ZNOG 10-K & 10-Q changes, risk factors and insider trading
Zion Oil & Gas Inc. (also ZNOGW) · OTC · Oil & Gas Field Exploration Services · CIK 1131312 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Removed heading “The outbreak of Covid-19 in 2020, and the subsequent variants of Covid which continue today, may interrupt or delay our exploration activities and could affect our capital raising efforts on which we rely to continue our exploration program and maintain our operations, thereby adversely affecting our business.”
Largest changes
We are increasingly dependent upon information technology systems, infrastructure and data to operate our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including, among other things, trade secrets or other intellectual property, proprietary business information and personal information). It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information.see in full comparisonWeAdditionally,alsowe have outsourced elements of our operations to third parties, and as a result we manage a number of third-party vendors who may or could have access to our confidential information.The size and complexity of our information technology systems, and those of third-party vendors with whom we contract, and the large amounts of confidential information stored on those systems, make such systems vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees, third-party vendors and/or business partners, or to cyber-attacks by malicious third parties.Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information. The size and complexity of our information technology systems and those of the third-party vendors and service providers with whom we contract make these environments inherently vulnerable. Because we store large volumes of confidential information across our infrastructure, we face risks of service interruptions and security breaches. These vulnerabilities may be exploited through inadvertent or intentional actions by employees, vendors, and business partners, or through cyber attacks by malicious third parties. Likewise, our reliance on third-party systems creates supply chain vulnerabilities outside our direct oversight. A compromise of a vendor’s environment could facilitate unauthorized access to our environments or data.
“The outbreak of Covid-19 in 2020, and the subsequent variants of Covid which continue today, may interrupt or delay our exploration activities and could affect our capital raising efforts on which we rely to continue our exploration program and maintain our operations, thereby adversely affecting our business.”see in full comparison
Significant disruptionssee in full comparisonofor security breaches affecting our information technologysystems,systems or those of our third-party vendorsorand businesspartners, or security breachespartners could adverselyaffectimpact ourbusinessoperations.operationsSuchand/orincidents may result in the loss,misappropriationmisappropriation,and/or unauthorizedaccess, use ordisclosureof, or the preventionofaccess to,confidentialinformation,data,including, among other things,including tradesecrets or othersecrets, intellectual property,proprietary business informationand personalinformation,information.andConsequently, these failures couldresultleadinto substantial financial, legal,businessand reputationalharm to us.harm. Security breaches and other unauthorized inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above. While we have implemented security measures to protect our information technology systems and infrastructure, there can be no assurance that such measures will prevent service interruptions or security breaches that could adversely affect our business. In addition, our liability insurance may not be sufficient in type or amount to cover us against costs of or claims related to security breaches, cyber-attacks and other related breaches. A cybersecurity breach could adversely affect our reputation and could result in other negative consequences, including disruption of our internal operations, increased cybersecurity protection costs, lost revenue, or litigation.
“We cannot predict the impact, if any, that the outbreak of the coronavirus and subsequent variants, will have on our exploration activities. Worldwide, the coronavirus is adversely affecting the global economy, global supply chain/manufacturing and resulting in, amongst other things, significant time delays, unemployment and business shutdowns.”see in full comparison
After months of delay, we received our New Megiddo Valleys License 434 on September 14, 2023 (see above) and our proposed Work Plan on December 6, 2023. On February 21, 2024 the Israeli Supervisory Committee approved the detailed work plan for oursee in full comparisonplannedre-entry operations on the MJ-01 well. The Supervisory Committee is a group of representatives from various interest groups in Israel tasked with oversight of our license area, including from the Spring Valley Regional Council, along with members of local kibbutzim (self-sustaining economic and social communities). While we have secured these approvals on prior wells we’ve drilled, we have no assurance we can obtain them for any future wells in a timely enough manner to prevent disruption in the provision of necessary services, personnel and equipment from our vendors.
“On March 13, 2014, Zion filed a registration statement on Form S-3 that was part of a replacement registration statement that was filed with the SEC using a “shelf” registration process. The registration statement was declared effective by the SEC on March 31, 2014. On February 23, 2017, the Company filed a Form S-3 with the SEC (Registration No. 333-216191) as a replacement for the Form S-3 (Registration No. 333-193336), for which the three-year period ended March 31, 2017, along with the base Prospectus and Supplemental Prospectus. …”see in full comparison
Full comparison: every changed paragraph (24)
Our ability to continue in business depends upon our continued ability to obtain the necessary financing from external sources to undertake further exploration and development activities and generate profitable operations from oil and natural gas interests in the future. We incurred net losses of $7,627,000 for the year ended December 31, 2025, and $7,343,000 for the year ended December 31, 2024, and $7,957,000 for the year ended December 31, 2023.2024. The audited consolidated financial statements have contained a statement by the auditors that raises substantial doubt about us being able to continue as a “going concernconcern.” unless we are able to raise additional capital.
On March 13, 2014, Zion filed a registration statement on Form S-3 that was part of a replacement registration statement that was filed with the SEC using a “shelf” registration process. The registration statement was declared effective by the SEC on March 31, 2014. On February 23, 2017, the Company filed a Form S-3 with the SEC (Registration No. 333-216191) as a replacement for the Form S-3 (Registration No. 333-193336), for which the three-year period ended March 31, 2017, along with the base Prospectus and Supplemental Prospectus. The Form S-3, as amended, and the new base Prospectus became effective on March 10, 2017, along with the Prospectus Supplement that was filed and became effective on March 10, 2017. The Prospectus Supplement under Registration No. 333-216191 describes the terms of the Dividend Reinvestment and Stock Purchase Plan (“DSPP” or the "Plan") and replaces the prior Prospectus Supplement, as amended, under the prior Registration No. 333-193336.
Currently, we are substantially reliant on the proceeds of sales of our common stock under the Dividend Reinvestment and Stock Purchase Plan. During the past two completed fiscal years, we have financed our operations primarily from the proceeds of sales of our stock under the Dividend Reinvestment and Stock Purchase Plan. For the years ended December 31, 20242025 and 2023,2024, we raised approximately $16,257,000$21,479,000 and $6,949,000,$16,257,000, respectively, under the Plan. Of the amounts raised, approximately 60% of the amounts raised in 2025 were attributable to two participants and 57% of the amounts raised in 2024 were attributable to one participant and 54% of the amounts raised in 2023 were attributable to one participant. The cessation of funding from these participants may result in adverse consequences to our business, such as a delay in our exploration and testing efforts, until we locate alternate sources for this funding.
