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the SEC on December 15, 2021. An Amendment No. 2 to the Prospectus Supplement |
was filed on March 13, 2023. This Amendment No. 2 to Prospectus Supplement amends the Prospectus Supplement. This Amendment No. 2 to Prospectus |
Supplement should be read in conjunction with the Original Prospectus Supplement, the base Prospectus and Amendment No. 1. This Amendment |
No. 2 is incorporated by reference into the Original Prospectus Supplement. This Amendment No. 2 is not complete without, and may not |
be delivered or utilized except in connection with, the Original Prospectus Supplement, including any amendments or supplements thereto. Amendment No. 2 - New Unit Option under the |
Unit Program Under our Plan, we are providing a Unit Option |
under Amendment No. 2. Our Unit Program consists of the combination of Common Stock and warrants with basic Unit Program features, conditions |
and terms outlined in the Original Prospectus Supplement and Amendment No. 1. Amendment No. 2 provides the option period, unit price and |
the determination of the number of shares of Common Stock and warrants per unit. This Unit Option has up to three tranches of investment, |
in which the second and third tranches are each subject to termination upon a total of $7,500,000 received from participants by the Company |
during the first or second tranche. The first tranche period began on March 13, 2023 and terminates on March 26, 2023. The second tranche |
begins on March 27, 2023 and terminates on April 9, 2023 and the third tranche begins on April 10, 2023 and terminates on April 27, 2023, |
subject to early termination upon reaching $7,500,000 of funds received from participants by the Company under this Unit Option. F- 37 Our Unit Program consists of the combination of |
Common Stock and warrants with basic Unit Program features, conditions and terms outlined in the Original Prospectus Supplement and Amendment |
No. 1. Amendment No. 2 provides the option period, unit price and the determination of the number of shares of Common Stock and warrants |
per unit. This Unit Option begins on March 13, 2023 with the first tranche and is scheduled to terminate on March 26, 2023. The second |
and third tranches follow upon the dates provided above. The Unit Option consists of Units of our securities where each Unit (priced at |
$250.00 each) is 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 publicly traded common stock as reported on the OTCQX on the Unit Purchase |
Date and (ii) Common Stock purchase warrants to purchase an additional five hundred (500) shares of Common Stock at a per share exercise |
price of $0.05. The participant’s Plan account will be credited with the number of shares of the Company’s Common Stock and |
Warrants that are acquired under the Units purchased. Each warrant affords the participant the opportunity to purchase one share of our |
Common Stock at a warrant exercise price of $0.05. The warrant shall have the Company notation of “ZNWAV” under the first |
tranche, “ZNWAW” under the second tranche and “ZNWAX” under the third tranche. The warrants will not be registered |
for trading on the OTCQX or any other stock market or trading market. Plan participants, who enroll into the Unit Program |
with the purchase of at least one Unit and enroll in the separate Automatic Monthly Investments (“AMI”) program at a minimum |
of $50.00 per month, will receive an additional fifty (50) warrants at an exercise price of $0.05 during this Unit Option Program. The |
fifty (50) additional warrants are for enrolling into the AMI program and shall have the Company notation of “ZNWAY.” Existing |
subscribers to the AMI are entitled to the additional fifty (50) warrants, if they purchase at least one (1) Unit during the Unit program. |
Plan participants, who enroll in the AMI at a minimum of $100 per month, will receive one hundred (100) ZNWAY warrants. Plan participants, |
who enroll in the AMI at a minimum of $250 per month, will receive two hundred and fifty (250) ZNWAY warrants. Plan participants, who |
enroll in the AMI at a minimum of $500 per month, will receive five hundred (500) ZNWAY warrants. The AMI program requires 90 days of |
participation to receive the ZNWAY warrants. Existing AMI participants are entitled to participant in this monthly program by increasing |
