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
|
NYSE
Amex
|
Common
Stock Purchase Warrants
|
NYSE
Amex
|
(Title
of Class)
|
(Name
of each exchange on which
registered)
|
PART
I
|
||
Item 1
|
Business
|
4
|
Item 1A
|
Risk
Factors
|
17
|
Item 1B
|
Unresolved
Staff Comments
|
23
|
Item 2
|
Properties
|
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 Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
24
|
Item 6
|
Selected
Financial Data
|
28
|
Item 7
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
28
|
Item 7A
|
Quantitative
and Qualitative Disclosures about Market Risk
|
35
|
Item 8
|
Financial
Statements and Supplementary Data
|
35
|
Item 9
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
35
|
Item 9A
|
Controls
and Procedures
|
36
|
Item 9B
|
Other
Information
|
36
|
PART III
|
||
Item 10
|
Directors,
Executive Officer and Corporate Governance
|
36
|
Item 11
|
Executive
Compensation
|
43
|
Item 12
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
48
|
Item 13
|
Certain
Relationships and Related Transactions and Director
Independence
|
51
|
Item 14
|
Principal
Accounting Fees and Services
|
52
|
Item 15
|
Exhibits,
Financial Statement Schedules
|
53
|
•
|
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 raise capital to finance our exploration and
development activities;
|
•
|
our
capital expenditure program;
|
•
|
Future
market conditions in the oil and gas industry;
and
|
•
|
the
impact of governmental regulation.
|
2008
|
2007
|
|||||||
US
$(000)
|
||||||||
Ma'anit-Joseph
and Joseph Licenses
|
||||||||
Geological
& Geophysical Operations
|
85 | 140 | ||||||
Exploratory
Drilling Operations
|
1,811 | 3,271 | ||||||
Asher
Permit and Asher-Menashe License
|
||||||||
Geological
& Geophysical Operations
|
720 | 177 | ||||||
Hula
Valley
|
||||||||
Geological
& Geophysical Operations
|
40 | - | ||||||
Total
|
$ | 2,656 | $ | 3,588 |
|
·
|
exchange
rate fluctuations;
|
|
·
|
royalty
and tax increases and other risks arising out of Israeli State sovereignty
over the mineral rights in Israel and its taxing authority;
and
|
|
·
|
changes
in Israel's economy that could cause the legislation of oil and gas price
controls.
|
|
·
|
changes
in the Petroleum Law resulting in modification of license and permit
rights;
|
|
·
|
adoption
of new legislation relating to the terms and conditions pursuant to which
operations in the energy sector may be
conducted;
|
|
·
|
changes
in laws and policies affecting operations of foreign-based companies in
Israel; and
|
|
·
|
changes
in governmental energy and environmental policies or the personnel
administering them.
|
•
|
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
5.
|
MARKET FOR THE
REGISTRANT'S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
|
Fiscal
Year
|
High
|
Low
|
||||||
2008:
|
||||||||
First
Quarter
|
$ | 6.70 | $ | 5.90 | ||||
Second
Quarter
|
6.65 | 6.00 | ||||||
Third
Quarter
|
6.59 | 5.17 | ||||||
Fourth
Quarter
|
6.50 | 5.60 |
Fiscal
Year
|
High
|
Low
|
||||||
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$
(000)
|
|||
a. Completion
of Ma'anit #1 well
|
$ | 1,242 |
(1)
|
|
b. Preparation
for drilling of Ma'anit-Rehoboth #2 well
|
$ | 2,507 | ||
c. Exploration
Costs
|
$ | 1,122 | ||
d. Compensation
to officers and directors
|
$ | 3,106 |
(2)
|
|
e. Repayment
of indebtedness
|
$ | 144 |
(3)
|
|
f. Temporary
investments
|
- | |||
g. Accounting,
legal and professional Fees
|
2,005 | |||
h. Other
|
$ | 811 |
(4)
|
(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)
|
Includes
repayment of indebtedness in an amount of $1,053,000, including $434,000
of previously deferred compensation paid to the company's former Chief
Executive Officer (in the amount of $352,000) and to the company's former
Chief Financial Officer (in the amount of $82,000) 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 $204,000, along with normal payments to officers
and directors.
|
(3)
|
Does
not include repayment of indebtedness to officers and directors which is
included in note (2) above. Does include conversions of certain
debts (other than those in note (2) above) into shares in the
IPO.
|
(4)
|
Including
a $60,000 financial advisory and investment banking fee to the underwriter
of the 2006 Public Offering pursuant to an investment banking/consulting
agreement entered into pursuant to the Underwriting Agreement and working
capital (general and
administrative).
|
In US$
(000)
|
||||
Underwriting
Commissions
|
$ | 202 | ||
Expenses
Paid to Underwriter
|
122 | |||
Other
expenses as follows:
|
||||
Accounting
Fees and Expenses
|
66 | |||
Legal
Fees and Expenses
|
50 | |||
Printing
Fees and Advertising
|
304 | |||
Listing
Fees (including SEC filing fees)
|
59 | |||
Transfer
and Escrow Agent Fees
|
6 | |||
Other
Expenses
|
6 | |||
TOTAL
EXPENSES
|
$ | 815 |
|
In US$
|
|||
a. Preparation
for drilling of Ma'anit-Rehoboth #2 well
|
$ | 1,374 | ||
b. Compensation
to officers and directors
|
$ | 250 |
(1)
|
|
c. Temporary
investments
|
$ | 1,662 |
(2)
|
(1)
|
Includes
$120,000 of debt conversion by an officer during the 2nd
closing
|
(2)
|
Balance
in US money market account at December 31,
2008
|
ITEM
7A.
|
QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
ITEM
8.
|
FINANCIAL
STATEMENTS
|
ITEM
9.
|
CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
ITEM
9A(T).
