ZION OIL & GAS INC

Note1 - Nature of Operations, Basis of Presentation and Going Concern

A. Nature of Operations

Zion Oil & Gas, Inc., a Delaware corporation (“we,” “our,” “Zion” or the “Company”) is an oil and gas exploration company with a history of25 years of oil & gas exploration in Israel. As of* March 31, 2025*, the Company hasno revenues from its oil and gas operations.

Zion maintains its corporate headquarters in Dallas, Texas. The Company also has branch offices in Caesarea, Israel and Geneva, Switzerland. The purpose of the Israel branch is to support the Company’s operations in Israel, and the purpose of the Switzerland branch is to operate a foreign treasury center for the Company.

On* January 24, 2020,Zion incorporated a wholly owned subsidiary, Zion Drilling, Inc., 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 isnot* 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* 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 2024and a tax file was created in January 2025.The bank account is denominated in Israeli Shekels. When there will be bank transactions in the future, there will be a translation adjustment to United States Dollars. Zion Drilling Israel LTD didnot* have any activities during thethree months ended* March 31, 2025.*

Zion has the trademark “ZION DRILLING” filed with the United States Patent and Trademark Office. Zion has the trademark filed with the World Intellectual Property Organization in Geneva, Switzerland, pursuant to the Madrid Agreement and Protocol. In addition, Zion has the trademark filed with the Israeli Trademark Office in Israel.

Exploration Rights/Exploration Activities

New Megiddo Valleys License434 (“NMVL434”)–** Megiddo-Jezreel*#1* Re-Entry (“MJ-01”)**

On* September 14, 2023,the Israel Ministry of Energy approved a new Megiddo Valleys License434* (“NMVL434”), allowing for oil and gas exploration on approximately 75,000 acres or 302 square kilometers. This Exploration License434 is valid forthree years until* September 13, 2026withfour* potential1-year extensions for a total ofseven years until* September 13, 2030.This NMVL434* effectively supersedes our previous NML428.

On* February 21, 2024,*members of the Supervisory Committee visited our rig site. During this visit, they interacted with staff from Zion Oil & Gas, our consultants and potential service providers. Some of these interactions occurred at Kibbutz Sde Eliyahu, while others were conducted through video conferencing with participants from the United States, Europe and the Middle East. Following these discussions, the Committee officially accepted our work plan for the MJ-01 re-completion project. This acceptance allowed us to sign agreements and secure mobilization dates with our service providers to commence and complete the project.

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**Note1 - Nature of Operations, Basis of Presentation and Going Concern (cont’d)

The initial phase of our recompletion project consisted of a categorythree inspection of the drilling rig, rigging down from MJ-02 and moving and rigging up over the MJ-01 well.

Stagetwo of the operation involved drilling out both the steel plugs along with625 meters (about2,050 feet) of cement plugs and re-conditioning the wellbore to allow unhindered access to the selected zones for testing.

Aftersix years of inactivity in a well overthree miles deep, the MJ-01 wellbore presents a challenging environment. The wellbore appears to have experienced elastic and partial collapse of the casing in some areas. This led to the bottom hole assembly (“BHA”) becoming stuck over4,000 meters from surface. Attempts to overpull the BHA were unsuccessful, and the crew completed a backoff operation which left over500 meters of the BHA remaining downhole. This isnot an uncommon occurrence with oil and gas drilling operations and the crew was unsuccessful in retrieving the remaining BHA with the tools that were on location.

Another delay arose out of the logistical challenges we face. The ongoing conflict in the region has impacted shipping routes, the timely arrival of necessary equipment, and created travel difficulties for our rig crews. Our operations require specialized rig crews who arenot available in Israel.

An even further delay was created by many of our rig crew members reaching the limit of their work visas. This requires us to reset visas, which isnot a simple process, and it adds another layer of delay and complexity. Moreover, the recent changes to visa eligibility have further complicated the process, as Israel, in just the last few months, has changed their90-day visa renewals from resetting at the end of the year to resetting aftersix months after expiration. We are working with the Ministry of Interior on this issue. As a side note, the crew had to enter Israel under90-day visas andnot six month or visas in order to comply with the labor law requirements in place at the time the operation commenced.

In light of the combination of downhole, logistical, and crew challenges, as well as holidays, and theone-year remembrance of* October 7,we temporarily paused active operations duringQ4* 2024. This was a necessary step to ensure the safety of our personnel and to ensure proper engineering and tools are brought to location to avoid lengthy delays waiting for additional tools should any be required once the job resumes. With the necessary tools and renewed visas for our crews, we can resumed operations inQ1 2025. This is, of course, subject to the realities of the present geopolitical environment. The conflict in Israel, whilenot directly impacting our operations on a daily basis, creates uncertainties that could affect our schedule at any time.

Zion’s rig crew arrived in Israel in* February 2025and has completed critical maintenance and preparatory work. The rig, which was safely “warm stacked” in September 2024,underwent necessary checks for maintenance, including fluid changes, lubrication and greasing, and mechanical, electrical, and safety audits to ensure peak functionality. The rig crew drilled out the temporary plug at approximately1,100* meters and set a permanent plug at the deeper part of the well, allowing for isolation of targeted zones for testing.

Perforation and stimulation operations were successfully completed, with gas observed at surface during early flowback. The well is currently in the fluid recovery and cleaning phase. Zion is sourcing additional equipment to continue flowback testing and conduct volumetric analysis to evaluate reservoir characteristics. These efforts are part of Zion’s ongoing plan to optimize recovery and assess the well’s production potential. Zion anticipates progressing through the well completion and testing operations duringQ2 2025.

