arcee-ai/sec-data-full · Datasets at Hugging Face

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adjusted carrying amount of the proved properties is amortized on the unit-of-production method. 9 Zion
Oil & Gas, Inc. Consolidated
Condensed Notes to Financial Statements (Unaudited) Note
2 - Summary of Significant Accounting Policies (cont’d) The
Company’s oil and gas property represents an investment in unproved properties. These costs are excluded from the amortized cost
pool until proved reserves are found or until it is determined that the costs are impaired. All costs excluded are reviewed at least
quarterly to determine if impairment has occurred. The amount of any impairment is charged to expense since a reserve base has not yet
been established. Impairment requiring a charge to expense may be indicated through evaluation of drilling results, relinquishing drilling
rights or other information. During
the fourth quarter of 2022, the Company testing protocol was concluded at the MJ-02 well. The test results confirmed that the MJ-02 well
did not contain hydrocarbons in commercial quantities in the zones tested. As a result, in the year ended December 31, 2022, the Company
recorded a non-cash impairment charge to its unproved oil and gas properties of $ 45,615,000 . During
the three and nine months ended September 30, 2023, the Company recorded post-impairment charges of $ 36,000 and $ 129,000 , respectively.
During the three and nine months ended September 30, 2022, the Company did not record any post-impairment charges. Currently,
the Company has no economically recoverable reserves and no amortization base. The Company’s unproved oil and gas properties consist
of capitalized exploration costs of $ 16,342,000 and $ 15,889,000 as of September 30, 2023 and December 31, 2022, respectively. D.
Fair Value Measurements The
Company follows Accounting Standards Codification (ASC) 820, “Fair Value Measurements and Disclosures,” as amended by Financial
Accounting Standards Board (FASB) Financial Staff Position (FSP) No. 157 and related guidance. Those provisions relate to the Company’s
financial assets and liabilities carried at fair value and the fair value disclosures related to financial assets and liabilities. ASC
820 defines fair value, expands related disclosure requirements, and specifies a hierarchy of valuation techniques based on the nature
of the inputs used to develop the fair value measures. Fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement date, assuming the transaction
occurs in the principal or most advantageous market for that asset or liability. The
Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring
basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement.
The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining
fair value. The three tiers are defined as follows: ● Level
1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; ● Level
2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace
for identical or similar assets and liabilities; and ● Level
3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. The
Company’s financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities, are carried at
historical cost. At September 30, 2023, and December 31, 2022, the carrying amounts of these instruments approximated their fair values
because of the short-term nature of these instruments. 10 Zion
Oil & Gas, Inc. Consolidated
Condensed Notes to Financial Statements (Unaudited) Note
2 - Summary of Significant Accounting Policies (cont’d) E.
Stock-Based Compensation ASC
718, “Compensation – Stock Compensation,” prescribes accounting and reporting standards for all share-based payment
transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares,
options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees,
including grants of employee stock options, are recognized as compensation expense in the consolidated financial statements based on
their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for
the award, known as the requisite service period (usually the vesting period). The
Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 718
Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurab
(a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined
at the earlier of the performance commitment date or performance completion date. F.
Warrants In
connection with the Dividend Reinvestment and Stock Purchase Plan (“DSPP”) financing arrangements, the Company has issued
warrants to purchase shares of its common stock. The outstanding warrants are stand-alone instruments that are not puttable or mandatorily
redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes
option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded
and accounted as a part of the DSPP investment as additional paid-in capital of the common stock issued. All other warrants are recorded
at fair value and expensed over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted
in connection with ongoing arrangements are more fully described in Note 3, Stockholders’ Equity . G.
Related parties Parties
are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are
controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management,
members of the immediate families of principal owners of the Company and its management and other parties with which the Company may
deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of
the transacting parties might be prevented from fully pursuing its own separate interests. All transactions with related parties are
recorded at fair value of the goods or services exchanged. Zion
did not have any related party transactions for the periods covered in this report. 11 Zion
Oil & Gas, Inc. Consolidated
Condensed Notes to Financial Statements (Unaudited) Note
2 - Summary of Significant Accounting Policies (cont’d) H.
Recently Adopted Accounting Pronouncements In
March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments”: The amendments in this update
are to clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2020-03 are not expected
to have a significant effect on current accounting practices. The ASU improves various financial instrument topics in the Codification
to increase stakeholder awareness of the amendments and to expedite the improvement process by making the Codification easier to understand
and easier to apply by eliminating inconsistencies and providing clarifications. The ASU is effective for smaller reporting companies
for fiscal years beginning after December 15, 2022 with early application permitted. Zion adopted ASU 2020-03 in the first quarter of
2023. The adoption of this ASU did not have any impact on its consolidated financial statements. In
October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers . The ASU requires companies to apply the definition of a performance obligation under ASC 606 to recognize
and measure contract assets and contract liabilities relating to contracts with customers acquired in a business combination. Prior to
the adoption of this ASU, an acquirer generally recognized assets acquired and liabilities assumed in a business combination, including
contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. The ASU
results in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree
before the acquisition under ASC 606. The ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted.
Zion adopted ASU 2021-08 in the first quarter of 2023. The adoption of this ASU did not have a material impact on our consolidated financial
statements; the impact in future periods will be dependent upon the contract assets acquired and contract liabilities assumed in any
future business combinations. In
September 2022, the FASB issued ASU No. 2022-04 , Liabilities – Supplier Finance Programs (Subtopic 405-50) . The ASU requires
companies to disclose information about supplier finance programs, including key terms of the program, outstanding confirmed amounts
as of the end of the period, a roll forward of such amounts during each annual period, and a description of where the amounts are presented.
The new standard does not affect the recognition, measurement, or financial statement presentation of supplier finance obligations. The
ASU is effective for fiscal years beginning after December 15, 2022, including interim periods, except for roll forward information,
which is effective for fiscal years beginning after December 15, 2023. 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 in 2023 had a significant impact on our consolidated
financial position, results of operations, or cash flow. 12 Zion
Oil & Gas, Inc. Consolidated
Condensed Notes to Financial Statements (Unaudited) Note
2 - Summary of Significant Accounting Policies (cont’d) I.
Depreciation and Accounting for Drilling Rig and Related Equipment Zion