|
CONTROLS AND
PROCEDURES
|
ITEM
9B.
|
OTHER
INFORMATION
|
ITEM
10.
|
DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE
GOVERNANCE.
|
Name
|
Age
|
Position
|
|||
John
M. Brown
|
69
|
Founder,
Chairman of the Board
|
|||
Richard
J. Rinberg
|
56
|
Director,
Chief Executive Officer
|
|||
Glen
H. Perry
|
66
|
Director,
Chief Operating Officer and President
|
|||
William
H. Avery
|
61
|
Director,
Executive Vice President and Treasurer
|
|||
Martin
Van Brauman
|
61
|
Director,
Chief Legal Officer and Senior Vice President
|
|||
Sandra
Green
|
45
|
Chief
Financial Officer and Senior Vice President
|
|||
Paul
Oroian
|
59
|
Director
|
|||
Kent
S. Siegel
|
53
|
Director
|
|||
Robert
Render
|
79
|
Director
|
|||
James
Barron
|
48
|
Director
|
|||
Yehezkel
Druckman
|
70
|
Director
|
|||
Forrest
A. Garb
|
79
|
Director
|
|||
Eliezer
L. Kashai
|
86
|
Vice
President – Israeli Exploration
|
|||
Stephen
E. Pierce
|
66
|
Exploration
Manager
|
Reporting Person
|
Form Type
|
Transaction
|
Form Due
Date
|
Form Filed Date
|
|||||
Glen
Perry
|
4
|
Purchase
of 12,000 Units
|
December
4, 2008
|
February
13, 2009(1)
|
|||||
4
|
Gifting
of 12,000 Units
|
December
4, 2008
|
February
13, 2009(1)
|
||||||
4
|
Gifting
of 12,500 shares
|
December
22, 2008
|
February
13, 2009(1)
|
||||||
John
Brown
|
4
|
Gifting
of 30,000 shares
|
November
20, 2008
|
November
26, 2008
|
|||||
4
|
Gifting
of 12,500 shares
|
December
22, 2008
|
March
16, 2009(1)
|
||||||
Sandra
Green
|
4
|
Gifting
of 700 shares
|
December
22, 2008
|
March
16, 2009(1)
|
|||||
Martin
Van Brauman
|
4
|
Grant
of 4,165 shares
|
July
3, 2008
|
October
28, 2008
|
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
Name and Principal Position
|
Year
|
Salary
|
Bonus
|
Options
|
All Other
Compensation
|
Total
|
||||||||||||||||
US$ (thousands)
|
||||||||||||||||||||||
Richard J. Rinberg, Chief
|
2008
|
275 |
(1)
|
— | 202 |
(3)
|
— | 477 | ||||||||||||||
Executive Officer
|
2007
|
254 |
(2)
|
— | 55 |
(3)
|
— | 309 | ||||||||||||||
Glen H. Perry, President and
|
2008
|
250 |
(4)
|
— | — | 144 |
(5)
|
394 | ||||||||||||||
Chief Operating Officer
|
2007
|
204 |
(4)
|
— | — | 203 |
(6)
|
407 | ||||||||||||||
William H. Avery, Executive
|
2008
|
225 |
(7)
|
— | — | — | 225 | |||||||||||||||
Vice President and Treasurer
|
2007
|
150 |
(7)
|
— | 257 |
(8)
|
20 |
(9)
|
427 |
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 | - | - | $ | 0.01 |
10/31/17
|
||||||||||||||
Glen
H. Perry
|
- | - | - | - | - | |||||||||||||||
William
H. Avery
|
40,000 | - | - | $ | 0.01 |
10/31/17
|
Name
|
Fees Earned
or Paid
in Cash
|
Stock
Awards
|
Option
Awards
|
All Other
Compensation
|
Total
|
|||||||||||||||
US$ (thousands)
|
||||||||||||||||||||
John
M. Brown
|
156 |
(1)
|
— | — | — | 156 | ||||||||||||||
James
A. Barron
|
18 | — | — | — | 18 | |||||||||||||||
Yehezkel
Druckman
|
18 | — | — |
(2)
|
— | 18 | ||||||||||||||
Forrest
A. Garb
|
18 | — | — |
(3)
|
— | 18 | ||||||||||||||
Paul
Oroian
|
24 | — | — |
(4)
|
— | 24 | ||||||||||||||
Robert
Render
|
18 | — | — | — | 18 | |||||||||||||||
Kent
S. Siegel
|
24 | — | — |
(5)
|
— | 24 |
(1)
|
Of
this amount, $35,000 was paid and $121,000 was deferred through July 1,
2009 (See discussion
below).
|
(2)
|
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, which
options were originally scheduled to expire on December 31, 2008. The
expiration date was extended to December 31, 2009. 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. An additional
expense of $3,000 was recognized at the time of the extension
grant. The options became exercisable on July 1, 2007. The
rights underlying the options vested on November 1,
2005.
|
(3)
|
Mr.
Garb holds director’s stock option under our 2005 Stock Option Plan to
purchase 25,000 shares of Common Stock at $5.00, which options were
originally scheduled to expire on December 31, 2008. The expiration date
was extended to December 31, 2009. 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. An additional expense of $3,000 was recognized
at the time of the extension grant. The options became
exercisable on July 1, 2007. The rights underlying the options vested on
November 1, 2005.
|
(4)
|
Mr.
Oroian holds a warrant, granted on October 27, 2005, exercisable
commencing July 1, 2007 to purchase 25,000 shares of Common Stock, which
warrant was originally exercisable through December 31, 2008. The
expiration date was, extended to December 31, 2009, at $5.00 per share.