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**Note1 - Nature of Operations, Basis of Presentation and Going Concern (cont’d)

B. Basis of Presentation

The accompanying unaudited interim consolidated condensed financial statements of Zion Oil & Gas, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with Article8-03 of Regulation S-X. Accordingly, they donot include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals necessary for a fair statement of financial position, results of operations and cash flows, have been included. The information included in this Quarterly Report on Form10-Q should be read in conjunction with the financial statements and the accompanying notes included in the Company’s Annual Report on Form10-K for the year ended* December 31, 2024*. The year-end balance sheet data presented for comparative purposes was derived from audited financial statements, but doesnot include all disclosures required by GAAP. The results of operations for thethree months ended* March 31, 2025* arenot necessarily indicative of the operating results for the year ending* December 31,*2025 or for any other subsequent interim period.

C. Going Concern

The Company incurs cash outflows from operations, and all exploration activities and overhead expenses to date have been financed by way of equity or debt financing. The recoverability of the costs incurred to date is uncertain and dependent upon achieving significant commercial production of hydrocarbons.

The Company’s ability to continue as a going concern is dependent upon obtaining the necessary financing to undertake further exploration and development activities and ultimately generating profitable operations from its oil and natural gas interests in the future. The Company’s current operations are dependent upon the adequacy of its current assets to meet its current expenditure requirements and the accuracy of management’s estimates of those requirements. Should those estimates be materially incorrect, the Company’s ability to continue as a going concern* maybe in doubt. The consolidated condensed 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. During thethree* months ended* March 31, 2025*, the Company incurred a net loss of approximately $1.7 million and had an accumulated deficit of approximately $296 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern forone year from the date the financials were issued.

To carry out planned operations, the Company must raise additional funds through additional equity and/or debt issuances or through profitable operations. There can beno assurance that this capital or positive operational income will be available to the Company, and if it isnot, the Company* maybe forced to curtail or cease exploration and development activities. The consolidated condensed financial statements donot* include any adjustments that might result from the outcome of this uncertainty.

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Note2 - Summary of Significant Accounting Policies

A. Net Loss per Share Data

Basic and diluted net loss per share of common stock, par value $0.01 per share (“Common Stock”) is presented in conformity with ASC260-10 “Earnings Per Share.” Diluted net loss per share is the same as basic net loss per share for2025 as the inclusion of 32,986,325 in stock options and 2,676,904 in warrants would be anti-dilutive.

Diluted net loss per share is the same as basic net loss per share for2024 as the inclusion of 26,965,575 in stock options and 29,456,952 in warrants would be anti-dilutive.

B. Use of Estimates

The preparation of the accompanying unaudited consolidated condensed financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of expenses. Such estimates include the valuation of unproved oil and gas properties, deferred tax assets, asset retirement obligations, borrowing rate of interest consideration for leases, accounting and legal contingencies. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity, foreign currency, political instability and energy markets have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated condensed financial statements in future periods.

The full extent to which the COVID-19 pandemic* maydirectly or indirectly impact our business, results of operations and financial condition, will depend on future developments that are uncertain, including as a result of new information that mayemerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international markets. We have made estimates of the impact of COVID-19 within our consolidated financial statements, and although there is currentlyno* major impact, there* maybe changes to those estimates in future periods. We have made the same estimates as to the potential impact the Israel-Hamas war, as well as the Israel- Hezbollah war, mayhave on our operations. Actual results may*differ from these estimates.

C. Oil and Gas Properties and Impairment

The Company follows the full-cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized.

All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects arenot amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is included in loss from continuing operations before income taxes, and the adjusted carrying amount of the proved properties is amortized on the unit-of-production method.

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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 hasnot yet been established. Impairment requiring a charge to expense* may*be indicated through evaluation of drilling results, relinquishing drilling rights or other information.

During thethree months ended* March 31, 2025*, and2024, the Company didnot record any post-impairment charges.

Currently, the Company hasno economically recoverable reserves andno amortization base. The Company’s unproved oil and gas properties consist of capitalized exploration costs of $22,449,000 and $21,682,000 as of* March 31, 2025* and* December 31, 2024*, 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. ASC820 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 athree-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. Thethree tiers are defined as follows:

The Company’s financial instruments, including cash and cash equivalents, other receivables, prepaid expenses and other, Government receivables, accounts payable and accrued liabilities, are carried at historical cost. At* March 31, 2025*, and* December 31, 2024*, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

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E. Stock-Based Compensation

ASC718, “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 condensed 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 ASC718. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (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 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 arenot 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 isnot a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note3, Stockholders’* Equity*.

G. Related parties

Parties are considered to be related to the Company if the parties, directly or indirectly, throughone 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* maydeal ifone* party controls or can significantly influence the management or operating policies of the other to an extent thatone 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 didnot have any related party transactions for the periods covered in this report.

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H. Recently Adopted Accounting Pronouncements

In* November 2023,the FASB issued ASUNo.* 2023-07, “Segment Reporting (Topic280*): Improvements to Reportable Segment Disclosures*”. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses among other disclosure requirements. ASU2023-07 is effective for fiscal years beginning after* December 15, 2023,and interim periods within fiscal years beginning after December 15, 2024.Early adoption is permitted. The amendments will be applied retrospectively to all prior periods presented in the financial statements. Zion adopted this ASU effective January 1, 2023.The adoption of this ASU didnot* have any impact on its consolidated financial statements.

Other Recent Accounting Pronouncements

The Company doesnot believe that the adoption of any recently issued accounting pronouncements in2025 had a significant impact on our consolidated condensed financial position, results of operations, or cash flow.

I. Depreciation and Accounting for Drilling Rig and Related Equipment

Zion purchased an onshore oil and gas drilling rig, drilling pipe, related equipment and spare parts 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 asone line item with the drilling rig on the balance sheet. Zion determined that the life of the I-35 drilling rig (the rig Zion purchased), is 10 years. Zion is depreciating the rig on a straight-line basis.

Zion uses the First In First Out (“FIFO”) method of accounting for the spare parts, meaning that the earliest items purchased will be thefirst item charged to the well in which the spare parts gets consumed.

It is also noteworthy that various components and systems on the rig will be subject to certifications by the manufacturer to ensure that the rig is maintained at optimal levels. Per standard practice in upstream oil and gas, each certification performed on our drilling rig increases the useful life of the rig byfive years. The costs of each certification will be added to the drilling rig account, and our straight-line amortization will be adjusted accordingly.