We may not be able to maintain the listing of our common stock on the OTCQBOTCQX Market, which could adversely affect our liquidity and the trading volume and market price of our common stock, and decrease your investment.
Effective January 1, 2024, our common stock began trading on the OTCQB Market. The maintenance requirements for listing are to maintain a minimum bid price of $0.01 per share as of the close of business for at least one of every 30 consecutive calendar days and market capitalization of at least $2 million for at least one of every 30 consecutive calendar days. In the event that the Company’s bid price or the market capitalization falls below the minimum criteria, a cure period of 90 calendar days to regain compliance shall begin, during which time the applicable criteria must be met for 10 consecutive trading days. During January 2026, the Company applied for trading on the OTCQX Market (the highest market withing the OTC) due to the rising of its ZNOG stock price during December and January. On February 5, the Company’s application was granted and its ZNOG began trading on the OTCQX Market.
The outbreak of Covid-19 in 2020, and the subsequent variants of Covid which continue today, may interrupt or delay our exploration activities and could affect our capital raising efforts on which we rely to continue our exploration program and maintain our operations, thereby adversely affecting our business.
We cannot predict the impact, if any, that the outbreak of the coronavirus and subsequent variants, will have on our exploration activities. Worldwide, the coronavirus is adversely affecting the global economy, global supply chain/manufacturing and resulting in, amongst other things, significant time delays, unemployment and business shutdowns.
The extent to which the coronavirus impacts our operations, specifically our capital raising efforts, as well as our ability to continue our exploratory efforts, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.
After months of delay, we received our New Megiddo Valleys License 434 on September 14, 2023 (see above) and our proposed Work Plan on December 6, 2023. On February 21, 2024 the Israeli Supervisory Committee approved the detailed work plan for our planned re-entry operations on the MJ-01 well. The Supervisory Committee is a group of representatives from various interest groups in Israel tasked with oversight of our license area, including from the Spring Valley Regional Council, along with members of local kibbutzim (self-sustaining economic and social communities). While we have secured these approvals on prior wells we’ve drilled, we have no assurance we can obtain them for any future wells in a timely enough manner to prevent disruption in the provision of necessary services, personnel and equipment from our vendors.
Our ongoing work program is expensive. We believe that our current cash resources are sufficient to allow us to undertake exploratory activities through MayMarch 31, 2027. The company raised approximately $6,530,000 from the period January 1, 2026 through March 17, 2026 under the DSPP program, which includes collection of the $29,000 stock subscription receivable at December 31, 2025. We estimate that, when we are not actively drilling a well, our monthly expenditure is approximately $600,000 per month. However, when we are drilling, or testing, we estimate that there is an additional cost of approximately $2,000,000 - $3,000,000 per month. Additionally, the newly enacted onshore licensing and environmental and safety related regulations promulgated by the various energy related ministries in Israel during 2021-2023 are likely to render extending our existing license or obtaining new explorations licenses increasingly expensive. For example, at the time of the award of any new exploration license, we will be required to submit performance bank guarantees in the form of a restricted Israel cash deposits for 10% of the cost of the planned drilling program as well as other amounts to cover potential environmental damages. See “Israel Energy Related Governmental Regulations.”
The success of our oil and gas exploration efforts is dependent upon the efforts of various third parties that we do not control. These third parties provide critical drilling, engineering, logging, pressure pumping, geological, geophysical and other scientific analytical services, including 2-D and 3-D seismic imaging technology to explore for and develop oil and gas prospects. Given our small size and limited resources, we do not have all the required expertise on staff. As a result, we rely upon various companies and other third parties like engineers, geologists, geophysics, labs and other scientific analytical services to assist us in identifying desirable hydrocarbon prospects to acquire and to provide us with technical assistance and services. In addition, we rely upon the owners and operators of oilfield service equipment.
Our global operations subject us to various risks, and our failure to manage these risks could adversely affect our results of operations.operations and cash flows.
We are also vulnerable to accidents, electrical blackouts, labor strikes, terrorist activities, war, natural disasters, adverse public health events and other events beyond our control, and we have not undertaken a systematic analysis of the potential consequences to our business as a result of all of such events and do not have an applicable recovery plan in place. Any disruption to our operations or the operations of our collaborators or suppliers from these kinds of events would likely impact our operating resultsresults, cash flows and our financial condition.
Although we carry insurance to protect us against some losses or damages resulting from certain types of disasters, the extent of that insurance is limited in scope and amount, and we cannot assure you that our insurance coverage will be sufficient to satisfy any damages and losses. Any business interruption may have a material adverse effect on our business, financial position, results of operations, cash flows and prospects.
Any major hostilities involving Israel, a substantial decline in the prevailing regional security situation or the interruption or curtailment of trade between Israel and its present trading partners could have a material adverse effect on our operations.operations and cash flows. See the prior discussion on Political Climate.
Prolonged and/or widespread regional conflict in the Middle East, including but not limited to the Israel-Hamas war,East could have the following results, among others:
Our business focus is on oil and gas exploration on a limited number of properties in Israel and exploitation of any significant reserves that are found within our license areas. As a result, we lack diversification, in terms of both the nature and geographic scope of our business. We will likely be impacted more acutely by factors affecting our industry or the regions in which we operate than we would if our business were more diversified. If we are unable to diversify our operations,operations and cash flows, our financial condition and results of operations and cash flows could deteriorate.
Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations and cash flows may be adversely impacted by currency fluctuations and inflation.
Our need to incur costs associated with responding to these initiatives or complying with any resulting new legal or regulatory requirements resulting from these activities that are substantial and not adequately provided for, could have a material adverse effect on our business, financial condition and results of operations.operations and cash flows.
In the event of a commercialCommercial discoveryDiscovery approved by the Petroleum Commissioner and depending on the nature of the discovery and the production and related distribution equipment necessary to produce and sell the discovered hydrocarbons, we will be subject to additional licenses and permits, including from various departments in the Energy Ministry, regional and local planning commissions, the environmental authorities and the Israel Lands Authority. If we are unable to obtain some or all of these permits or the time required to obtain them is longer than anticipated, we may have to alter or delay our planned work schedule, which would increase our costs.
If compliance with environmental regulations is more expensive than anticipated, it could adversely impact the profitability and cash flows of our business.