The warrant vested on the grant date. The warrants were valued
at the time of issuance and an additional expense of $3,000 was recognized
at the time of the termination
extension.
|
(5)
|
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, subsequently extended to December 31, 2009, at $5.00
per share. The warrant vested on the grant date. The
warrants were valued at the time of issuance and an additional expense of
$3,000 was recognized at the time of the termination
extension.
|
ITEM
12.
|
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
|
726,000 |
(1)
|
6.7 | % | ||||
Richard
J. Rinberg
|
391,833 |
(2)
|
3.6 | % | ||||
Glen
H. Perry
|
491,000 |
(3)
|
4.5 | % | ||||
William
Avery
|
281,334 |
(4)
|
2.6 | % | ||||
Martin
Van Brauman
|
56,987 |
(5)
|
* | |||||
Sandra
F. Green
|
7,182 |
(6)
|
* | |||||
Robert
Render
|
100,000 | )(7) | * | |||||
James
A. Barron
|
235,572 | (8) | 2.2 | % | ||||
Kent
S. Siegel
|
41,225 |
(9)
|
* | |||||
Paul
Oroian
|
32,471 |
(10)
|
* | |||||
Yehezkel
Druckman
|
25,000 |
(11)
|
* | |||||
Forrest
A. Garb
|
25,000 |
(11)
|
* | |||||
All
directors and executive officers as a group (12 members)
|
2,213,604 |
(12)
|
19.9 | % |
(1)
|
Includes
100,000 shares owned by Mr. Brown’s wife and 200,000 shares issued to a
trust company for the benefit of Mr. Rinberg, as to which Mr. Brown
disclaims beneficial ownership
|
(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, subject to a voting
proxy in favor of Mr. Brown; and (c) employee stock options awarded under
the Zion 2005 Stock Option Plan to purchase 50,000 shares of common stock
at $0.01 par share through December 3, 2017. Does not include
options for an additional 30,000 shares of common stock at $0.01 per share
exercisable through December 3, 2017 which are scheduled to vest in
2009.
|
(3)
|
Includes
(a) 30,000 shares and (b) warrants to purchase 30,000 shares at $7 per
share through January 31, 2012, owned by a person with whom Mr. Perry
shares a residence, of which Mr. Perry disclaims beneficial
ownership
|
(4)
|
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
and (b) 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
December 3, 2017.
|
(5)
|
Includes
(a) 2,000 shares owned by two of Mr. Van Brauman’s adult children who
share his residence, in which Mr. Van Brauman disclaims beneficial
interest, (b) employee stock options awarded under Zion’s 2005 Stock
Option Plan to purchase 20,000 shares of common stock at $5.60 per share
through June 30, 2012 and (c) warrants to purchase 2,000 shares at $7 per
share through January 31, 2012.
|
(6)
|
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 December
3, 2017.
|
(7)
|
Includes
(a) 93,000 shares owned by a trust controlled by Mr. Render and (b) 7,000
shares owned by Mr. Render's wife.
|
(8)
|
Includes
(a) 45,000 shares held by trusts for Dr. Barron's children, in which
shares Dr. Barron disclaims beneficial interest, (b) 56,000 shares owned
by a ministry of which Dr. Barron is president and a director, and in
which shares Dr. Barron disclaims any beneficial interest, and (c)
warrants to purchase 50,000 shares at $7 per share through January 31,
2012, of which 10,000 of those warrants are held by the ministry
previously referenced.
|
(9)
|
Includes
(a) a warrant to purchase 25,000 shares of common stock through December
31, 2009 at $5.00 per share; and (b) 16,225 shares held by Mr. Siegel's
wife, of which Mr. Siegel disclaims
ownership.
|
(10)
|
Includes
a warrant to purchase 25,000 shares of common stock through December 31,
2009 at $5.00 per share.
|
(11)
|
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, 2009.
|
(12)
|
Includes
all shares noted in notes 1-11
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)
|
50,000 | $ | 5.00 | 0 | ||||||||
-
Underwriter’s Warrants (2)
|
46,621 | $ | 8.75 | 0 | ||||||||
TOTAL
|
347,170 | $ | 4.39 | 749,451 |
(1)
|
In
October 2005, warrants to purchase 50,000 common shares of our stock at
$5.00 per share were issued to two 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, which date
was subsequently extended to December 31,
2009.
|
(2)
|
Warrants
issued to an underwriter pursuant to the terms of an underwriting
agreement in connection with our initial 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
13.
|
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
ITEM
15.
|
EXHIBITS, FINANCIAL
STATEMENTS SCHEDULES
|
Exhibit
Number
|
Description
|
|
3.1
|
Certificate
of Amendment to Amended and Restated Certificate of Incorporation of Zion
Oil & Gas, Inc.