Zion purchased rig spare parts and other drilling equipment totaling approximately $106,000 during thethree months ended* March, 31,*2025 in preparation for its MJ-01 re-entry project.

See the table below for a reconciliation of the rig-related activity during the period ended* March 31, 2025*:

I-35 Drilling Rig & Associated Equipment:

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Note3 - Stockholders’** Equity**

The Company’s shareholders approved the amendment of the Company’s Amended and Restated Certificate of Incorporation to increase the number of shares of common stock, par value $0.01, that the Company is authorized to issue from 800,000,000 shares to 1,200,000,000 shares, effective* June 7, 2023.*

A.2021 Omnibus Incentive Stock Option Plan

Effective* June 9, 2021,*the Company’s shareholders authorized the adoption of the Zion Oil & Gas, Inc.2021 Omnibus Incentive Stock Option Plan (“Omnibus Plan”) for employees, directors and consultants, initially reserving for issuance thereunder 38,000,000 shares of common stock.

The Omnibus Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, bonus stock, awards in lieu of cash obligations, other stock-based awards and performance units. The plan also permits cash payments under certain conditions.

The compensation committee of the Board of Directors (comprised of independent directors) is responsible for determining the type of award, when and to whom awards are granted, the number of shares and the terms of the awards and exercise prices. The options are exercisable for a periodnot to exceedten years from the date of grant.

During thethree months ended* March 31, 2025*, the Company granted the following options from the Omnibus Plan for employees, directors and consultants, to purchase shares of common stock as non-cash compensation:

During thethree months ended* March 31, 2024*, the Company granted the following options from the Omnibus Plan for employees, directors and consultants, to purchase shares of common stock as non-cash compensation:

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B. Stock Options

The stock option transactions since* January 1,*2025 are shown in the table below:

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The following table summarizes information about stock options outstanding as of* March 31, 2025*:

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Granted to employees

The following table sets forth information about the weighted-average fair value of options granted to employees and directors during the year, using the Black Scholes option-pricing model and the weighted-average assumptions used for such grants:

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the options.

The expected life represents the weighted average period of time that options granted are expected to be outstanding. The expected life of the options granted to employees and directors is calculated based on the Simplified Method as allowed under Staff Accounting BulletinNo. 110 (“SAB110”), giving consideration to the contractual term of the options and their vesting schedules, as the Company doesnot have sufficient historical exercise data at this time. The expected life of the option granted to non-employees equals their contractual term. In the case of an extension of the option life, the calculation was made on the basis of the extended life.

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C. Compensation Cost for Warrant and Option Issuances

The following table sets forth information about the compensation cost of warrant and option issuances recognized for employees and directors:

The following table sets forth information about the compensation cost of warrant and option issuances recognized for non-employees:

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D. Dividend Reinvestment and Stock Purchase Plan (“DSPP”)

On* March 13, 2014Zion 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 (RegistrationNo.* 333-216191) as a replacement for the Form S-3 (RegistrationNo. 333-193336), for which thethree-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 RegistrationNo.* 333-216191 describes the terms of the DSPP and replaces the prior Prospectus Supplement, as amended, under the prior RegistrationNo. 333-193336.

On* December 14, 2022,the Company extended the termination date of the ZNWAG warrant byone* (1) year from the expiration date of* January 8, 2023to January 8, 2024.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

As of* January 8, 2024,*any outstanding ZNWAG 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 warrants that were acquired. Each warrant affords the participant the opportunity to purchaseone share of our Common Stock at a warrant exercise price of $1.00. The warrant shall have the company notation of “ZNWAM.” The warrants willnot be registered for trading on the OTCQB or any other stock market or trading market. The warrants became exercisable on* January 15, 2021and continue to be exercisable through July 15, 2022.*

On* March 21, 2022,the Company extended the termination date of the ZNWAM warrant byone* (1) year from the expiration date of* July 15, 2022to July 15, 2023and revised the exercise price to $0.05. Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

On* June 16, 2023,the Company extended the termination date of the ZNWAM warrant from July 15, 2023to September 6, 2023.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

On* August 21, 2023,the Company extended the termination date of the ZNWAM warrant from September 6, 2023to October 31, 2023.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

On* October 19, 2023,the Company extended the termination date of the ZNWAM warrant from October 31, 2023to December 31, 2023.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

On* December 18, 2023,the Company extended the termination date of the ZNWAM warrant from December 31, 2023to March 31, 2024.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

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On* March 28, 2024,the Company extended the termination date of the ZNWAM warrant from March 31, 2024to December 31, 2024.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

On* January 21, 2025,the Company extended the termination date of the ZNWAM warrant from December 31, 2024to March 31, 2025.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

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 approximately $219,000. As of this report date, there areno* ZNWAM warrants outstanding.

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 purchaseone share of our Common Stock at a warrant exercise price of$.25. The warrant shall have the company notation of “ZNWAQ.” The warrants willnot* be registered for trading on the OTCQB or any other stock market or trading market. The warrants were issued on* May 5, 2022and were exercisable through July 15, 2023*at a revised per share exercise price of$.05.

Zion considers this warrant as permanent equity per ASC815-40-35-2. As such, there isno value assigned to this extension.

On* June 16, 2023,the Company extended the termination date of the ZNWAQ warrant from July 15, 2023to September 6, 2023.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

On* August 21, 2023,the Company extended the termination date of the ZNWAQ warrant from September 6, 2023to October 31, 2023.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

On* October 19, 2023,the Company extended the termination date of the ZNWAQ warrant from October 31, 2023to December 31, 2023.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

On* December 18, 2023,the Company extended the termination date of the ZNWAQ warrant from December 31, 2023to March 31, 2024.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

On* March 28, 2024,the Company extended the termination date of the ZNWAQ warrant from March 31, 2024to December 31, 2024.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

On* January 21, 2025,the Company extended the termination date of the ZNWAQ warrant from December 31, 2024to March 31, 2025.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno 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 areno ZNWAQ warrants outstanding.