We are increasingly dependent upon information technology systems, infrastructure and data to operate our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including, among other things, trade secrets or other intellectual property, proprietary business information and personal information). It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. WeAdditionally, alsowe have outsourced elements of our operations to third parties, and as a result we manage a number of third-party vendors who may or could have access to our confidential information. The size and complexity of our information technology systems, and those of third-party vendors with whom we contract, and the large amounts of confidential information stored on those systems, make such systems vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees, third-party vendors and/or business partners, or to cyber-attacks by malicious third parties. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information. The size and complexity of our information technology systems and those of the third-party vendors and service providers with whom we contract make these environments inherently vulnerable. Because we store large volumes of confidential information across our infrastructure, we face risks of service interruptions and security breaches. These vulnerabilities may be exploited through inadvertent or intentional actions by employees, vendors, and business partners, or through cyber attacks by malicious third parties. Likewise, our reliance on third-party systems creates supply chain vulnerabilities outside our direct oversight. A compromise of a vendor’s environment could facilitate unauthorized access to our environments or data.
Significant disruptions ofor security breaches affecting our information technology systems,systems or those of our third-party vendors orand business partners, or security breachespartners could adversely affectimpact our businessoperations. operationsSuch and/orincidents may result in the loss, misappropriationmisappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, confidential information,data, including, among other things,including trade secrets or othersecrets, intellectual property, proprietary business information and personal information,information. andConsequently, these failures could resultlead into substantial financial, legal, business and reputational harm to us.harm. Security breaches and other unauthorized inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above. While we have implemented security measures to protect our information technology systems and infrastructure, there can be no assurance that such measures will prevent service interruptions or security breaches that could adversely affect our business. In addition, our liability insurance may not be sufficient in type or amount to cover us against costs of or claims related to security breaches, cyber-attacks and other related breaches. A cybersecurity breach could adversely affect our reputation and could result in other negative consequences, including disruption of our internal operations, increased cybersecurity protection costs, lost revenue, or litigation.
In the future, we anticipate issuing additional securities in connection with capital raising efforts, including shares of our common stock or securities convertible into or exchangeable for our common stock, resulting in the dilution of the ownership interests of our stockholders. We are authorized under our amended and restated certificate of incorporation to issue 1,200,000,0001,600,000,000 shares of common stock. As of March 24,13, 2025,2026 there were approximately 996,876,8671,179,449,952 shares of our common stock issued and outstanding. We are considering increasing our authorized shares during the next proxy season in 2025.
Management's Discussion & Analysis (MD&A)
Removed heading “Amendment No. 2 - New Unit Option under the Unit Program”
Removed heading “Amendment No. 3 – New Unit Option under the Unit Program”
Removed heading “Subscription Rights Offering”
Largest changes
“During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (“COVID-19”). The pandemic significantly impacted the economic conditions in the United States and Israel, as federal, state and local governments reacted to the public health crisis, creating significant uncertainties in the United States, Israel and world economies. …”see in full comparison
“On March 13, 2023, Zion filed with the Securities and Exchange Commission an Amendment No. 2 to the Prospectus Supplement dated as of December 15, 2021 and accompanying base prospectus dated December 1, 2021 relating to the Company’s Dividend Reinvestment and Direct Stock Purchase Plan. The Prospectus forms a part of the Company’s Registration Statement on Form S-3 (File No. 333-261452), as amended, which was declared effective by the SEC on December 15, 2021.”see in full comparison
“Impairment of unproved oil and gas properties. Impairment of unproved oil and gas properties expenses during the year ended December 31, 2024 was $nil compared to $135,000 for the year ended December 31, 2023. The expense recorded in 2023 is attributable to the impairment charge of $45,615,000 related to the MJ-2 well during 2022.”see in full comparison
Full comparison: every changed paragraph (143)
Zion Oil and Gas, Inc., a DelawareTexas corporation, is an oil and gas exploration company with a history of 25 years of oil and gas exploration in Israel. We were incorporated in Florida on April 6, 2000 and reincorporated in Delaware on July 9, 2003. WeThe completedshareholders ourof initialZion publicOil offering& inGas, JanuaryInc. 2007.approved Our common stock, par value $0.01 per share (the “Commonre-domestication Stock”)of currentlyits tradesincorporation to Texas on theJune OTCQB4, Market under the symbol “ZNOG” and our Common Stock warrant under the symbol “ZNOGW.”2025.
We completed our initial public offering in January 2007. Our common stock, par value $0.01 per share (the “Common Stock”) currently trades on the OTCQX Market under the symbol “ZNOG” and our Common Stock warrant under the symbol “ZNOGW.”
On September 14, 2023, the Israel Ministry of Energy approved a new Megiddo Valleys License 434 (“NMVL 434”), allowing for oil and gas exploration on approximately 75,000 acres or 302 square kilometers out of the approximately 99,000 acres covered by our previous New Megiddo License 428 (“NML 428”) which expired on February 1, 2023. Zion applied for a replacement license for NML 428 months prior to its expiration. This Exploration License 434 will be valid for three years until September 13, 2026 with four potential 1-year extensions for a total of seven years until September 13, 2030. This NMVL 434 effectively supersedes our previous NML 428.
On March 12, 2020, Zion entered into a Purchase and Sale Agreement with Central European Drilling kft, a Hungarian corporation, to purchase an onshore oil and gas drilling rig, drilling pipe, related equipment and spare parts for a purchase price of $5.6 million in cash, subject to acceptance testing and potential downward adjustment. We remitted to the Seller $250,000 on February 6, 2020 as earnest money towards the Purchase Price. The Closing anticipated by the Agreement took place on March 12, 2020 by the Seller’s execution and delivery of a Bill of Sale to us. On March 13, 2020, the Seller retained the earnest money deposit, and the Company remitted $4,350,000 to the seller towards the purchase price and $1,000,000 (the “Holdback Amount”) was deposited in escrow with American Stock Transfer and Trust Company LLC. On January 6, 2021, Zion completed its acceptance testing of the I-35 drilling rig and the Holdback Amount was remitted to Central European Drilling on January 8, 2021.
Our executive offices are located at 1265512222 NMerit Central Expressway,Drive, Suite 1000, Dallas, Texas 75243,75251, and our telephone number is (214) 221-4610. Our field office in Israel is located at 9 Halamish Street, North Industrial Park, Caesarea 3088900, and the telephone number is +972-4-623-8500.