|
|
3.2
|
Amended
and Restated Bylaws of Zion Oil & Gas, Inc. (incorporated by reference
to Exhibit 3.2 to the Company’s Form 10-KSB for the year ended December
31, 2007 as filed with the SEC on March 28, 2008)
|
|
9.1
|
Rinberg-Brown
Voting Agreement (incorporated by reference to Exhibit 9.4 to the
Company’s Form 10-KSB for the year ended December 31, 2005 as filed with
the SEC on September 14, 2006)
|
|
10.1
|
Joseph
License (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K as filed with the SEC on October 16,
2007)
|
|
10.2
|
Asher
–Menashe License (incorporated by reference to Exhibit 10-2 to the
Company’s Form 10-QSB for the quarter ended June 30, 2007 as filed with
the SEC on August 20, 2007)
|
|
10.4
|
Executive
Employment and Retention Agreements (Management
Agreements)
|
|
(i)
Chairman of the Board Appointment Agreement dated as of January 18, 2008,
between Zion Oil & Gas, Inc. and John M. Brown (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as
filed with the SEC on January 24, 2008)
|
||
(ii)
Employment Agreement dated as of January 1, 2004, between Zion Oil &
Gas, Inc. and Glen H. Perry (incorporated by reference to Exhibit 10.4(iv)
to the Company’s Form 10-KSB for the year ended December 31, 2005 as filed
with the SEC on September 14, 2006)
|
||
(iii)
Employment Agreement dated as of July 3, 2007, between Zion Oil & Gas,
Inc. and Martin M. Van Brauman (incorporated by reference to Exhibit 10.3
to the Company’s Form 10-QSB for the quarter ended June 30, 2007 as filed
with the SEC on August 20, 2007)
|
||
(iv)
Employment Agreement dated as of November 1, 2007, between Zion Oil &
Gas, Inc. and Richard J. Rinberg (incorporated by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on
December 10, 2007)
|
||
(v)
Retention and Management Services Agreement dated as of November 1, 2005,
between Zion Oil & Gas and Richard Rinberg (incorporated by reference
to Exhibit 10.4(vii) to the Company’s Form 10-KSB for the year ended
December 31, 2005 as filed with the SEC on September 14,
2006)
|
||
(vi)
Employment Agreement dated as of December 1, 2007, between Zion Oil &
Gas, Inc. and William H. Avery (incorporated by reference to Exhibit 10.2
to the Company’s Current Report on Form 8-K as filed with the SEC on
December 10, 2007)
|
||
(vii) Employment
Agreement dated February 1, 2009 between Zion Oil & Gas, Inc. and
Sandra F. Green (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K as filed with the SEC on February 5,
2009)
|
||
10.5
|
International
Daywork Drilling Contract – Land dated as of September 12, 2008
between Zion Oil & Gas, Inc. and Aladdin Middle East Ltd.
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K as filed with the SEC on September 16,
2008)
|
|
10.6
|
Amendment
No. 1, dated as of December 7, 2008, to International Daywork Drilling
Contract – Land dated as of September 12, 2008 between Zion Oil &
Gas, Inc. and Aladdin Middle East Ltd. (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as
filed with the SEC on December 16, 2008)
|
|
10.7*
|
Settlement
Agreement dated as of January 9, 2009, between Zion Oil & Gas, Inc.
and Philip Mandelker
|
|
10.8
|
2005
Stock Option Plan (incorporated by reference to Exhibit 10.5 to the
Company’s Form 10-KSB for the year ended December 31, 2005 as filed with
the SEC on September 14, 2006)
|
|
14.1
|
Code
of Ethics (incorporated by reference to Exhibit 14.1 to the Company’s
Current Report on Form 8-K as filed with the SEC on December 10,
2007)
|
|
23.1*
|
Consent of Lane Gorman Trubitt, L.L.P. | |
23.2*
|
Consent of Somekh Chaikin, independent registered public accounting firm, a member of KPMG International |
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)
|
ZION
OIL & GAS, INC.
|
||||
(Registrant)
|
||||
By:
|
/s/
Richard J. Rinberg
|
By:
|
/s/
Sandra F. Green
|
|
Richard
J. Rinberg
|
Sandra
F. Green,
|
|||
Chief
Executive Officer
(Principal
Executive Officer)
|
Senior
Vice-President
(Principal
Financial Officer)
|
|||
Date:
|
March
30, 2009
|
Date:
|
March
30, 2009
|
*
|
Chairman
of the Board
|
March
30, 2009
|
||
John
M. Brown
|
||||
*
|
Chief
Executive Officer and Director
|
March
30, 2009
|
||
Richard
J. Rinberg
|
||||
*
|
President,
Chief Operating Officer and Director
|
March
30, 2009
|
||
Glen
H. Perry
|
||||
*
|
Executive
Vice President, Treasurer and Director
|
March
30, 2009
|
||
William
H. Avery
|
||||
*
|
Chief
Legal Officer, Senior Vice President,
|
March
30, 2009
|
||
Martin
M. Van Brauman
|
Secretary and Director | |||
*
|
Director
|
March
30, 2009
|
||
Robert
Render
|
||||
*
|
Director
|
March
30, 2009
|
||
Yehezkel
Druckman
|
||||
*
|
Director
|
March
30, 2009
|
||
Forrest
A. Garb
|
||||
*
|
Director
|
March
30, 2009
|
||
Paul
Oroian
|
||||
*
|
Director
|
March
30, 2009
|
||
Kent
S. Siegel
|
||||
*
|
Director
|
March
30, 2009
|
||
James
(Andy) Barron
|
*
By:
|
/s/
Richard J. Rinberg
|
|||
Richard
J. Rinberg, Attorney-in-Fact
|
INDEX
TO FINANCIAL STATEMENTS
|
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-14
|
Notes
to Financial Statements
|
F-16 to F-43
|
December 31
|
December 31
|
|||||||
2008
|
2007
|
|||||||
US$ thousands
|
US$ thousands
|
|||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
1,726 | 4,590 | ||||||
Prepaid
expenses and other
|
523 | 61 | ||||||
Deferred
offering costs
|
14 | - | ||||||
Refundable
Value-Added Tax
|
26 | 65 | ||||||
Total
current assets
|
2,289 | 4,716 | ||||||
Unproved
oil and gas properties, full cost method
|
5,246 | 2,590 | ||||||
Property
