
expenses in respect of severance pay for the years ended December
31,
2007, 2006 and the period from April 6, 2000 to December 31, 2007
amounted
to $85 thousand, $10 thousand and $136 thousand respectively.
|
E.
|
Withdrawals
from the funds may be made only upon termination of
employment.
|
F.
|
As
of December 31, 2007, the Company has a provision for severance
pay of
$316 thousand, which was classified as short-term. The balance
at December
31, 2006 was $63 thousand, of which all was long-term. As of December
31,
2007 and 2006, the Company has $42 thousand and $12 thousand respectively,
deposited in funds managed by major Israeli financial institutions
which
are earmarked to cover severance pay liability. Such deposits are
not
considered to be “plan assets” and are therefore included in other
assets.
|
Year
ended December 31 2007
|
|
Year
ended December 31 2006
|
|
||||
|
|
US$
thousands
|
|
US$
thousands
|
|||
Excluded
from amortization base:
|
|||||||
Drilling
operations, completion costs and other related costs
|
2,035
|
6,801
|
|||||
Capitalized
salary costs
|
145
|
683
|
|||||
Legal
costs and license fees
|
220
|
732
|
|||||
Other
costs
|
190
|
280
|
|||||
$
|
2,590
|
$
|
8,496
|
Year
ended December 31 2007
|
|
Year
ended December 31 2006
|
|
Period
from April 6, 2000 (inception) to December 31,
2007
|
|
|||||
|
|
US$
thousands
|
|
US$
thousands
|
|
US$
thousands
|
||||
Drilling
operations, completion costs and other related costs
|
7,959
|
-
|
7,959
|
|||||||
Capitalized
salary costs
|
683
|
-
|
683
|
|||||||
Legal
costs and license fees
|
509
|
-
|
509
|
|||||||
Other
costs
|
343
|
-
|
343
|
|||||||
9,494
|
-
|
9,494
|
Exercise
price |
|
Number
of shares |
|
Expiration
date
|
|
Warrants
or
Options
|
|||||||
To
non-employees
|
|||||||||||||
5.00
|
10,000
|
December
31, 2008
|
Warrants
|
||||||||||
8.75
|
46,621
|
September
26, 2009
|
Warrants
|
||||||||||
To
employees and directors
|
|||||||||||||
5.00
|
85,000
|
December
31, 2008
|
Warrants
|
||||||||||
5.00
|
50,000
|
December
31, 2008
|
Options
|
||||||||||
5.00
|
66,667
|
December
31, 2010
|
Options
|
||||||||||
5.60
|
50,000
|
December
31, 2012
|
Options
|
||||||||||
0.01
|
83,882
|
December
3, 2017
|
Options
|
||||||||||
To
investors
|
|||||||||||||
5.50
|
19,625
|
December
31, 2008
|
Warrants
|
||||||||||
4.50
|
* |
411,795
|
Number
of
|
|
Weighted
Average
|
|
||||
|
|
shares
|
|
exercise
price
|
|
||
|
|
|
|
US$
|
|||
Granted
from April 6, 2000 (inception) to December 31, 2005 to:
|
|
|
|
|
|
||
Employees,
officers and directors
|
|
|
1,580,936
|
|
|
1.38
|
|
Private
placement investors and others
|
|
|
1,098,367
|
|
|
2.82
|
|
Expired/canceled
|
|
|
(340,333
|
)
|
|
1.05
|
|
Exercised
|
|
|
(1,670,770
|
)
|
|
1.03
|
|
Outstanding,
December 31, 2005
|
|
|
668,200
|
|
|
4.78
|
|
|
|
|
|
|
|
|
|
Granted
to:
|
|
|
|
|
|
|
|
Employees,
officers and directors as part compensation
|
|
|
170,000
|
|
|
5.00
|
|
Underwriters
(in connection with IPO)
|
|
|
11,590
|
|
|
8.75
|
|
Private
placement investors and others
|
|
|
7,125
|
|
|
5.50
|
|
Expired/canceled
|
|
|
(247,393
|
)
|
|
4.92
|
|
Exercised
|
|
|
(313,307
|
)
|
|
4.57
|
|
Outstanding,
December 31, 2006
|
|
|
296,215
|
|
|
5.18
|
|
|
|
|
|
|
|
|
|
Granted
to:
|
|
|
|
|
|
|
|
Employees,
officers and directors as part compensation
|
|
|
133,882
|
|
|
2.10
|
|
Underwriters
(in connection with IPO)
|
|
|
35,031
|
|
|
8.75
|
|
Private
placement investors and others
|
|
|
-
|
|
|
-
|
|
Expired/Canceled
|
|
|
(53,333
|
)
|
|
5.00
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
Outstanding,
December 31, 2007
|
|
|
411,795
|
|
|
4.50
|
|
|
|
|
|
|
|
|
|
Exercisable,
December 31, 2007
|
|
|
311,795
|
|
|
5.75
|
|
Shares
underlying outstanding
warrants
and options (nonvested)
|
|
Shares
underlying outstanding
warrants
and options (all fully vested)