their monthly amount above the minimum $50.00 per month. The ZNWAV warrants will become exercisable on March |
31, 2023 and continue to be exercisable through June 28, 2023 at a per share exercise price of $0.05. The ZNWAW warrants will become exercisable |
on April 14, 2023 and continue to be exercisable through July 13, 2023 at a per share exercise price of $0.05. The ZNWAX warrants will |
become exercisable on May 2, 2023 and continue to be exercisable through July 31, 2023 at a per share exercise price of $0.05. The ZNWAY |
warrants will become exercisable on June 12, 2023 and continue to be exercisable through September 10, 2023 at a per share exercise price |
of $0.05. The company raised approximately $738,000 from the period January 1, |
2023 through March 23,2023, under the DSPP program. For the years ended December 31, 2022, and 2021, |
approximately $19,129,000, and $26,219,000 were raised under the DSPP program, respectively. The warrants represented by the company notation |
ZNWAA are tradeable on the OTCQX market under the symbol ZNOGW. However, all of the other warrants characterized above, in the table |
below, and throughout this Form 10-K, are not tradeable and are used internally for classification and accounting purposes only. F. Subscription Rights |
Offering On April 2, 2018 the Company announced an offering |
(“2018 Subscription Rights Offering”) through American Stock Transfer & Trust Company, LLC (the “Subscription Agent”), |
at no cost to the shareholders, of non-transferable Subscription Rights (each “Right” and collectively, the “Rights”) |
to purchase its securities to persons who owned shares of our Common Stock on April 13, 2018 (“the Record Date”). Pursuant |
to the 2018 Subscription Rights Offering, each holder of shares of common stock on the Record Date received non-transferable Subscription |
Rights, with each Right comprised of one share of the Company Common Stock, par value $0.01 per share (the “Common Stock”) |
and one Common Stock Purchase Warrant to purchase an additional one share of Common Stock. Each Right could be exercised or subscribed |
at a per Right subscription price of $5.00. Each Warrant affords the investor the opportunity to purchase one share of the Company |
Common Stock at a warrant exercise price of $3.00. The warrant is referred to as “ZNWAI.” The warrants became exercisable on June 29, 2018 |
and continued to be exercisable through June 29, 2020 at a per share exercise price of $3.00, after the Company, on December 4, 2018, |
extended the termination date of the Warrant by one (1) year from the expiration date of June 29, 2019 to June 29, 2020. On May 29, 2019, the Company extended the termination |
date of the ZNWAI Warrant by one (1) year from the expiration date of June 29, 2020 to June 29, 2021. On September 15, 2020, the Company extended the |
termination date of the ZNWAI Warrant by two (2) years from the expiration date of June 29, 2021 to June 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. Each shareholder received .10 (one tenth) of |
a Subscription Right (i.e. one Subscription Right for each 10 shares owned) for each share of the Company’s Common Stock owned |
on the Record Date. The 2018 Subscription Rights Offering terminated |
on May 31, 2018. The Company raised net proceeds of approximately $ 3,038,000 , from the subscription of Rights, after deducting fees and |
expenses of $ 243,000 incurred in connection with the rights offering. F- 38 Zion Oil & Gas, Inc. Notes to Consolidated Financial Statements Note 6 - Stockholders’ Equity (cont’d) G. Warrant Tables The |
warrant activity and balances for the year 2021 are shown in the table be Warrants Exercise Price Warrant Termination Date Outstanding Balance, 12/31/2020 Warrants Issued Warrants Exercised Warrants Expired Outstanding Balance, 12/31/2021 ZNWAA $ 2.00 01/31/2023 1,498,804 - - - 1,498,804 ZNWAD $ 1.00 05/02/2023 243,853 - - - 243,853 ZNWAE $ 1.00 05/01/2023 2,144,099 - - - 2,144,099 ZNWAF $ 1.00 08/14/2023 359,435 - - - 359,435 ZNWAG $ 1.00 01/08/2023 240,068 - - - 240,068 ZNWAH $ 5.00 04/19/2023 372,400 - - - 372,400 ZNWAI $ 3.00 06/29/2023 640,730 - - - 640,730 ZNWAJ $ 1.00 10/29/2023 545,900 - - - 545,900 ZNWAK $ 0.01 02/25/2023 437,875 - ( 6,220 ) - 431,655 ZNWAL $ 2.00 08/26/2023 517,875 - - - 517,875 ZNWAM $ 1.00 07/15/2022 - 4,376,000 - - 4,376,000 ZNWAN $ 1.00 07/15/2022 - 267,785 ( 125 ) - 267,660 ZNWAO $ 0.25 06/12/2023 - 190,480 ( 15,510 ) - 174,970 ZNWAP $ 0.25 06/02/2022 - 1,639,916 ( 1,200,000 ) - 439,916 ZNWAR $ 0.25 06/23/2022 - 1,020,000 - - 1,020,000 Outstanding warrants 7,001,039 7,494,181 ( 1,221,855 ) - 13,273,365 The |