and equipment
|
||||||||
Net
of accumulated depreciation of $60,000 and $33,000
|
83 | 73 | ||||||
Other
assets
|
||||||||
Assets
held for severance benefits
|
58 | 42 | ||||||
Total
assets
|
7,676 | 7,421 | ||||||
Liabilities
and Stockholders’ Equity
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
117 | 128 | ||||||
Accrued
liabilities
|
223 | 172 | ||||||
Deferred
officers compensation – short term
|
1,487 | 1,017 | ||||||
Total
current liabilities
|
1,827 | 1,317 | ||||||
Provision
for severance pay
|
174 | 316 | ||||||
Deferred
officers' compensation
|
120 | - | ||||||
Total
liabilities
|
2,121 | 1,633 | ||||||
Commitments
and contingencies (See Note 8)
|
||||||||
Stockholders’
equity
|
||||||||
Common
stock, par value $.01; 30,000,000 shares authorized:
|
||||||||
2008
– 10,541,563 shares and 2007 – 10,120,893 shares
|
||||||||
issued
and outstanding
|
105 | 101 | ||||||
Additional
paid-in capital
|
29,855 | 26,074 | ||||||
Deficit
accumulated in development stage
|
(24,405 | ) | (20,387 | ) | ||||
Total
stockholders’ equity
|
5,555 | 5,788 | ||||||
Total
liabilities and stockholders' equity
|
7,676 | 7,421 |
Period from
|
||||||||||||
April 6, 2000
|
||||||||||||
(inception) to
|
||||||||||||
For the year ended December 31
|
December 31
|
|||||||||||
2008
|
2007
|
2008
|
||||||||||
US$ thousands
|
US$ thousands
|
US$ thousands
|
||||||||||
Revenues
|
- | - | - | |||||||||
General
and administrative expenses
|
||||||||||||
Legal
and professional
|
1,015 | 1,209 | 5,094 | |||||||||
Salaries
|
1,663 | 1,475 | 5,708 | |||||||||
Other
|
1,397 | 1,074 | 3,654 | |||||||||
Impairment
of unproved oil and gas properties
|
- | 9,494 | 9,494 | |||||||||
Loss
from operations
|
(4,075 | ) | (13,252 | ) | (23,950 | ) | ||||||
Other
expense, net
|
||||||||||||
Termination
expenses of offerings
|
(20 | ) | - | (527 | ) | |||||||
Other
income, net
|
- | 4 | 4 | |||||||||
Interest
income, net
|
77 | 201 | 68 | |||||||||
Loss
before income taxes
|
(4,018 | ) | (13,047 | ) | (24,405 | ) | ||||||
Income
taxes
|
- | - | - | |||||||||
Net
loss
|
(4,018 | ) | (13,047 | ) | (24,405 | ) | ||||||
Net
loss per share of common stock - basic and diluted (in
US$)
|
(0.39 | ) | (1.34 | ) | (4.22 | ) | ||||||
Weighted-average
shares outstanding – basic and diluted (in thousands)
|
10,193 | 9,712 | 5,779 |
Deficit
|
||||||||||||||||||||||||||||
Additional
|
Accumulated
|
|||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Paid-in
|
in development
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
stage
|
Total
|
||||||||||||||||||||||
Thousands
|
US$ 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
($1 per share)
|
- | - | 175 | * - | 175 | - | 175 | |||||||||||||||||||||
Costs
associated with the issuance of shares
|
- | - | - | - | (85 | ) | - | (85 | ) | |||||||||||||||||||
Waived
interest on conversion of debt
|
- | - | - | - | 1 | - | 1 | |||||||||||||||||||||
Value
of warrants granted to employees
|
- | - | - | - | 37 | - | 37 | |||||||||||||||||||||
Value
of warrants granted to directors and consultants
|
- | - | - | - | 3 | - | 3 | |||||||||||||||||||||
Net
loss
|
- | - | - | - | - | (207 | ) | (207 | ) | |||||||||||||||||||
Balances,
December 31, 2001
|
- | - | 3,000 | * - | 536 | (212 | ) | 324 |
Deficit
|
||||||||||||||||||||||||||||
Additional
|
Accumulated
|
|||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Paid-in
|
in development
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
stage
|
Total
|
||||||||||||||||||||||
Thousands
|
US$ 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
($10 per share)
|
25 | * - | 22 | * - | 254 | - | 254 | |||||||||||||||||||||
Payment
of accounts payable through issuance of preferred shares and
warrants
|
13 | * - | - | - | 127 | - | 127 | |||||||||||||||||||||
Payment
of accounts payable through issuance of common shares and
warrants
|
- | - | 111 | 1 | 131 | - | 132 | |||||||||||||||||||||
Payment
of note payable through issuance of shares and warrants
|
5 | * - | - | - | 50 | - | 50 | |||||||||||||||||||||
Payment
of accounts payable to employee through issuance of shares upon exercise
of warrants
|
- | - | 400 | 4 | 76 | - | 80 | |||||||||||||||||||||
Costs
associated with the issuance of shares
|
- | - | - | - | (160 | ) | - | (160 | ) | |||||||||||||||||||
Waived
interest on conversion of debt
|
- | - | - | - | 3 | - | 3 | |||||||||||||||||||||
Deferred
financing costs on debt conversions / modifications
|
- | - | - | - | 21 | - | 21 | |||||||||||||||||||||
Value
of warrants granted to employees
|
- | - | - | - | 1 | - | 1 | |||||||||||||||||||||
Value
of warrants granted to directors and consultants
|
- | - | - | - | 13 | - | 13 | |||||||||||||||||||||
Net
loss
|
- | - | - | - | - | (403 | ) | (403 | ) | |||||||||||||||||||
Balances,
December 31, 2002
|
43 | * - | 3,553 | 35 | 1,042 | (615 | ) | 462 |
Deficit
|
||||||||||||||||||||||||||||
Additional
|
Accumulated
|
|||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Paid-in
|
in development
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
stage
|
Total
|
||||||||||||||||||||||
Thousands
|
US$ 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 ($3 per
share):
|
||||||||||||||||||||||||||||
for
cash consideration
|
- | - | 33 | * - | 99 | - | 99 | |||||||||||||||||||||
for
reduction of accounts payable
|
- | - | 3 | * - | 9 | - | 9 | |||||||||||||||||||||
Issuance
of shares upon exercise of warrants:
|
||||||||||||||||||||||||||||
for
cash consideration
|