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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* November 15, 2021,the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and warrants that will be acquired. Each warrant affords the participant the opportunity to purchaseone* share of our Common Stock at a warrant exercise price of*$1.00.* The warrant shall have the company notation of “ZNWAS.” The warrants willnot be registered for trading on the OTCQB or any other stock market or trading market. The warrants will be issued and become exercisable on* November 15, 2025and continue to be exercisable through December 31, 2025*at a revised per share exercise price of$.25.

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* September 30, 2022,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 purchaseone* share of our Common Stock at a warrant exercise price of$.25. The warrant shall have the company notation of “ZNWAT.” The warrants willnot be registered for trading on the OTCQB or any other stock market or trading market. The warrants will be issued and become exercisable on* November 15, 2025and continue to be exercisable through December 31, 2025*at a per share exercise price of$.25.

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* December 31, 2022,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 purchaseone* share of our Common Stock at a warrant exercise price of$.25. The warrant shall have the company notation of “ZNWAU.” The warrants willnot be registered for trading on the OTCQB or any other stock market or trading market. The warrants will be issued and exercisable on* November 15, 2025and continue to be exercisable through December 31, 2025*at a per share exercise price of$.25.

Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a program consisting of shares of stock to a participant. After conclusion of the program on* August 31, 2023,the participant’s Plan account was credited with the number of shares of the Company’s Common Stock that were acquired. Zion incurred $173,000 in equity issuance costs to an outside party related to this waiver program. The Company executedtwo* additional Waiver Term Sheets with a participant consisting of shares of stock. After conclusion of the program on* December 31, 2023,the participant’s Plan account was credited with the number of shares of the Company’s Common Stock that were acquired. During the year ended December 31, 2023,*Zion incurred $1,120,000 in equity issuance costs.

On* January 1, 2024,the Company executed a Waiver Term Sheet with a participant consisting of shares of stock. After conclusion of the program on March 31, 2024,the participant’s Plan account was credited with the number of shares of the Company’s Common Stock that were acquired. During thethree* months ended* March 31, 2024*, Zion incurred $816,000 in equity issuance costs and$2,921,000 in equity issuance costs for the year ending* December 31, 2024.*

During thethree months ended* March 31, 2025*, Zion didnot incur any equity issuance costs.

On* April 1, 2024,*the Company executed its current Waiver Term Sheet with a participant consisting of shares of stock and warrants.

The program was scheduled to terminate at the earlier of: (a) a maximum purchase of $10,000,000 through the DSPP, (b)* October 1, 2024or (c) the closing price of Zion’s stock is 15 cents per share forfive* (5) consecutive days. Additional terms of the Waiver Term Sheet included the pro-rata issuance of up to 5,000,000 warrants with an exercise price of$.25 per share and an expiration date of* December 31, 2024,in the event the Participant purchases up to $5,000,000 of the Company’s stock by July 1, 2024.*

On or around* August 13, 2024,afirst* amendment to its current Waiver Term Sheet was signed with the participant. The additional terms of the Waiver Term sheet included the pro-rata issuance of up to 10,000,000 warrants with an exercise price of$.25 per share and an expiration date of* December 31, 2024,in the event the Participant purchases up to $10,000,000 of the Company’s stock by October 1, 2024.*

On or around* September 30, 2024,asecond* amendment to its current Waiver Term Sheet was signed with the participant. The additional terms of the Waiver Term sheet included changing the expiration date to* December 31, 2024and the pro-rata issuance of up to 10,000,000 warrants with an exercise price of$.25 per share and an expiration date of April 1, 2025,in the event the Participant purchases up to $10,000,000 of the Company’s stock by December 31, 2024.*

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On or around* November 12, 2024,athird* amendment to its current Waiver Term Sheet was signed with the participant. The additional terms of the Waiver Term sheet included changing the provision for the program termination provided that the closing stock price is$.20 cents per share or higher forfive (5) consecutive days.

On or around* January 21, 2025,afourth* amendment to this latest Waiver Term Sheet was signed with the participant. The Pricing Plan of the program terminates at the earlier of: (a) a maximum purchase of $15,000,000 through the DSPP, (b)* June 30, 2025or (c) the closing price of Zion’s stock is 20 cents per share forfive* (5) consecutive days. Additional terms of the Waiver Term Sheet include the pro-rata issuance of up to 15,000,000 warrants with an exercise price of$.25 per share and an expiration date of* December 31, 2025,in the event the Participant purchases up to $15,000,000 of the Company’s stock by June 30, 2025.As of May 2, 2025,*this latest Waiver Term Sheet was terminated as the participant completed the maximum purchase of $15,000,000 through the DSPP along with 15,000,000 warrants.

During2025,one participant who participated in the “Request for Waiver” aspect of the DSPP contributed approximately 56% of the net cash raised through the DSPP.

During2024,one participant who participated in the “Request for Waiver” aspect of the DSPP contributed approximately 59% of the net cash raised through the DSPP.

On* March 13, 2023,Zion filed with the Securities and Exchange Commission an AmendmentNo.* 2 to the Prospectus Supplement dated as of* December 15, 2021and accompanying base prospectus dated December 1, 2021relating 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 (FileNo.* 333-261452), as amended, which was declared effective by the SEC on* December 15, 2021.*

AmendmentNo. 3 – New Unit Option under the Unit Program**

Under our Plan, we provided a Unit Option under AmendmentNo. 3. This Unit Option period began on* May 15, 2023and terminated on June 15, 2023.*

Our Unit Program consisted of the combination of Common Stock and warrants with basic Unit Program features, conditions and terms outlined in the Original Prospectus Supplement and AmendmentNo. 1 and AmendmentNo. 2. AmendmentNo. 3 provided the option period, unit price and the determination of the number of shares of Common Stock and warrants per unit. As mentioned above, this Unit Option began on* May 15, 2023and terminated on June 15, 2023.The Unit Option consisted of Units of our 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 ofone* Unit) by the average of the high and low sale prices of the Company’s publicly traded common stock as reported on the OTCQB on the Unit Purchase Date and (ii) Common Stock purchase warrants to purchase an additionaltwo hundred (200) shares of Common Stock at a per share exercise price of $0.25. The participant’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants that were acquired under the Units purchased. Each warrant affords the participant the opportunity to purchaseone share of our Common Stock at a warrant exercise price of $0.25. The warrant shall have the Company notation of “ZNWAZ” and willnot be registered for trading on the OTCQB or any other stock market or trading market.