SinceAlthough we have limited capital resources, no revenue to date and a loss from operations, our consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and liquidation of liabilities in the ordinary course of business. The appropriateness of using the going concern basis is dependent upon our ability to obtain additional financing or equity capital and, ultimately, to achieve profitable operations. Therefore, there is substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Impairment of Unproved Oil and Gas Properties
During the year ended December 31, 2024, the Company recorded $ nil in non-cash post-impairment charges to its unproved oil and gas properties. During the year ended December 31, 2023, the Company record a non-cash post-impairment charge to its unproved oil and gas properties of $135,000 (see Note 4).
Operating costs and expenses. Operating costs and expenses for the year ended December 31, 20242025 were $7,339,000$7,731,000 compared to $7,955,000$7,339,000 for the year ended December 31, 20232024. Operating costs for the year ended December 31, 20242025 were $616,000$392,000 (8%)5% lowerhigher compared to the year ended December 31, 2023.2024.
General and administrative expenses. General and administrative expenses for the year ended December 31, 2024 were $4,645,000 compared to $5,193,000 for the year ended December 31, 2023. This represents a reduction of $548,000, or 11%, year over year. A major component of general and administrative expenses is non-cash stock compensation expense in the form of stock options granted to employees, management and directors. As stated in this filing, Zion does not have revenue generating operations. Historically, we have compensated our staff in part by granting stock options in lieu of cash balances. However, though stock option grants are intended to provide a financial incentive, there are no guarantees that stock options will be “in the money” and, in that event, would maintain no value.
Zion granted the following number of stock options during the quarters of 2024 and 2023:
The primary driver of this variance was stock option expense. The number of stock options granted was 7,925,000 lower during 2024, and therefore expenses were significantly lower.
Other expenses. Other expenses during the year ended December 31, 2024 were $2,694,000 compared to $2,627,000 for the year ended December 31, 2023. This is a variance of $67,000 or 3%, which is not a material variance . The expenses in this category are comprised of non-compensation and non-professional expenses incurred.
Impairment of unproved oil and gas properties. Impairment of unproved oil and gas properties expenses during the year ended December 31, 2024 was $nil compared to $135,000 for the year ended December 31, 2023. The expense recorded in 2023 is attributable to the impairment charge of $45,615,000 related to the MJ-2 well during 2022.
OtherGeneral expense,and net.administrative Otherexpenses. expense,General netand administrative expenses for the year ended December 31, 20242025 waswere $4,000$4,943,000 compared to $2,000$4,645,000 for the year ended December 31, 2023.2024. This isrepresents a variancegrowth of $2,000$298,000, or 100%,6%, whichyear isover notyear. In 2025, payroll-related expenses were higher in lieu of a materiallower variance.number of stock options granted.
Other expenses. Other expenses during the year ended December 31, 2025 were $2,788,000 compared to $2,694,000 for the year ended December 31, 2024. This is a variance of $94,000 or 3%, which is not a material variance. The expenses in this category are comprised of non-compensation and non-professional expenses incurred.
Other (income) expense, net. Other (income) expense, net for the year ended December 31, 2025 was ($104,000) compared to $4,000 for the year ended December 31, 2024. This is a variance of $108,000 or 2,700%. The expenses/income in this category are comprised of foreign currency exchange costs, primarily the New Israeli Shekel (NIS) to the US dollar, and the financial expenses/income. Zion earned higher interest income during 2025, due to higher average cash balances.
Our ability to continue as a going concern is dependent upon obtaining the necessary financing to complete further exploration and development activities and generate profitable operations from our oil and natural gas interests in the future. Our current operations are dependent upon the adequacy of our current assets to meet our current expenditure requirements and the accuracy of management’s estimates of those requirements. Should those estimates be materially incorrect, our ability to continue as a going concern will be in doubt. Our consolidated financial statements for the year ended December 31, 20242025 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We have incurred a history of operating losses and negative cash flows from operations. Therefore, there is substantial doubt about our ability to continue as a going concern.
During the past two completed fiscal years, we have financed our operations primarily from the proceeds of sales of our stock under the Dividend Reinvestment and Stock Purchase Plan.Plan (see Note 6E for details). For the years ended December 31, 20242025 and 2023,2024, we raised approximately $16,257,000$21,479,000 and $6,949,000,$16,257,000, respectively, under the Plan. Of the amounts raised, approximately 60% of the amounts raised in 2025 were attributable to two participants and 57% of the amounts raised in 2024 were attributable to one participant and 54% of the amounts raised in 2023 were attributable to one participant. The cessation of funding from these participants may result in adverse consequences to our business, such as a delay in our testing efforts, until we locate alternate sources for this funding.
At December 31, 2024,2025, we had approximately $2,272,000$8,313,000 in unrestricted cash and cash equivalents compared to $615,000$2,272,000 at December 31, 2023.2024. Our working capital (current assets minus current liabilities) was $9,463,000 at December 31, 2025 and $1,702,000 at December 31, 2024 and ($349,000) at December 31, 2023.2024.
During the years ended December 31, 20242025 and 2023,2024, cash used in operating activities totaled $6,230,000$8,013,000 and $5,133,000,$6,288,000, respectively. Cash provided by financing activities during the years ended December 31, 20242025 and 20232024 was $13,205,000$21,175,000 and $6,008,000,$13,263,000, respectively, and is primarily attributable to proceeds received from the Dividend Reinvestment and Stock Purchase Plan (the “DSPP” or “Plan”). Net cash used in investing activities such as drilling costs for our MJ-02MJ-01 exploratory well, purchaseand purchases of equipment and spare parts was $5,274,000$6,636,000 and $2,354,000$5,274,000 for the years ended December 31, 20242025 and 2023,2024, respectively.
Accounting standards require management to evaluate our ability to continue as a going concern for a period of one year subsequent to the date of the filing of the consolidated financial statements. We expect to incur additional significant expenditures to further our exploration and development programs. While we raised approximately $5,315,000, inclusive of $650,000 from the exercise of warrants,$6,530,000, during the period January 1, 20252026 through March 26,17 2026, which includes collection of the $29,000 stock subscription receivable at December 31, 2025, we will need to raise additional funds in order to continue our exploration and development activities. Additionally, we estimate that, when we are not actively drilling a well, our expenditures are approximately $600,000 per month excluding exploratory operational activities.activities and capital expenditures. However, when we are actively drilling a well, we estimate an additional minimum expenditure of approximately $2,500,000 per month. The above estimates are subject to change. Subject to the qualifications specified below, management believes that our existing cash balance, coupled with anticipated proceeds under the DSPP, will be sufficient to finance our plan of operations through OctoberMarch 2025.31, 2027.