adjusted carrying amount of the proved properties is amortized on the unit-of-production method. 9 Zion

Oil & Gas, Inc. Consolidated

Condensed Notes to Financial Statements (Unaudited) Note

2 - Summary of Significant Accounting Policies (cont’d) The

Company’s oil and gas property represents an investment in unproved properties. These costs are excluded from the amortized cost

pool until proved reserves are found or until it is determined that the costs are impaired. All costs excluded are reviewed at least

quarterly to determine if impairment has occurred. The amount of any impairment is charged to expense since a reserve base has not yet

been established. Impairment requiring a charge to expense may be indicated through evaluation of drilling results, relinquishing drilling

rights or other information. During

the fourth quarter of 2022, the Company testing protocol was concluded at the MJ-02 well. The test results confirmed that the MJ-02 well

did not contain hydrocarbons in commercial quantities in the zones tested. As a result, in the year ended December 31, 2022, the Company

recorded a non-cash impairment charge to its unproved oil and gas properties of $ 45,615,000 . During

the three and nine months ended September 30, 2023, the Company recorded post-impairment charges of $ 36,000 and $ 129,000 , respectively.

During the three and nine months ended September 30, 2022, the Company did not record any post-impairment charges. Currently,

the Company has no economically recoverable reserves and no amortization base. The Company’s unproved oil and gas properties consist

of capitalized exploration costs of $ 16,342,000 and $ 15,889,000 as of September 30, 2023 and December 31, 2022, respectively. D.

Fair Value Measurements The

Company follows Accounting Standards Codification (ASC) 820, “Fair Value Measurements and Disclosures,” as amended by Financial

Accounting Standards Board (FASB) Financial Staff Position (FSP) No. 157 and related guidance. Those provisions relate to the Company’s

financial assets and liabilities carried at fair value and the fair value disclosures related to financial assets and liabilities. ASC

820 defines fair value, expands related disclosure requirements, and specifies a hierarchy of valuation techniques based on the nature

of the inputs used to develop the fair value measures. Fair value is defined as the price that would be received to sell an asset or

paid to transfer a liability in an orderly transaction between market participants at the measurement date, assuming the transaction

occurs in the principal or most advantageous market for that asset or liability. The

Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring

basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement.