Plan participants, who enrolled into the Unit Program with the purchase of at leastone Unit and enrolled in the separate Automatic Monthly Investments (“AMI”) program at a minimum of*$50.00* per month, received an additionalthree hundred (300) warrants at an exercise price of $0.25 during this Unit Option Program. Thethree hundred (300) additional warrants were for enrolling into the AMI program and received the above warrant with the Company notation of “ZNWAZ.” Existing subscribers to the AMI were entitled to the additionalthree hundred (300) warrants, if they purchased at leastone (1) Unit during the Unit program.

The ZNWAZ warrants became exercisable on* July 17, 2023and continued to be exercisable through July 17, 2024*at a per share exercise price of $0.25.

On* July 17, 2024,*any outstanding ZNWAZ warrants expired.

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AmendmentNo. 4 – New Unit Option under the Unit Program**

Under our Plan, we provided a Unit Option under our Unit Program with this AmendmentNo. 4. This Unit Option period began on* November 6, 2023and was scheduled to terminate on December 31, 2023.See AmendmentNo.* 5 below for data on an extension.

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 AmendmentNo. 1. AmendmentNo. 4 provided the option period, unit price and the determination of the number of shares of Common Stock and warrants per unit. This Unit Option began on* November 6, 2023and terminated on December 31, 2023.The Unit Option consisted of Units of our 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 ofone* Unit) by the average of the high and low sale prices of the Company’s publicly traded common stock as reported on the OTCQB on the Unit Purchase Date and (ii) Common Stock purchase warrants to purchase an additionalfifty (50) shares of Common Stock at a per share exercise price of $0.25. The participant’s Plan account will be credited with the number of shares of the Company’s Common Stock and Warrants that were acquired under the Units purchased. Each warrant affords the participant the opportunity to purchaseone share of our Common Stock at a warrant exercise price of $0.25. The warrant shall have the Company notation of “ZNWBA” and willnot be registered for trading on the OTCQB or any other stock market or trading market.

Plan participants, who enrolled into the Unit Program with the purchase of at leastone Unit and enroll in the separate Automatic Monthly Investments (“AMI”) program at a minimum of*$50.00* per month, received an additionalfifty (50) warrants at an exercise price of $0.25 during this Unit Option Program. Thefifty (50) additional warrants were for enrolling into the AMI program and received the above warrant with the Company notation of “ZNWBA.” Existing subscribers to the AMI were entitled to the additionalfifty (50) warrants, if they purchased at leastone (1) Unit during the Unit program.

The ZNWBA warrants became exercisable on* January 15, 2024,and continued to be exercisable through January 15, 2025,unless extended, at a per share exercise price of $0.25. See AmendmentNo.* 5 below for new dates.

AmendmentNo. 5 – Extension of Termination Date to January 31, 2024****

Under our Dividend Reinvestment and Common Stock Purchase Plan (the “Plan”), we extended the current Unit Option that was filed under AmendmentNo. 4, dated* November 6, 2023,to terminate on January 31, 2024.*

The ZNWBA warrants now will befirst exercisable on* February 15, 2024,instead of January 15, 2024and continued to be exercisable through February 15, 2025,instead of January 15, 2025,unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

Accordingly, all references in the Original Prospectus Supplement and AmendmentNo. 1 and AmendmentNo. 4, concerning the Unit Option, continue, except for the substitution of the revised Unit Option dates and features above. All other Plan features, conditions and terms remain unchanged.

The date of this AmendmentNo. 5 to Prospectus Supplement was* December 20, 2023.*

AmendmentNo. 6 – Extension of Termination Date to February**29,* 2024***

Under our Dividend Reinvestment and Common Stock Purchase Plan (the “Plan”), we extended the current Unit Option that was filed under AmendmentNo. 4, dated* November 6, 2023,to terminate on February**29,* 2024.

The ZNWBA warrants now will be exercisable on* March 15, 2024,instead of February 15, 2024and continued to be exercisable through March 15, 2025,instead of February 15, 2025,unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

Accordingly, all references in the Original Prospectus Supplement and AmendmentNo. 1 and AmendmentNo. 4, concerning the Unit Option, continue, except for the substitution of the revised Unit Option dates and features above. All other Plan features, conditions and terms remain unchanged.

The date of this AmendmentNo. 6 to Prospectus Supplement was* January 29, 2024.*

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AmendmentNo. 7 – Extension of Termination Date to March 31, 2024****

Under our Dividend Reinvestment and Common Stock Purchase Plan (the “Plan”), we are extending the current Unit Option that was filed under AmendmentNo. 4, dated* November 6, 2023,to terminate on March 31, 2024.*

The ZNWBA warrants now will befirst exercisable on* April 15, 2024,instead of March 15, 2024and continued to be exercisable through April 15, 2025,instead of March 15, 2025,unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

Accordingly, all references in the Original Prospectus Supplement and AmendmentNo. 1 and AmendmentNo. 4, concerning the Unit Option, continue, except for the substitution of the revised Unit Option dates and features above. All other Plan features, conditions and terms remain unchanged.