Uncertainties are posed by the various wars and conflicts affecting Israel including, but not limited to, Iran, Hezbollah, Hamas, the Houthis (in Yemen), as well as armed groups in Syria and Iraq. The duration and impacts of these conflicts and/or wars are not fully known at this point in time.
During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (“COVID-19”). The pandemic significantly impacted the economic conditions in the United States and Israel, as federal, state and local governments reacted to the public health crisis, creating significant uncertainties in the United States, Israel and world economies. In the interest of public health and safety, jurisdictions (international, national, state and local) where we have operations, restricted travel and required workforces to work from home. However, as of the date of this report, most of our employees are working at our physical offices, but have the ability to work from home as needed.
Similar uncertainties are posed by the Israel-Hamas war, as well as the Israel-Hezbollah war. The duration of both wars and its impact on the region and world is not fully known at this point in time. As stated previously in this report, our operations are paused, and our rig crew workers are safely out of Israel and at home.
Even if we raise the needed funds, there are factors that can nevertheless adversely impact our ability to fund our operating needs, including (without limitation), the potential impact(s) of the Israel-Hamasaforementioned war,conflicts theand Israel-Hezbollahwars war,affecting the potential actions of other hostile parties in the region,Israel, unexpected or unforeseen cost overruns in planned non-drilling exploratory work in existing license areas, the costs associated with extended delays in undertaking the required exploratory work, and plugging and abandonment activities which is typical of what we have experienced in the past.
The financial information contained in thesethe consolidated financial statements has been prepared on a basis that assumes that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. This financial information and these consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.
On September 15, 2020, the Company extended the termination date of the ZNWAD Warrant by two (2) years from the expiration date of May 2, 2021 to May 2, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
As of May 2, 2023, any outstanding ZNWAD warrants expired.
On September 15, 2020, the Company extended the termination date of the ZNWAE Warrant by two (2) years from the expiration date of May 1, 2021 to May 1, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
As of May 1, 2023, any outstanding ZNWAE warrants expired.
On September 15, 2020, the Company extended the termination date of the ZNWAF Warrant by two (2) years from the expiration date of August 14, 2021 to August 14, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
As of August 14, 2023, any outstanding ZNWAF warrants expired.
Under Amendment No. 2, the Company initiated another unit offering which terminated on December 6, 2017. This unit offering enabled participants to purchase Units of the Company’s securities where each Unit (priced at $250.00 each) was comprised of (i) a certain number of shares of Common Stock determined by dividing $250.00 (the price of one Unit) by the average of the high and low sale prices of the Company’s Common Stock as reported on the NASDAQ on the unit purchase date and (ii) Common Stock purchase warrants to purchase an additional 15 shares of Common Stock at a warrant exercise price of $1.00 per share. The warrant is referred to as “ZNWAG.”
The warrants became exercisable on January 8, 2018 and continued to be exercisable through January 8, 2023 at a revised per share exercise price of $.25. The warrant terms provided that if the Company’s Common Stock trades above $5.00 per share as the closing price for 15 consecutive trading days at any time prior to the expiration date of the warrant, the Company had the sole discretion to accelerate the termination date of the warrant upon providing 60 days advanced notice to the warrant holders.
On September 15, 2020, the Company extended the termination date of the ZNWAH Warrant by two (2) years from the expiration date of April 2, 2021 to April 2, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
As of April 2, 2023, any outstanding ZNWAH warrants expired.
On September 15, 2020, the Company extended the termination date of the ZNWAJ Warrant by two (2) years from the expiration date of October 29, 2021 to October 29, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
As of October 29, 2023, any outstanding ZNWAJ warrants expired.
On September 15, 2020, the Company extended the termination date of the ZNWAK warrant by two (2) years from the expiration date of February 25, 2021 to February 25, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
As of February 25, 2023, any outstanding ZNWAK warrants expired.
On September 15, 2020, the Company extended the termination date of the ZNWAL warrant by two (2) years from the expiration date of August 26, 2021 to August 26, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
As of August 26, 2023, any outstanding ZNWAL warrants expired.
Under our Plan, the Company under a Request For Waiver Program executed Waiver Term Sheets of a unit option program consisting of a Unit (shares of stock and warrants) of its securities and subsequently an option program consisting of shares of stock to a participant. The participant’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrantswarrants that were acquired. Each warrant affordsprovided the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $1.00. The warrant shall havehas the company notation of “ZNWAM.” The warrants were not be registered for trading on the OTCQB or any other stock market or trading market. The warrants became exercisable on January 15, 2021 and continuecontinued to be exercisable through July 15, 2022.
On March 18, 2025, the entire number of outstanding warrants of 4,376,000 were exercised at $.05 each for total proceeds to Zion of $218,800.approximately $219,000. As of this report date, there are no ZNWAM warrants outstanding.
The ZNWAN warrants became exercisable on May 16, 2021 and continued to be exercisable through May 16, 2023 at a per share exercise price of $1.00.
As of May 16, 2023, any outstanding ZNWAN warrants expired.
The ZNWAO warrants became exercisable on June 12, 2021 and continued to be exercisable through June 12, 2023 at a per share exercise price of $.25.
As of June 12, 2023, any outstanding ZNWAO warrants expired.
Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet for a program consisting of Zion securities to a participant. After conclusion of the program on June 17, 2021, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock that were acquired.
Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet for a unit program consisting of a Unit (shares of stock and warrants) to a participant. After conclusion of the program on May 28, 2021, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants that were acquired. Each warrant affords the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $.25. The warrant has the company notation of “ZNWAP.” The warrants were not registered for trading on the OTCQB or any other stock market or trading market. The warrants were issued and became exercisable on June 2, 2021 and continued to be exercisable through June 2, 2022 at a per share exercise price of $.25.
On March 21, 2022, the Company extended the termination date of the ZNWAP Warrant by one (1) year from the expiration date of June 2, 2022 to June 2, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
During the second quarter of 2022, all warrants represented by ZNWAP and ZNWAR were exercised resulting in a net cash inflow of approximately $365,000.
Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program consisting of units of shares of stock and warrants to a participant. After conclusion of the program on June 18, 2021, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and warrants that were acquired. Each warrant affordsprovides the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $.25. The warrant hasshall have the company notation of “ZNWAQ.” The warrants were not registered for trading on the OTCQB or any other stock market or trading market. The warrants were issued on May 5, 2022 and were exercisable through July 15, 2023 at a revised per share exercise price of $.05.
Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
During March 2025, the entire number of outstanding warrants of 23,428,348 were exercised at $.05 each for total proceeds to Zion of approximately $1,171,000. As of this report date, there are no ZNWAQ warrants outstanding.
On March 18, 2025, the warrant holder exercised 5,624,000 of the ZNWAQ warrants at $.05 each for total proceeds to Zion of $218.200. On March 25, 2025, the warrant holder exercised 3,000,000 of the ZNWAQ warrants at $.05 each for total proceeds to Zion of $150,000.
As of this report date, there are 14,804,348 outstanding ZNWAQ warrants exercisable at $.05 each. The Company does not plan to extend the warrant termination date beyond March 31, 2025.
Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program consisting of units of shares of stock and warrants to a participant. After conclusion of the program on June 18, 2021, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants that were acquired. Each warrant affords the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $.25. The warrant shall have the company notation of “ZNWAR.” The warrants were not to be registered for trading on the OTCQB or any other stock market or trading market. The warrants were issued and became exercisable on June 22, 2021 and continued to be exercisable through June 22, 2022 at a per share exercise price of $.25. Additionally, Zion incurred $115,000 during 2021 in equity issuance costs to an outside party related to this waiver program.
On March 21, 2022, the Company extended the termination date of the ZNWAR Warrant by one (1) year from the expiration date of June 22, 2022 to June 22, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.
What changed in the latest 10-Q
Risk Factors
We could not find a separate Risk Factors item in the latest 10-Q. Some companies leave it out of quarterly reports; see the annual 10-K risk factors and the original filing. Open the filing on SEC.gov.
Management's Discussion & Analysis (MD&A)
Removed heading “Off-Balance Sheet Arrangements”
Removed heading “Recently Issued Accounting Pronouncements”
Removed heading “Other Recent Accounting Pronouncements”
Largest changes
“Due to the Israel-Iran war which began on February 28, 2026, and related impacts on logistics and shipping, we demobilized our rig crew. We are monitoring daily the hostilities in the Middle East for the next best opportunity to bring back the rig crew to the wellsite in Israel. The next phase of operations will be to rig up over the MJ-02 well, plug and abandon the lower sections of that wellbore, set the direction, and begin the planned horizontal drilling operations into the target reservoir zone.”see in full comparison
“Our rig crew arrived in Israel in January 2026 to begin a new phase of operations at both MJ-01 and MJ-02 in Israel. The team completed routine rig repair and maintenance, including a much-needed upgrade to the generator system, ensuring reliable power for the drilling ahead. A mandatory five-year re-certification and inspection of the rig was also completed and the results indicated that the rig is in good working condition. …”see in full comparison
“As of June 10, 2026, field operations commenced for the planned sidetrack phase of the Megiddo-Jezreel #2 well in Israel. As expected, Zion re-entered the well, drilled out the temporary plug, conditioned the wellbore downhole, and has proceeded with the planned horizontal sidetrack drilling. Drilling activities are ongoing as of the date of this report. Additionally, our drilling rig has been recertified and recommissioned in accordance with regulatory requirements, and in a fitting tribute, the rig has officially been renamed JB-1 in honor of Zion’s late founder, John Brown.”see in full comparison
Full comparison: every changed paragraph (40)
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES TO THOSE STATEMENTS INCLUDED IN THIS FORM 10-Q. SOME OF OUR DISCUSSION IS FORWARD-LOOKING AND INVOLVES RISKS AND UNCERTAINTIES. FOR INFORMATION REGARDING RISK FACTORS THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, REFER TO THE DISCUSSION OF RISK FACTORS IN THE “DESCRIPTIONRISK OF BUSINESSFACTORS” SECTION OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED December 31, 2025, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
Zion Oil and Gas, Inc., a Texas corporation, is an oil and gas exploration company with a history of 25 years of oil and gas exploration in Israel. We were incorporated in Florida on April 6, 2000 and reincorporated in Delaware on July 9, 2003. The shareholders of Zion Oil & Gas, Inc. approved the re-domestication of its incorporation to Texas on June 4, 2025. We completed our initial public offering in January 2007. Our common stock, par value $0.01 per share (the “Common Stock”) currently trades on the OTCQX marketplace of OTC Markets, Inc. under the symbol “ZNOG” and our Common Stock warrant under the symbol “ZNOGW”. On January 24, 2020, Zion incorporated a wholly owned subsidiary, Zion Drilling, Inc., as a Delaware corporation, for the purpose of owning a drilling rig, related equipment and spare parts, and on January 31, 2020, Zion incorporated another wholly owned subsidiary, Zion Drilling Services, Inc., a Delaware corporation, to act as the contractor providing such drilling services. When Zion is not using the rig for its own exploration activities, Zion Drilling Services may contract with other operators in Israel to provide drilling services at market rates then in effect. On May 14, 2025, Zion Drilling, Inc. and Zion Drilling Services, Inc. were re-domesticated and converted from Delaware corporations to Texas corporations pursuant to plans of conversion approved unanimously by the directors and shareholders of each corporation. On October 19, 2022, Zion incorporated a wholly owned subsidiary in Israel, Zion Drilling Israel Ltd, for the purpose of owning a drilling rig and related equipment and spare parts. On this date, the entity was created as a placeholder only. A bank account was created in November 2024 and a tax file was created in January 2025. Zion Drilling Israel Ltd did not have any activities during the threesix months ended MarchJune 31,30, 2026.
On September 14, 2023, the Israel Ministry of Energy approved a new Megiddo Valleys License 434 (“NMVL 434” or “Exploration License 434”), allowing for oil and gas exploration on approximately 75,000 acres or 302 square kilometers. This Exploration License 434 is valid for three years until September 13, 2026 with four potential 1-year extensions for a total of seven years until September 13, 2030. This NMVL 434 effectively supersedes our previous NML 428. On May, 18, 2026, the Israel Ministry of Energy extended NMVL 434 until September 13, 2027.
As of June 10, 2026, field operations commenced for the planned sidetrack phase of the Megiddo-Jezreel #2 well in Israel. As expected, Zion re-entered the well, drilled out the temporary plug, conditioned the wellbore downhole, and has proceeded with the planned horizontal sidetrack drilling. Drilling activities are ongoing as of the date of this report. Additionally, our drilling rig has been recertified and recommissioned in accordance with regulatory requirements, and in a fitting tribute, the rig has officially been renamed JB-1 in honor of Zion’s late founder, John Brown.