warrant activity and balances for the year 2022 are shown in the table be Warrants Exercise Price Warrant Termination Date Outstanding Balance, 12/31/2021 Warrants Issued Warrants Exercised Warrants Expired Outstanding Balance, 12/31/2022 ZNWAA $ 2.00 01/31/2024 1,498,804 - - - 1,498,804 ZNWAD $ 1.00 05/02/2023 243,853 - - - 243,853 ZNWAE $ 1.00 05/01/2023 2,144,099 - - - 2,144,099 ZNWAF $ 1.00 08/14/2023 359,435 - - - 359,435 ZNWAG $ 1.00 01/08/2024 240,068 - - - 240,068 ZNWAH $ 5.00 04/19/2023 372,400 - - - 372,400 ZNWAI $ 3.00 06/29/2023 640,710 - - 640,710 ZNWAJ $ 1.00 10/29/2023 545,900 - - - 545,900 ZNWAK $ 0.01 02/25/2023 431,675 - ( 7,450 ) - 424,225 ZNWAL $ 2.00 08/26/2023 517,875 - - - 517,875 ZNWAM $ 0.05 07/15/2023 4,376,000 - - - 4,376,000 ZNWAN $ 1.00 05/16/2023 267,660 100 - - 267,760 ZNWAO $ 0.25 06/12/2023 174,970 - ( 310 ) - 174,660 ZNWAP $ 0.25 06/02/2023 439,916 - ( 439,916 ) - - ZNWAQ $ 0.05 07/06/2023 - 23,428,348 - - 23,428,348 ZNWAR $ 0.25 06/23/2023 1,020,000 - ( 1,020,000 ) - - Outstanding |
warrants 13,273,365 23,428,448 ( 1,467,676 ) - 35,234,137 F- 39 Zion Oil & Gas, Inc. Notes to Consolidated |
Financial Statements Note 6 - Stockholders’ Equity (cont’d) H. |
Warrant Descriptions The price and the expiration dates for the series |
of warrants to investors are as follows *: Period of Grant US$ Expiration Date ZNWAA Warrants B,C,G March 2013 – December 2014 2.00 January 31, 2024 ZNWAD Warrants A,B,C January 2015 – March 2016 1.00 May 02, 2023 ZNWAE Warrants B,C November 2016 – March 2017 1.00 May 01, 2023 ZNWAF Warrants A,B,C May 2017 – July 2017 1.00 August 14, 2023 ZNWAG Warrants C,G October 2017 – December 2017 1.00 January 08, 2024 ZNWAH Warrants A,B,C February 2018 5.00 April 19, 2023 ZNWAI Warrants A,B,C April 2018 – May 2018 3.00 June 29, 2023 ZNWAJ Warrants B,C August 2018 – September 2018 1.00 October 29, 2023 ZNWAK Warrants B,C,H December 2018 – January 2019 0.01 February 25, 2023 ZNWAL Warrants C July 2019 – August 2019 2.00 August 26, 2023 ZNWAM Warrants D,I January 2021 – March 2021 1.00 July 15, 2023 ZNWAN Warrants May – June 2021 1.00 May 16, 2023 ZNWAO Warrants June 2021 0.25 June 12, 2023 ZNWAQ Warrants E,I June 2021 0.25 July 6, 2023 ZNWAS Warrants F August 2021 – March 2022 0.25 December 31, 2025 ZNWAT Warrants F August – September 2022 0.25 December 31, 2025 ZNWAU Warrants F October – November 2022 0.25 December 31, 2025 ZNWAV Warrants J March 2023 0.05 June 28, 2023 ZNWAW Warrants J March – April 2023 0.05 July 13, 2023 ZNWAX Warrants J April 2023 0.05 July 31, 2023 * Zion’s ZNWAB Warrants expired on May 2, 2017, and the ZNWAC Warrants expired on May 2, 2018 A On December 4, 2018, the Company extended the expiration date of the Warrants by one ( 1 ) year. B On May 29, 2019, the Company extended the expiration date of the Warrants by one ( 1 ) year. C On September 15, 2020, the Company extended the expiration date of the Warrants by two ( 2 ) years. D On March 21, 2022, the Company extended the expiration date of the Warrants by one ( 1 ) year. E These warrants were issued on May 5, 2022, and on May 17, 2022, the Company extended the expiration date of the Warrants by one ( 1 ) year. F These warrants will be issued and become exercisable beginning on November 15, 2025 and expire on December 31, 2025. G On December 14, 2022, the Company extended the expiration date of the Warrants by one ( 1 ) year. H These warrants are now |
expired as of the report date. I The warrant exercise price was lowered to $ 0.05 on December 28, 2022. J. On March 13, 2023, The Company announced a new Unit Offering, |
inclusive of three tranches of warrants (ZNWAV, ZNWAW and ZNWAX). F- 40 Zion Oil & Gas, Inc. Notes to Consolidated |
Financial Statements Note |
7 - Income Taxes The Company had no income tax expense due to |
the operating loss incurred for the years ended December 31, 2022 and 2021. The tax effects of temporary differences that |
give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2022 and 2021 are presented |