The date of this AmendmentNo. 7 to Prospectus Supplement was* February 26, 2024.*

AmendmentNo. 8 – Extension of Termination Date to April 30, 2024****

Under our Dividend Reinvestment and Common Stock Purchase Plan (the “Plan”), we extended the current Unit Option that was filed under AmendmentNo. 4, dated* November 6, 2023,to terminate on April 30, 2024.*

The ZNWBA warrants now will befirst exercisable on* May 15, 2024,instead of April 15, 2024,and continue to be exercisable through May 15, 2025,instead of April 15, 2025,unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

Accordingly, all references in the Original Prospectus Supplement and AmendmentNo. 1 and AmendmentNo. 4, concerning the Unit Option, continue, except for the substitution of the revised Unit Option dates and features above. All other Plan features, conditions and terms remain unchanged.

The date of this AmendmentNo. 8 to Prospectus Supplement was* March 23, 2024.*

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AmendmentNo. 9 – Extension of Termination Date to May 31, 2024****

Under our Dividend Reinvestment and Common Stock Purchase Plan (the “Plan”), we extended the current Unit Option that was filed under AmendmentNo. 4, dated* November 6, 2023,to terminate on May 31, 2024.*

The ZNWBA warrants now will befirst exercisable on* June 15, 2024,instead of May 15, 2024,and continue to be exercisable through June 15, 2025,instead of May 15, 2025,unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

Accordingly, all references in the Original Prospectus Supplement and AmendmentNo. 1 and AmendmentNo. 4, concerning the Unit Option, continue, except for the substitution of the revised Unit Option dates and features above. All other Plan features, conditions and terms remain unchanged.

The date of this AmendmentNo. 9 to Prospectus Supplement was* April 24, 2024.*

AmendmentNo. 10 – Extension of Termination Date to August 31, 2024****

Under our Dividend Reinvestment and Common Stock Purchase Plan (the “Plan”), we extended the current Unit Option that was filed under AmendmentNo. 4, dated* November 6, 2023,to terminate on August 31, 2024.*

The ZNWBA warrants now will befirst exercisable on* September 15, 2024,instead of June 15, 2024,and continue to be exercisable through September 14, 2025,instead of June 15, 2025,unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

Accordingly, all references in the Original Prospectus Supplement and AmendmentNo. 1 and AmendmentNo. 4, concerning the Unit Option, continue, except for the substitution of the revised Unit Option dates and features above. All other Plan features, conditions and terms remain unchanged.

The date of this AmendmentNo. 10 to Prospectus Supplement was* May 29, 2024.*

AmendmentNo. 11 – Extension of Termination Date to October 15, 2024****

Under our Dividend Reinvestment and Common Stock Purchase Plan (the “Plan”), we extended the current Unit Option that was filed under AmendmentNo. 4, dated* November 6, 2023,to terminate on October 15, 2024.*

The ZNWBA warrants now will befirst exercisable on* November 15, 2024,instead of September 15, 2024,and continue to be exercisable through November 14, 2025,instead of September 15, 2025,unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

Accordingly, all references in the Original Prospectus Supplement and AmendmentNo. 1 and AmendmentNo. 4, concerning the Unit Option, continue, except for the substitution of the revised Unit Option dates and features above. All other Plan features, conditions and terms remain unchanged.

The date of this AmendmentNo. 11 to Prospectus Supplement was* August 22, 2024.*

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AmendmentNo. 12 – Extension of Termination Date to December 31, 2024****

Under our Dividend Reinvestment and Common Stock Purchase Plan (the “Plan”), we extended the current Unit Option that was filed under AmendmentNo. 4, dated* November 6, 2023.Our Unit Program consists of the combination of Common Stock and warrants with an extended time period, but otherwise the same Unit Program features, conditions and terms in the Prospectus Supplement and AmendmentNo.* 4 apply. We extended under our Unit Program that was to terminate* October 15, 2024,but now will terminate December 31, 2024,*and we extended the exercise and termination dates of the related ZNWBA warrants.

For Plan participants who enroll into the Unit Program with the purchase of at leastone Unit and also enroll in the separate Automatic Monthly Investments (“AMI”) program at a minimum of*$50.00* per month or more, will receive an additionalfifty (50) Warrants at an exercise price of $0.25 during this Unit Option Program. Thefifty (50) additional warrants are for enrolling into the AMI program. Existing subscribers to the AMI are entitled to the additionalfifty (50) warrants once, if they purchase at leastone (1) Unit during the Unit program.

The ZNWBA warrants will befirst exercisable on* January 31, 2025,instead of November 15, 2024,and continue to be exercisable through January 31, 2026,instead of November 15, 2025,unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

Accordingly, all references in the Original Prospectus Supplement and AmendmentNo. 1 and AmendmentNo. 4, concerning the Unit Option, continue, except for the substitution of the revised Unit Option dates and features above. All other Plan features, conditions and terms remain unchanged.

The date of this AmendmentNo. 12 to Prospectus Supplement was* October 9, 2024.*

AmendmentNo. 13 – Extension of Termination Date to February 28, 2025****

Under our Dividend Reinvestment and Common Stock Purchase Plan (the “Plan”), we extended the current Unit Option that was filed under AmendmentNo. 4, dated* November 6, 2023,to terminate on February 28, 2025.*

The ZNWBA warrants now will befirst exercisable on* March 31, 2025,instead of January 31, 2025,and continue to be exercisable through March 31, 2026,instead of January 31, 2026,unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

Accordingly, all references in the Original Prospectus Supplement and AmendmentNo. 1 and AmendmentNo. 4, concerning the Unit Option, continue, except for the substitution of the revised Unit Option dates and features above. All other Plan features, conditions and terms remain unchanged.

The date of this AmendmentNo. 13 to Prospectus Supplement was* December 10, 2024.*

The current Unit Option terminated on* February 28, 2025as described in AmendmentNo.* 13. The ZWNBA warrants, exercisable at $0.25, were issued on* March 31, 2025and will be exercisable through March 31, 2026.*

For thethree months ended* March 31, 2025*, and2024, approximately $212,000 and$nil were recorded under the Company’s Statement of Changes in Stockholders’ Equity as Subscriptions Receivables.

For thethree months ended* March 31, 2025*, approximately $6,040,000 were raised under the DSPP program.