Our rig crew arrived in Israel in January 2026 to begin a new phase of operations at both MJ-01 and MJ-02 in Israel. The team completed routine rig repair and maintenance, including a much-needed upgrade to the generator system, ensuring reliable power for the drilling ahead. A mandatory five-year re-certification and inspection of the rig was also completed and the results indicated that the rig is in good working condition. The crew re-entered the MJ-01 wellbore and completed necessary cleanup, installed a seal below the water aquifer zone, and re-established the mandated water monitoring well as required by the Ministry of Energy and Ministry of Water. Following this work, we rigged down awaiting the next operational phase.
Due to the Israel-Iran war which began on February 28, 2026, and related impacts on logistics and shipping, we demobilized our rig crew. We are monitoring daily the hostilities in the Middle East for the next best opportunity to bring back the rig crew to the wellsite in Israel. The next phase of operations will be to rig up over the MJ-02 well, plug and abandon the lower sections of that wellbore, set the direction, and begin the planned horizontal drilling operations into the target reservoir zone.
While our MJ-01 re-completion project has faced a multitude of hurdles, including recent hostilities with Hamas, Hezbollah, Iran and Yemen, downhole issues and logistical challenges, we continue to move forward each time a safe opportunity permits continuation of operations. However, we will only move forward in coordination with Israeli authorities. We are actively monitoring the port situation to import the items needed to complete the current work program. We remain optimistic about making significant progress in the coming months.
I-35JB-1 Drilling Rig & Associated Equipment
Zion purchased an onshore oil and gas drilling rig, drilling pipe, related equipment and spare parts in March 2020 for a purchase price of $5.6 million in cash, inclusive of approximately $540,000 allocated to spare parts and $48,000 allocated to additional separate assets. The value of the spare parts and separate assets are captured in separate ledger accounts, but reported as one line item with the drilling rig on the balance sheet. Zion determined that the life of the I-35JB-1 drilling rig (the rig Zion purchased), is 10 years. Zion is depreciating the rig on a straight-line basis.
During the threesix months ended MarchJune 31,30, 2026, Zion added approximately $294,000$1,302,000 in costs associated with its drilling rig, approximately $307,000$372,000 in rig spare parts and approximately $485,000$556,000 in other drilling assets, for total combined additions of $1,086,000.$2,230,000. We also recorded approximately $150,000$240,000 in self-consumption of rig spare parts.
See the table below for a reconciliation of the rig-related activity during the period ended MarchJune 31,30, 2026:
Map 1. Zion’s New Megiddo License 434 as of MarchJune 31,30, 2026.2026
For the threesix months ended MarchJune 31,30, 2026 and 2025,2026, approximately $30,000 and $212,000, respectively,$208,000 were recorded under the Company’s Statement of Changes in Stockholders’ Equity as Subscriptions Receivables. InThese both cases above, the subscription receivablesfunds were later received in July 2026 For the followingsix month.months ended June 30, 2025, approximately $179,000 were recorded under the Company’s Statement of Changes in Stockholders’ Equity as Subscriptions Receivables. These funds were later received in July 2025.
For the three and six months ended MarchJune 31,30, 20262026, approximately $3,385,000 and 2025, approximately $8,009,000 and $6,040,000,$11,394,000, respectively, were raised under the DSPP program.
For the three and six months ended June 30, 2025, approximately $7,740,000 and $13,780,000, respectively, were raised under the DSPP program.
The warrants balances at December 31, 2025 and transactions since January 1, 2026are2026 are shown in the table below:
On February 28, 2026, Israel and the United States jointly attacked Iran. The attacks took the form of missile strikes throughout Iran targeting regime leadership, nuclear sites, ballistic missile sites and other military infrastructure. Iran’s former supreme leader, Ali Khomenei, was killed on this day. There have been daily attacks during March 2026 and into April 2026. WhileHostilities thereescalated hassignificantly beenduring the Passover holiday period in early April 2026, when Iran launched a massive retaliatory wave of hundreds of ballistic missiles and drone salvos targeting cities and infrastructure throughout Israel. Following these intensive exchanges, a temporary ceasefire recently,was tensionsimplemented on April 8, 2026. While direct kinetic engagements subsequently subsided into a tense naval standoff through May, a formal bilateral 60-day stabilization framework was initiated on June 17, 2026, to manage regional security boundaries and lift maritime blockades. Tensions still remain high between the US, IsraelIsrael, and Iran.Iran
Our operations in Israel take place at the wellsite in north central Israel, away from the primary location of the war in southern Israel. Our drilling rig, pad site, employees and service providers were safe throughout 2025 and through the date of this filing in MayAugust 2026.
In early March 2026, Hezbollah joined the war against Israel by launching daily attacks, primarily missiles, into northern Israel. Israel responded by launching its own missiles into Beirut and southern Lebanon and moving ground forces into southern Lebanon. These active border hostilities peaked in intensity in late March and early April 2026, resulting in significant defensive maneuvers to establish a security buffer zone in southern Lebanon. A 10-day cessation of hostilities was instituted on April 16, 2026, which underwent consecutive diplomatic extensions through May. Sporadic field skirmishes persisted and a regional truce framework was negotiated on June 19, 2026. Israel stated that they will abide by the truce on a strict "quiet for quiet" basis.
Critical Accounting PoliciesEstimates
We have identified the accounting principlesestimates which we believe are most critical to the reported financial status by considering accounting policies that involve the most complex of subjective decisions or assessment.
The total net book value of our unproved oil and gas properties under the full cost method is $30,964,000$33,199,000 and $27,673,000 at MarchJune 31,30, 2026 and at December 31, 2025, respectively.
There are three levels of inputs to fair value measurements - Level 1, meaning the use of quoted prices for identical instruments in active markets; Level 2, meaning the use of quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable; and Level 3, meaning the use of unobservable inputs. We use Level 1 inputs for fair value measurements whenever there is an active market, with actual quotes, market prices, and observable inputs on the measurement date. We use Level 2 inputs for fair value measurements whenever there are quoted prices for similar securities in an active market or quoted prices for identical securities in an inactive market. We did not use unobservable (level 3) inputs for fair value measurements at MarchJune 31,30, 2026 and at December 31, 2025, respectively.
Operating costs and expenses. Operating costs and expenses for the three and six months ended MarchJune 31,30, 2026 were $2,122,000$2,060,000 and $4,182,000, respectively, compared to $1,700,000$1,996,000 and $3,696,000, respectively, for the three and six months ended MarchJune 31,30, 2025. Operating costs and expenses for the three months ended MarchJune 31,30, 2026 were $422,000$64,000 (25%3%) higher compared to the three months ended MarchJune 31,30, 2025. Operating costs and expenses for the six months ended June 30, 2026 were $486,000 (13%) higher compared to the six months ended June 30, 2025. The primary driver of the increase was legal fees incurred for a proactive cyber security assessment.