- | - | 25 | * - | 25 | - | 25 | |||||||||||||||||||||
for
reduction of accounts payable
|
- | - | 124 | 1 | 142 | - | 143 | |||||||||||||||||||||
Issuance
of shares upon exercise of warrants for cash consideration
|
- | - | 63 | 1 | 82 | - | 83 | |||||||||||||||||||||
Payment
of account payable through issuance of shares
|
- | - | 80 | 1 | 139 | - | 140 | |||||||||||||||||||||
Costs
associated with the issuance of shares
|
- | - | - | - | (58 | ) | - | (58 | ) | |||||||||||||||||||
Value
of warrants granted to employees
|
- | - | - | - | 47 | - | 47 | |||||||||||||||||||||
Deferred
financing costs on debt conversions / modifications
|
- | - | - | - | (10 | ) | - | (10 | ) | |||||||||||||||||||
Net
loss
|
- | - | - | - | - | (873 | ) | (873 | ) | |||||||||||||||||||
Balances
as at December 31, 2003
|
- | - | 4,859 | 48 | 1,751 | (1,488 | ) | 311 |
Deficit
|
||||||||||||||||||||
Additional
|
Accumulated
|
|||||||||||||||||||
Common Stock
|
paid-in
|
in development
|
||||||||||||||||||
Shares
|
Amounts
|
capital
|
stage
|
Total
|
||||||||||||||||
Thousands
|
US$ 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 |
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 |
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 Unit Offering
for subscription shares:
|
||||||||||||||||||||
For
cash
|
405 | 4 | 4,040 | 4,044 | ||||||||||||||||
For
debt
|
12 | *- | 120 | 120 | ||||||||||||||||
Value
of warrants and options granted to employees
|
- | - | 266 | - | 266 | |||||||||||||||
Value
of options granted to directors and consultants
|
- | - | 44 | - | 44 | |||||||||||||||
Value
of shares granted to employees
|
4 | *- | 25 | - | 25 | |||||||||||||||
Value
of shares gifted to employees
|
- | - | 101 | - | 101 | |||||||||||||||
Costs
associated with the issuance of shares
|
- | - | (815 | ) | (815 | ) | ||||||||||||||
Net
loss
|
- | - | - | (4,018 | ) | (4,018 | ) | |||||||||||||
Balances
December 31, 2008
|
10,542 | 105 | 29,855 | (24,405 | ) | 5,555 |
Period from
|
||||||||||||
April 6, 2000
|
||||||||||||
(inception) to
|
||||||||||||
For the year ended December 31
|
December 31
|
|||||||||||
2008
|
2007
|
2008
|
||||||||||
US$ thousands
|
US$ thousands
|
US$ thousands
|
||||||||||
Cash
flows from operating activities
|
||||||||||||
Net
loss
|
(4,018 | ) | (13,047 | ) | (24,405 | ) | ||||||
Adjustments
required to reconcile net loss to net cash
|
||||||||||||
used
in operating activities:
|
||||||||||||
Depreciation
|
29 | 16 | 66 | |||||||||
Officer,
director and other fees, paid via common stock
|
126 | 475 | 2,265 | |||||||||
Cost
of warrants issued to employees, directors & others
|
310 | 416 | 1,284 | |||||||||
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
|
(462 | ) | (40 | ) | (523 | ) | ||||||
Increase
in deferred offering costs
|
(14 | ) | - | (14 | ) | |||||||
Refundable
value-added tax
|
39 | (55 | ) | (26 | ) | |||||||
Severance
pay, net
|
(158 | ) | 223 | 116 | ||||||||
Accounts
payable
|
(11 | ) | (134 | ) | 760 | |||||||
Accrued
liabilities
|
51 | (330 | ) | 224 | ||||||||
Increase(decrease)
in deferred officers' compensation (net)
|
710 | (534 | ) | 1,727 | ||||||||
Net
cash used in operating activities
|
(3,398 | ) | (3,512 | ) | (8,354 | ) | ||||||
Cash
flows from investing activities
|
||||||||||||
Acquisition
of property and equipment
|
(39 | ) | (48 | ) | (153 | ) | ||||||
Investment
in oil and gas properties
|
(2,656 | ) | (3,438 | ) | (14,890 | ) | ||||||
Net
cash used in investing activities
|
(2,695 | ) | (3,486 | ) | (15,043 | ) | ||||||
Cash
flows from financing activities
|
||||||||||||
Deferred
financing costs on debt conversions and modification
|
- | - | 89 | |||||||||
Loan
proceeds – related party
|
- | - | 259 | |||||||||
Loan
principal repayments – related party
|
- | (107 | ) | (259 | ) | |||||||
Loan
proceeds – other
|
- | - | 500 | |||||||||
Proceeds
from sale of stock
|
4,044 | 9,352 | 27,819 | |||||||||
Costs
associated with the issuance of shares
|
(815 | ) | (1,027 | ) | (3,285 | ) | ||||||
Net
cash provided by financing activities
|
3,229 | 8,218 | 25,123 | |||||||||
Net
increase (decrease) in cash
|
(2,864 | ) | 1,220 | 1,726 | ||||||||
Cash
– beginning of period
|
4,590 | 3,370 | - | |||||||||
Cash
– end of period
|
1,726 | 4,590 | 1,726 |
Period from
|
||||||||||||
April 6, 2000
|
||||||||||||
(inception) to
|
||||||||||||
For the year ended December 31
|
December 31
|
|||||||||||
2008
|
2007
|
2008
|
||||||||||
US$ thousands
|
US$ thousands
|
US$ thousands
|
||||||||||
Supplemental
information
|
||||||||||||
Cash
paid for interest
|
- | 1 | 58 | |||||||||
Cash
paid for income taxes
|
- | - | - | |||||||||
Non-cash
operating, investing and financing activities:
|
||||||||||||
Payment
of accounts payable through issuance
of preferred and common stock
|
- | - | 950 | |||||||||
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
|
120 | 235 | 820 | |||||||||
Shares
issued for services provided by officer
|
- | 208 | 500 | |||||||||
Value
of warrants and options granted to employees
|
266 | 337 | 1,108 | |||||||||
Value
of warrants and options granted to directors and
consultants
|
44 | - | 77 | |||||||||
Value
of warrants granted to underwriters
|
- | 79 | 99 | |||||||||
Value
of shares granted to employees
|
25 | 25 | 50 | |||||||||
Value
of shares gifted to directors, employees and
service providers
|
101 | 7 | 255 | |||||||||
Deferred
financing costs
|
- | - | 85 | |||||||||
Transfer
of inventory to oil and gas properties
|
- | 150 | 150 |
|
A.