|
|
|||||||||||||||||||
Range
of
exercise
price
US$
|
|
Number
outstanding
|
|
Weighted
average
remaining
contractual
life
(years)
|
|
Weighted
average
exercise
price
US$
|
|
Range
of
exercise
price
US$
|
|
Number
Outstanding
|
|
Weighted
average
remaining
contractual
life
(years)
|
|
Weighted
Average
exercise
price
US$
|
||||||||
0.01
|
40,000
|
9.93
|
0.01
|
0.01
|
43,882
|
9.93
|
0.01
|
|||||||||||||||
5.00
|
|
10,000
|
3.00
|
5.00
|
5.00
|
201,667
|
1.49
|
5.00
|
||||||||||||||
5.60
|
50,000
|
5.00
|
5.60
|
5.50
|
19,625
|
1.00
|
5.50
|
|||||||||||||||
-
|
-
|
-
|
-
|
8.75
|
46,621
|
1.74
|
8.75
|
|||||||||||||||
0.01-5.60
|
100,000
|
3.30
|
0.01-8.75
|
311,795
|
4.89
|
2007
|
|
2006
|
|
Period
from April 6,
2000
(inception) to
December
31, 2007
|
|
|||||
|
|
US$
|
|
US$
|
|
US$
|
||||
Weighted-average
fair value of underlying stock at grant date
|
6.13
|
5.50
|
3.00
- 6.13
|
|||||||
Dividend
yields
|
-
|
-
|
-
|
|||||||
Expected
volatility
|
40
|
%
|
40.0
|
%
|
28.2%
- 40.0
|
%
|
||||
Risk-free
interest rates
|
3.89%
- 4.90
|
%
|
5.15
|
%
|
2.1%
- 5.15
|
%
|
||||
Expected
lives
|
4.63
years
|
4.49
years
|
1.74
- 4.63 years
|
|||||||
Weighted-average
grant date
fair
market value
|
2.83
|
2.43
|
0.76
- 2.83
|
|
2007
|
|
2006
|
|
Period
from April 6,
2000
(inception) to
December
31, 2007
|
|
||||
|
|
US$
|
|
US$
|
|
US$
|
||||
Weighted-average
fair value of underlying stock at grant date
|
||||||||||
Dividend
yields
|
-
|
-
|
-
|
|||||||
Expected
volatility
|
40
|
%
|
40.0
|
%
|
32.2%
- 99.8
|
%
|
||||
Risk-free
interest rates
|
5.50
|
%
|
5.50
|
%
|
2.8%
- 5.50
|
%
|
||||
Contractual
lives
|
3
years
|
3
years
|
0.56
- 3.17 years
|
|||||||
Average
grant date fair market value
|
1.75
|
1.
75
|
0.68
- 1.75
|
E.
|
Compensation
Cost for Warrant and Option Issuances
|
US$
thousands
|
||||
For
the year ended December 31, 2008
|
264
|
|||
For
the year ended December 31, 2009
|
22
|
|||
For
the year ended December 31, 2010
|
6
|
|||
292
|
Period
of Grant
|
US$
|
Expiration
Date
|
||||
A
Warrants
|
January
2001 - December 2001
|
1.00
|
January
31, 2005
|
|||
B
Warrants
|
November
2001 - February 2003
|
1.50
|
January
31, 2005
|
|||
C
Warrants
|
July
2003 - March 2004
|
3.00
|
December
31, 2005
|
|||
$3.00
Warrants
|
June
2004 - August 2004
|
3.00
|
December
31, 2006
|
|||
D
Warrants
|
September
2004 - April 2005
|
4.00
|
December
31, 2006
|
|||
E
Warrants
|
September
2004 - June 2005
|
5.00
|
December
31, 2006
|
|||
F
and FF Warrants
|
October
2005
|
5.00
|
December
31, 2008
|
|||
G
Warrants
|
December
2005 - January 2006
|
5.50
|
December
31, 2008
|
|||
H
Warrants
|
December
2006 -May 2007
|
8.75
|
September
26, 2009
|
As
of December 31,
|
|
||||||
|
|
2007
|
|
2006
|
|
||
US$
thousands
|
|||||||
Deferred
tax assets:
|
|
|
|
|
|
||
Net
operating loss carryforwards
|
|
$
|
5,967
|
|
$
|
1,814
|
|
Other
|
|
|
524
|
|
|
385
|
|
Total
gross deferred tax assets
|
|
|
6,491
|
|
|
2,199
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
Property
and equipment
|
|
|
(2
|
)
|
|
(3
|
)
|
Total
gross deferred liabilities
|
|
|
(2
|
)
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
Less
valuation allowance
|
|
|
(6,489
|
)
|
|
(2,196
|
)
|
Net
deferred tax assets
|
$
|
-
|
$
|
-
|
For
the year ended December 31,
|
|
||||||
|
|
2007
|
|
2006
|
|
||
|
|
US$
(thousands)
|
|||||
Pre-tax
loss as reported
|
$
|
(13,047
|
)
|
$
|
(2,510
|
)
|
|
U.S.
statutory tax rate
|
34
|
%
|
34
|
%
|
|||
Theoretical
tax on above amount per tax rate applicable to the company
|
$
|
(4,436
|
)
|
$
|
(853
|
)
|
|
Increase
(decrease) in tax liability resulting from:
|
|||||||
Permanent
differences
|
143
|
176
|
|||||
Change
in valuation allowance
|
4,293
|
677
|
|||||
Tax
expenses per statement of income
|
$
|
-
|
$
|
-
|
US$
thousands
|
||||
2008
|
76
|
|||
2009
|
3
|
|||
79
|