General and administrative expenses. General and administrative expenses (“G&A expenses”) for the three and six months ended MarchJune 31,30, 2026 were $1,461,000$1,120,000 and $2,581,000, respectively, compared to $1,101,000 and $2,202,000, respectively, for the three and six months ended MarchJune 31,30, 2025. This expense grouping includes salaries, benefits, stock option expenses and professional fees. G&A expenses were higher by $360,000$19,000 (33%2%) during the most recent quarter versus the prior year quarterquarter. G&A expenses increased $379,000, (17%) during the first six months of 2026 as compared to the six months of 2025, primarily due to higher legal fees incurred for a proactive cyber security assessment.
Other expense. Other expenses during the three and six months ended MarchJune 31,30, 2026 were $661,000$940,000 and $1,601,000, respectively, compared to $599,000$895,000 and $1,494,000, respectively, for the three and six months ended MarchJune 31,30, 2025. Other general and administrative expenses are comprised of non-cash compensation and non-professional expenses incurred. Other expenses increased by $62,000$45,000, (10%5%) and by $107,000, or about 7% for the three and six months ended MarchJune 31,30, 2026.2026 respectively. Zion incurred higher rig depreciation expense in 2026 due to rig additions.
Other expenses (income), net. Other expenses (income) during the three and six months ended MarchJune 31,30, 2026 were ($39,000$10,000) and ($49,000), respectively, compared to ($25,000$85,000) and ($110,000), respectively, for the three and six months ended MarchJune 31,30, 2025. The income in this category is comprised of foreign currency exchange costs, primarily the New Israeli Shekel (NIS) to the US dollar, and the financial expenses/income. Zion earned higher interest income during the three and ninesix months ended MarchJune 31,30, 2026, due to higher average cash balances.
Net Loss. Net losses for the three and six months ended MarchJune 31,30, 2026 were $2,083,000$2,050,000 and $4,133,000, respectively, compared to $1,675,000$1,911,000 and $3,586,000, respectively, for the three and six months ended MarchJune 31,30, 2025.
Our ability to continue as a going concern is dependent upon obtaining the necessary financing to complete further exploration and development activities and generate profitable operations from our oil and natural gas interests in the future. Our current operations are dependent upon the adequacy of our current assets to meet our current expenditure requirements and the accuracy of management’s estimates of those requirements. Should those estimates be materially incorrect, our ability to continue as a going concern will be in doubt. Our financial statements for the threesix months ended MarchJune 31,30, 2026 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We have incurred a history of operating losses and negative cash flows from operations. Therefore, there is substantial doubt about our ability to continue as a going concern.
At MarchJune 31,30, 2026, we had approximately $10,700,000$9,608,000 in cash and cash equivalents compared to $8,313,000 at December 31, 2025, which does not include any restricted funds. Our working capital (current assets minus current liabilities) was $11,317,000$9,729,000 at MarchJune 31,30, 2026 and $9,271,000 at December 31, 2025.
As of MarchJune 31,30, 2026, and December 31, 2025, the Company provided Israeli-required bank guarantees to various governmental bodies (approximately $1,429,000$1,461,000 and $1,424,000, respectively) and others (approximately $109,000$118,000 and $109,000, respectively) with respect to its drilling operation in an aggregate amount of approximately $1,538,000$1,579,000 and $1,533,000, respectively. The (cash) funds backing these guarantees are held in restricted interest-bearing accounts in Israel and are reported on the Company’s balance sheets as cash and cash equivalents – restricted.
During the threesix months ended MarchJune 31,30, 2026, cash used in operating activities totaled $1,478,000.$3,673,000. Cash provided by financing activities during the threesix months ended MarchJune 31,30, 2026 was $8,045,000$11,463,000 and is primarily attributable to proceeds received from the Dividend Reinvestment and Stock Purchase Plan. Net cash used in investing activities such as unproved oil and gas properties, equipment and spare parts was $4,179,000$6,440,000 for the threesix months ended MarchJune 31,30, 2026.
During the threesix months ended MarchJune 31,30, 2025, cash used in operating activities totaled $2,457,000.$3,141,000. Cash provided by financing activities during the threesix months ended MarchJune 31,30, 2025 was $6,041,000$13,467,000 and is primarily attributable to proceeds received from the Dividend Reinvestment and Stock Purchase Plan. Net cash used in investing activities such as unproved oil and gas properties, equipment and spare parts was $798,000$3,977,000 for the threesix months ended MarchJune 31,30, 2025.
Accounting standards require management to evaluate our ability to continue as a going concern for a period of one year subsequent to the date of the filing of this Form 10-Q. We expect to incur additional significant expenditures to further our exploration and development programs. While we raised approximately $974,000$1,115,000 during the period AprilJuly 1, 2026 through MayAugust 5,6, 2026, which includes collection of the $30,000$237,000 stock subscription receivable at MarchJune 31,30, 2026, we will need to raise additional funds in order to continue our exploration and development activities in our license area. Additionally, we estimate that, when we are not actively drilling a well, our expenditures are approximately $600,000 per month excluding exploratory operational activities. However, when we are actively drilling a well, we estimate an additional minimum expenditure of approximately $2,500,000 per month. The above estimates are subject to change. Subject to the qualifications specified below, management believes that our existing cash balance, coupled with anticipated proceeds under the DSPP, will be sufficient to finance our plan of operations through JuneDecember 2027.2026.
Off-Balance Sheet Arrangements
We do not currently use any off-balance sheet arrangements to enhance our liquidity or capital resource position, or for any other purpose.
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures.” This ASU enhances income tax disclosures under topic 740 to increase transparency for investors. Key changes include more detailed rate reconciliations, disaggregation of taxes paid by jurisdiction, and increased disclosure of income before taxes. The effect of this ASU became effective for fiscal years beginning after December 15, 2024. Zion adopted this ASU effective January 1, 2025. The adoption of this ASU did not have any impact on its consolidated financial statements.
Other Recent Accounting Pronouncements
The Company does not believe that the adoption of any recently issued accounting pronouncements had a significant impact on our consolidated financial position, results of operations, or cash flow.
ZNOG insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding ZNOG (13F)
None of the 59 investors we track reported a position in their latest 13F.