be December 31, 2022 December 31, 2021 US$ thousands US$ thousands Deferred tax assets: Net operating loss carry forwards 57,521 52,812 Other 3,612 3,275 Total gross deferred tax assets 61,133 56,087 Less – valuation allowance ( 57,448 ) ( 45,908 ) Net deferred tax assets 3,685 10,179 Deferred tax liabiliti Property and equipment 101 51 Other ( 449 ) ( 449 ) Unproved oil and gas properties ( 3,337 ) ( 9,781 ) Total gross deferred tax liabilities ( 3,685 ) ( 10,179 ) Net deferred tax asset - - In assessing the likelihood of the realization |
of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will |
not be realized. The ultimate realization of deferred tax assets, including net operating losses, is dependent upon the generation of |
future taxable income during the periods in which those temporary differences become deductible and tax carry forwards are utilizable. Management considers the scheduled reversal of |
deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize |
the deferred tax asset, the Company will need to generate future taxable income of approximately $ 273,910,024 prior to the expiration |
of some of the net operating loss carry forwards between 2023 and 2043. Based upon the level of historical taxable losses since the Company’s |
inception, management believes that the Company will not likely realize the benefits of these deductible differences and tax carry forwards |
and thus, full valuation allowances have been recorded at December 31, 2022 and 2021. The Company continuously monitors all shareholders |
that might reach a 5% ownership in the common stock for various purposes, in addition to the I.R.C §382/383 limitation on net operating |
loss (“NOL”) carry forwards following an ownership change. Sections 382/383 limit the use of corporate NOLs following an |
ownership change. Section 382(g) defines an ownership change generally as a greater than 50% change in the ownership of stock among certain |
5% shareholders over a three-year period. For the tax year 2019, the Company became aware of one individual owning greater than 5%, as |
evidenced by the filing of a Section 13(G) report with the SEC. However, there have been no changes in stock ownership to trigger sections |
382/383. At December 31, 2022, the Company has available |
federal net operating loss carry forwards of approximately $273,910,024 to reduce future U.S. taxable income. F- 41 Zion Oil & Gas, Inc. Notes to Consolidated Financial Statements Note 7 - Income Taxes (cont’d) The Tax Cuts and Jobs Act (TCJA) removed the |
2-year carryback provision, extended the 20-year carryforward provision out indefinitely, and limited carryforwards to 80% of net income |
in any future year. Net operating losses originating in tax years beginning prior to Jan. 1, 2018, are still subject to the former carryover |
rules of 100% of net income and 20 taxable years following the taxable year of loss. I.R.C. §172. Income earned from activities in Israel is subject |
to regular Israeli tax rates. For Israeli tax purposes, exploration costs on unproved properties are expensed. Tax losses can be carried |
forward indefinitely. At December 31, 2022, the Company has available net operating loss carry forwards of approximately $ 205,944,000 to reduce future Israeli taxable income. On July 11, 2014, Zion Oil & Gas, Inc. registered |
the Geneva Branch in the Canton of Geneva, Switzerland. The legal Swiss name for the foreign branch is “Zion Oil & Gas, Inc., |
Wilmington, Branch of Geneva.” The Geneva Branch has its registered office and its business office at 6 Avenue Jules Crosnier, |
1206 Champel, Case Postale 295, 1211 Geneva 12, Switzerland. The purpose of the branch is to operate a foreign treasury center for the |
Company. As such, the Geneva branch is not expected to have taxable income in any future year. Reconciliation between the theoretical tax benefit |
on pre-tax reported (loss) and the actual income tax expense: Year ended December 31, 2022 Year ended December 31, 2021 US$ thousands US$ thousands Pre-tax loss as reported ( 55,077 ) ( 10,709 ) U.S. statutory tax rate 21 % 21 % Theoretical tax expense ( 11,566 ) ( 2,249 ) Increase in income tax expense resulting from: Permanent differences - 1 Change in valuation allowance 11,556 2,248 Income tax expense - - The Company has no material unrecognized tax |
benefit which would favorably affect the effective income tax rate in future periods and does not believe there will be any significant |
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