|
Nature
of Operations
|
|
A.
|
Nature
of Operations (cont’d)
|
|
A.
|
Nature
of Operations (cont’d)
|
|
L.
|
Recently
Issued Accounting Pronouncements
|
|
L.
|
Recently
Issued Accounting Pronouncements
(cont’d)
|
|
L.
|
Recently
Issued Accounting Pronouncements
(cont’d)
|
|
M.
|
Recently
Adopted Accounting Pronouncements
|
|
1.
|
SFAS
157 – Fair Value Measurements
(SFAS 157)
|
|
M.
|
Recently
Adopted Accounting Pronouncements
(cont’d)
|
|
1.
|
SFAS
157 – Fair Value Measurements (SFAS 157)
(cont’d)
|
|
2.
|
SFAS
159 – Fair Value Option for Financial Assets and Financial Liabilities
(SFAS 159)
|
|
M.
|
Recently
Adopted 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
Company’s liability for severance pay for its Israeli employees is
calculated pursuant to Israeli severance pay law based on the most recent
salary of the employee multiplied by the number of years of employment, as
of the balance sheet date. Employees are entitled to one
month’s salary for each year of employment, or a portion
thereof. Certain senior executives are entitled to receive
additional severance pay. The Company’s liability for all of
its Israeli employees is partly provided by monthly deposits for insurance
policies and by an accrual. The value of these policies is
recorded as an asset in the Company’s balance
sheet.
|
|
The
deposited funds include profits/loss accumulated up to the balance sheet
date. The deposited funds may be withdrawn only upon the
fulfillment of the obligation pursuant to Israeli Severance Pay Law or
labor agreements. The value of the deposited funds is based on
the cash surrender value of these
policies.
|
|
D.
|
The
expenses in respect of severance pay for the years ended December 31, 2008
and 2007 and the period from April 6, 2000 to December 31, 2008 amounted
to $(93,000), $85,000 and $43,000
respectively.
|
|
E.
|
Withdrawals
from the funds may be made only upon termination of
employment.
|
|
F.
|
As
of December 31, 2008, the Company has a provision for severance pay of
$174,000. The balance at December 31, 2007 was $316,000, of
which all was long-term. As of December 31, 2008 and 2007, the Company has
$58,000 and $42,000 respectively, deposited in funds managed by major
Israeli financial institutions which are earmarked to cover severance pay
liability. Such deposits are not considered to be “plan assets” and are
therefore included in other assets.
|
Year ended December
31 2008
|
Year ended
December 31 2007
|
|||||||
US$ thousands
|
US$ thousands
|
|||||||
Excluded
from amortization base:
|
||||||||
Drilling
operations, completion costs and other related costs
|
3,641 | 2,035 | ||||||
Capitalized
salary costs
|
582 | 145 | ||||||
Legal
costs and license fees
|
684 | 220 | ||||||
Other
costs
|
339 | 190 | ||||||
$ | 5,246 | $ | 2,590 |
Year ended
December 31
2008
|
Year ended
December 31
2007
|
Period from April
6, 2000
(inception) to
December 31,
2008
|
||||||||||
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
|
Number of
|
Expiration
|
Warrants or
|
||||||
price
|
Shares
|
Date
|
Options
|
||||||
To
non-employees
|
|||||||||
8.75
|
46,621
|
September 26, 2009
|
Warrants
|
||||||
To
employees and directors
|
|||||||||
5.00
|
50,000
|
December 31, 2009
|
Warrants
|
||||||
5.00
|
50,000
|
December 31, 2009
|
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
|
|||||||||
7.00
|
416,404
|
January 31, 2012
|
Warrants
|
||||||
5.81*
|
763,574
|
Number of
|
Weighted Average
|
|||||||
shares
|
exercise price
|
|||||||
US$
|
||||||||
Granted
from April 6, 2000 (inception) to December 31, 2006 to:
|
||||||||
Employees,
officers and directors as part compensation
|
1,750,936 | 1.73 | ||||||
Underwriters
(in connection with IPO)
|
11,590 | 8.75 | ||||||
Private
placement investors and others
|
1,105,492 | 2.84 | ||||||
Expired/canceled
|
(587,726 | ) | 2.68 | |||||
Exercised
|
(1,984,077 | ) | 1.59 | |||||
Outstanding,
December 31, 2006
|
296,215 | 5.18 | ||||||
Granted
during 2007 to:
|
||||||||
Employees,
officers and directors as part compensation
|
133,882 | 2.10 | ||||||
Underwriters
(in connection with IPO)
|
35,031 | 8.75 | ||||||
Expired/Canceled
|
(53,333 | ) | 5.00 | |||||
Outstanding,
December 31, 2007
|