For thethree months ended* March 31, 2024*, approximately $3,557,000 were raised under the DSPP program. The $3,557,000 figures were reduced by $816,000 in equity issuance costs to an outside party resulting in net cash provided of $2,741,000.

The company raised approximately $6,816,000 from the period* April 1, 2025through May 7, 2025,under the DSPP program, which includes collection of the $212,000 stock subscription receivable at March 31, 2025.*

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The warrants represented by the company notation ZNWAA are tradeable on the OTCQB market under the symbol ZNOGW. However, all of the other warrants characterized above, in the table below, and throughout this Form10-Q, arenot tradeable and are used internally for classification and accounting purposes only.

E. Warrant Table

The warrant balances at* December 31, 2024* and transactions since* January 1,*2025 are shown in the table below:

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F. Warrant Descriptions of Current Warrants

The price and the expiration dates for the series of warrants to investors are shown in the table below. The listing contains only those warrants with a future expiration date.

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Note4 - Unproved Oil and Gas Properties, Full Cost Method

Unproved oil and gas properties, under the full cost method, are comprised as follows:

During thethree months ended* March 31, 2025*, and2024, the Company did not record any post-impairment charges.

Changes in Unproved oil and gas properties during thethree months ended* March 31, 2025and2024* are as follows:

Inclusive of non-cash amounts of approximately $693,000, and $664,000 during the three months ended March 31, 2025, and 2024, respectively

Please refer to Footnote1 – Nature of Operations and Going Concern for more information about Zion’s exploration activities.

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Note5 - Right of use lease assets and lease obligations

The Company is a lessee in several non-cancellable operating leases for transportation and office space.

The table below presents the operating lease assets and liabilities recognized on the balance sheet as of* March 31, 2025* and* December 31, 2024*:

The depreciable lives of operating lease assets and leasehold improvements are limited by the expected lease term.

The Company’s leases generally donot provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. The Company used incremental borrowing rates as of* January 1, 2019*for operating leases that commenced prior to that date.

The Company’s field office in Caesarea, Israel is under lease for 6,566 square feet.

The Company had an option to renew the lease for another five years from* February 1, 2024to January 31, 2029,provided it wasnot* in breach of the agreement, where it is required as well to furnish a notice of intent to exercise the optionsix months prior to termination of lease, and it furnishes a bank guarantee and insurance confirmation prior to commencement of the option period. The Company exercised the option to renew the lease for another seven years from* February 1, 2024through January 31, 2031,when rent is to be paid on a monthly basis in the base amount of approximately NIS 46,500 per month (approximately $12,500) at the exchange rate in effect on the date of this report and is linked to an increase (butnot* a decrease) in the CPI.

The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of* March 31, 2025* are:

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**Note5 - Right of use lease assets and leases obligations(cont’d)

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under non-cancellable operating leases with terms of more thanone year to the total operating lease liabilities recognized on the condensed balance sheets as of* March 31, 2025*:

Operating lease costs were $62,000 and $75,000 for thethree months ended* March 31, 2025*, and2024 respectively. Operating lease costs are included within general and administrative expenses on the statements of operations.

Cash paid for amounts included in the measurement of operating lease liabilities was $39,000 and $88,000 for thethree months ended* March 31, 2025*, and2024, respectively. These amounts are included in operating activities in the statements of cash flows.

Right-of-use assets obtained in exchange for new operating lease liabilities were$nil and $829,000 for thethree months ended* March 31, 2025*, and2024, respectively.

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Note6 - Commitments and Contingencies

A. Litigation

From time to time, the Company* may*be subject to routine litigation, claims or disputes in the ordinary course of business. The Company defends itself vigorously in all such matters. However, we cannot predict the outcome or effect of any of the potential litigation, claims or disputes.

The Company isnot subject to any litigation at the present time.

B. Recent Market Conditions–** Coronavirus, Israel-Hamas War, Israel-Hezbollah War and the Russia-Ukraine War**

Coronavirus

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.

Israel-Hamas War

On* October 7, 2023,Hamas, a militant terrorist organization in Gaza, infiltrated southern Israel, killing and injuring at leastone thousand* Israeli citizens. Roughly250 Israeli hostages were then taken back to Gaza. This unprovoked attack led the nation of Israel to declare war on Hamas approximatelyone week later. Israel and Gaza subsequently entered into a multi-phase ceasefire involving the cessation of battles in exchange for release of Israeli hostages and Palestinian prisoners, but hostilities resumed pending release of the remaining Israeli hostages.

There is uncertainty as to how long the war inside the Gaza strip will last. While we acknowledge that uncertainty, the Company is moving forward with its MJ-01 recompletion activities (see note 1 for details).

It is important to note that Zion’s license area is not located near any current combat zones.

Israel-Hezbollah War and Wider Hostilities

Immediately after the* October 7, 2023Hamas attack on Israel, the terrorist organization Hezbollah (in Lebanon) began launching daily rockets into Israel. Over the course of the next several months, both Hezbollah and Israel traded rocket fire into the other country, but without engaging in a full war. DuringQ3* 2024, both sides increased the frequency and number of missiles fired. In* September 2024,Israel began a ground invasion into Lebanon. On or around November 27, 2024,*Israel and Hezbollah signed a ceasefire agreement. As of the date of this report, both sides are holding to its terms.

Russia-Ukraine War

Due to Russia’s invasion of Ukraine, which began in* February 2022,and the resulting sanctions and other actions against Russia and Belarus, there has been uncertainty and disruption in the global economy. Although the Russian war against Ukraine didnot* have a material adverse impact on the Company’s financial results for the quarter ended* March 31, 2025*, at this time the Company is unable to fully assess the aggregate impact the Russian war against Ukraine* mayhave on its business due to various uncertainties, which include, but arenot* limited to, the duration of the war, the war’s effect on the global economy, future energy pricing, its impact to the businesses of the Company and actions that* may*be taken by governmental authorities related to the war.