The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining

fair value. The three tiers are defined as follows: ● Level

1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; ● Level

2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace

for identical or similar assets and liabilities; and ● Level

3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. The

Company’s financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities, are carried at

historical cost. At September 30, 2023, and December 31, 2022, the carrying amounts of these instruments approximated their fair values

because of the short-term nature of these instruments. 10 Zion

Oil & Gas, Inc. Consolidated

Condensed Notes to Financial Statements (Unaudited) Note

2 - Summary of Significant Accounting Policies (cont’d) E.

Stock-Based Compensation ASC

718, “Compensation – Stock Compensation,” prescribes accounting and reporting standards for all share-based payment

transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares,

options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees,

including grants of employee stock options, are recognized as compensation expense in the consolidated financial statements based on

their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for

the award, known as the requisite service period (usually the vesting period). The

Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 718

Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurab

(a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined

at the earlier of the performance commitment date or performance completion date. F.

Warrants In

connection with the Dividend Reinvestment and Stock Purchase Plan (“DSPP”) financing arrangements, the Company has issued

warrants to purchase shares of its common stock. The outstanding warrants are stand-alone instruments that are not puttable or mandatorily

redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes

option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded

and accounted as a part of the DSPP investment as additional paid-in capital of the common stock issued. All other warrants are recorded

at fair value and expensed over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted

in connection with ongoing arrangements are more fully described in Note 3, Stockholders’ Equity . G.

Related parties Parties

are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are

controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management,

members of the immediate families of principal owners of the Company and its management and other parties with which the Company may

deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of

the transacting parties might be prevented from fully pursuing its own separate interests. All transactions with related parties are

recorded at fair value of the goods or services exchanged. Zion

did not have any related party transactions for the periods covered in this report. 11 Zion

Oil & Gas, Inc. Consolidated

Condensed Notes to Financial Statements (Unaudited) Note

2 - Summary of Significant Accounting Policies (cont’d) H.

Recently Adopted Accounting Pronouncements In

March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments”: The amendments in this update

are to clarify, correct errors in, or make minor improvements to a variety of ASC topics. The changes in ASU 2020-03 are not expected

to have a significant effect on current accounting practices. The ASU improves various financial instrument topics in the Codification

to increase stakeholder awareness of the amendments and to expedite the improvement process by making the Codification easier to understand

and easier to apply by eliminating inconsistencies and providing clarifications. The ASU is effective for smaller reporting companies

for fiscal years beginning after December 15, 2022 with early application permitted. Zion adopted ASU 2020-03 in the first quarter of

2023. The adoption of this ASU did not have any impact on its consolidated financial statements. In

October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities

from Contracts with Customers . The ASU requires companies to apply the definition of a performance obligation under ASC 606 to recognize

and measure contract assets and contract liabilities relating to contracts with customers acquired in a business combination. Prior to

the adoption of this ASU, an acquirer generally recognized assets acquired and liabilities assumed in a business combination, including

contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. The ASU

results in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree

before the acquisition under ASC 606. The ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted.

Zion adopted ASU 2021-08 in the first quarter of 2023. The adoption of this ASU did not have a material impact on our consolidated financial

statements; the impact in future periods will be dependent upon the contract assets acquired and contract liabilities assumed in any

future business combinations. In

September 2022, the FASB issued ASU No. 2022-04 , Liabilities – Supplier Finance Programs (Subtopic 405-50) . The ASU requires

companies to disclose information about supplier finance programs, including key terms of the program, outstanding confirmed amounts

as of the end of the period, a roll forward of such amounts during each annual period, and a description of where the amounts are presented.

The new standard does not affect the recognition, measurement, or financial statement presentation of supplier finance obligations. The

ASU is effective for fiscal years beginning after December 15, 2022, including interim periods, except for roll forward information,

which is effective for fiscal years beginning after December 15, 2023. 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 in 2023 had a significant impact on our consolidated

financial position, results of operations, or cash flow. 12 Zion

Oil & Gas, Inc. Consolidated

Condensed Notes to Financial Statements (Unaudited) Note

2 - Summary of Significant Accounting Policies (cont’d) I.

Depreciation and Accounting for Drilling Rig and Related Equipment Zion