411,795 | 4.50 | ||||||
Granted
during 2008 to:
|
||||||||
Investors
in Follow On Public Offering
|
416,404 | 7.00 | ||||||
Expired
|
(64,625 | ) | 5.15 | |||||
Outstanding,
December 31, 2008
|
763,574 | 5.81 | ||||||
Exercisable,
December 31, 2008
|
317,170 | 4.27 |
Shares underlying outstanding
|
Shares underlying outstanding
|
||||||||||||||
warrants and options (nonvested)
|
warrants and options (all fully vested)
|
||||||||||||||
Weighted
|
Weighted
|
||||||||||||||
average
|
average
|
||||||||||||||
remaining
|
Weighted
|
remaining
|
Weighted
|
||||||||||||
Range of
|
Number
|
contractual
|
average
|
Range of
|
Number
|
contractual
|
Average
|
||||||||
exercise price
|
outstanding
|
life (years)
|
exercise price
|
exercise price
|
Outstanding
|
life (years)
|
exercise price
|
||||||||
US$
|
US$
|
US$
|
US$
|
||||||||||||
-
|
-
|
-
|
-
|
0.01
|
83,882
|
8.93
|
0.01
|
||||||||
-
|
-
|
-
|
-
|
5.00
|
100,000
|
1.00
|
5.00
|
||||||||
7.00
|
416,404
|
3.08
|
7.00
|
5.00
|
66,667
|
2.00
|
5.00
|
||||||||
5.60
|
30,000
|
5.00
|
5.60
|
5.60
|
20,000
|
4.00
|
5.60
|
||||||||
-
|
-
|
-
|
-
|
8.75
|
46,621
|
0.74
|
8.75
|
||||||||
5.60-7.00
|
446,404
|
6.91
|
0.01-8.75
|
317,170
|
4.27
|
Period
from April 6,
|
||||||||||||
2000
(inception) to
|
||||||||||||
2008
|
2007
|
December
31, 2008
|
||||||||||
US$
|
US$
|
US$
|
||||||||||
Weighted-average
fair value of underlying stock at grant date
|
- | 6.13 | 3.00 – 6.13 | |||||||||
Dividend
yields
|
- | - | - | |||||||||
Expected
volatility
|
- | 40.0 | % | 28.2% - 56.37 | % | |||||||
Risk-free
interest rates
|
- | 3.89-4.90 | % | 2.1% - 5.15 | % | |||||||
Expected
lives
|
- |
4.63 years
|
1.74 – 4.63 years
|
|||||||||
Weighted-average
grant date
fair
market value
|
- | 2.83 | 0.76 - 2.83 |
Period from April 6,
|
||||||||||||
2000 (inception) to
|
||||||||||||
2008
|
2007
|
December 31, 2008
|
||||||||||
US$
|
US$
|
US$
|
||||||||||
Weighted-average
fair value of underlying stock at grant date
|
5.00 | 8.75 | 1.00 – 8.75 | |||||||||
Dividend
yields
|
- | - | - | |||||||||
Expected
volatility
|
49.63 | % | 40.0 | % | 32.2% - 99.8 | % | ||||||
Risk-free
interest rates
|
.53 | % | 5.50 | % | 2.8% - 5.50 | % | ||||||
Contractual
lives
|
1.12
years
|
3
years
|
0.56
– 3.17 years
|
|||||||||
Average
grant date fair market value
|
0.44 | 1. 75 | 0.68 – 2.74 |
|
F.
|
Compensation
Cost for Warrant and Option
Issuances
|
US$ thousands
|
||||
For
the year ended December 31, 2009
|
22 | |||
For
the year ended December 31, 2010
|
6 | |||
28 |
Period of Grant
|
Exercise
Price
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
|
||||
$3.00
Warrants
|
June 2004 – August 2004
|
3.00
|
December 31, 2006
|
||||
D
Warrants
|
September 2004 – April 2005
|
4.00
|
December 31, 2006
|
||||
E
Warrants
|
September 2004 – June 2005
|
5.00
|
December 31, 2006
|
||||
F
and FF Warrants
|
October 2005
|
5.00
|
* December 31, 2008
|
||||
G
Warrants
|
December 2005 – January 2006
|
5.50
|
December 31, 2008
|
||||
H
Warrants
|
December 2006 –May 2007
|
8.75
|
September 26, 2009
|
||||
Unit
Warrants
|
October 2008 – December 2008
|
7.00
|
January 31, 2012
|
As of December 31,
|
||||||||
2008
|
2007
|
|||||||
US$ thousands
|
||||||||
Deferred
tax assets:
|
||||||||
Net
operating loss carryforwards
|
$ | 7,218 | $ | 5,967 | ||||
Other
|
643 | 524 | ||||||
Total
gross deferred tax assets
|
7,861 | 6,491 | ||||||
Less
valuation allowance
|
(7,846 | ) | (6,489 | ) | ||||
Net
deferred tax assets
|
15 | 2 | ||||||
Deferred
tax liabilities:
|
||||||||
Property
and equipment
|
(15 | ) | (2 | ) | ||||
Total
gross deferred tax liabilities
|
(15 | ) | (2 | ) | ||||
Net
deferred tax asset
|
$ | - | $ | - |
For the year ended December 31,
|
||||||||
2008
|
2007
|
|||||||
US$ (thousands)
|
||||||||
Pre-tax
loss as reported
|
$ | (4,018 | ) | $ | (13,047 | ) | ||
U.S.
statutory tax rate
|
34 | % | 34 | % | ||||
Theoretical
tax expense
|
$ | (1,366 | ) | $ | (4,436 | ) | ||
Increase
(decrease) in income tax expense resulting from:
|
||||||||
Permanent
differences
|
9 | 143 | ||||||
Change
in valuation allowance
|
1,357 | 4,293 | ||||||
Income
tax expense
|
$ | - | $ | - |
US$ thousands
|
||||
2009
|
102 | |||
2010
|
58 | |||
2011
|
57 | |||
217 |