C. Environmental and Onshore Licensing Regulatory Matters

The Company is engaged in oil and gas exploration and production and* may*become subject to certain liabilities as they relate to environmental clean-up of well sites or other environmental restoration procedures and other obligations as they relate to the drilling of oil and gas wells or the operation thereof. Various guidelines have been published in Israel by the State of Israel’s Petroleum Commissioner and Energy and Environmental Ministries as it pertains to oil and gas activities. Mention of these older guidelines was included in previous Zion filings.

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**Note6 - Commitments and Contingencies(cont’d)

The Company believes that these regulations will result in an increase in the expenditures associated with obtaining new exploration rights and drilling new wells. The Company expects that an additional financial burden could occur as a result of requiring cash reserves that could otherwise be used for operational purposes. In addition, these regulations are likely to continue to increase the time needed to obtain all of the necessary authorizations and approvals to drill and production test exploration wells.

As of* March 31, 2025*, and* December 31, 2024*, the Company accrued$nil and$nil for license regulatory matters.

D. Insurance Financing

Effective* March 12, 2024,the Company renewed its rig insurance policy with total premiums, taxes and fees for approximately $95,000. A cash down payment of approximately $38,000 was paid on February 23, 2024.Under the terms of the insurance financing, payments of approximately $9,000, which included interest at the rate of 13.99% per annum, were due each month for 10 months commencing on April 12, 2024.As of March 31, 2025,*this was fully paid off.

Effective* November 18, 2024,the Company renewed itsthird* party liability policy in Israel with total premiums, taxes and fees for approximately $76,000. A cash down payment of approximately $20,000 was paid on* November 18, 2024.Under the terms of the insurance financing, payments of approximately $5,000, which include interest at the rate of 12.9% per annum, are due each month for 11 months commencing on December 16, 2024.As of March 31, 2025,*the outstanding balance was approximately$36.000. This policy was capitalized under Unproved Oil and Gas Properties.

Effective* December 3, 2024the Company renewed its Control of well (“COW”) insurance policy in Israel with total premiums, taxes and fees for approximately $84,000. A cash payment of approximately $84,000 was paid on December 3, 2024.*This policy was capitalized under Unproved Oil and Gas Properties.

Effective* December 28, 2024,the Company renewed its D&O insurance policy with total premiums, taxes and fees for approximately $430,000. A cash down payment of approximately $41,000 was paid on January 2, 2025.Under the terms of the insurance financing, payments of approximately $39,000, which include interest at the rate of 12.9% per annum, are due each month for 10 months commencing on January 28, 2025.As of March 31, 2025,*the outstanding balance was approximately$272,000.

Effective* March 12, 2025,the Company renewed its rig insurance policy with total premiums, taxes and fees for approximately $119,000. A cash payment of approximately $119,000 was paid on March 7, 2025.*This policy was capitalized under Unproved Oil & Gas Properties.

As of* March 31, 2025* and* December 31, 2024*, the Company had contractual obligations to pay for various lines of insurance, including directors and officers, rig andthird-party liability. The balances for insurance financing were $308,000 and$490,000, respectively.

E. Bank Guarantees

As of* March 31, 2025*, the Company provided Israeli-required bank guarantees to various governmental bodies (approximately $971,000) and others (approximately $91,000) with respect to its drilling operation in an aggregate amount of approximately $1,062,000. 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.

F. Vendor Concentration

The Company’s financial instruments that are exposed to a concentration of credit risk are accounts payable. At* March 31, 2025*, there weretwo suppliers that represent 10% or more of the Company’s accounts payable balance. At* December 31, 2024*, there were three suppliers that represent 10% or more of the Company’s accounts payable balance.

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**Note6 - Commitments and Contingencies(cont’d)

G. Risks

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes* may*be the result of various factors, including interest rates, foreign exchange rates, commodity prices and/or equity prices. In the normal course of doing business, we are exposed to the risks associated with foreign currency exchange rates and changes in interest rates.

Foreign Currency Exchange Rate Risks. A portion of our expenses, primarily labor expenses and certain supplier contracts, are denominated in New Israeli Shekels (“NIS”). As a result, we have significant exposure to the risk of fluctuating exchange rates with the U.S. Dollar (“USD”), our primary reporting currency. During the period* January 1,2025 through March 31, 2025*, the USD has fluctuated by approximately 1.9% against the NIS (the USD strengthened relative to the NIS). Also, during the period* January 1,2024 through December 31, 2024*, the USD fluctuated by approximately 0.6% against the NIS (the USD strengthened relative to the NIS). Continued strengthening of the US dollar against the NIS will result in lower operating costs from NIS denominated expenses. To date, we havenot hedged any of our currency exchange rate risks, but we* may*do so in the future.

Interest Rate Risk.Our exposure to market risk relates to our cash and investments. We maintain an investment portfolio of short-term bank deposits and money market funds. The securities in our investment portfolio arenot leveraged, and are, due to their very short-term nature, subject to minimal interest rate risk. We currently donot hedge interest rate exposure. Because of the short-term maturities of our investments, we donot believe that a change in market interest rates would have a significant negative impact on the value of our investment portfolio except for reduced income in a low interest rate environment. At* March 31, 2025*, we had cash, cash equivalents, and restricted cash of approximately $6,122,000. The weighted average annual interest rate related to our cash and cash equivalents for thethree months ended* March 31, 2025*, exclusive of funds at US banks that earnno interest, was approximately 2.8%.

The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we invest our excess cash in short-term bank deposits and money market funds that* may*invest in high quality debt instruments.

Note7 - Subsequent Events

The Company has evaluated subsequent events through* May 8, 2025*, the date of filing of this Quarterly Report on Form10-Q, and determined that there have beenno events that have occurred that would require adjustments to our disclosures in the consolidated financial statements, other than the following:

(i) Approximately $6,816,000 was collected through the Company’s DSPP program during the period* April**1,* 2025 through* May 7, 2025,which includes collection of the $212,000 stock subscription receivable at March 31, 2025.*

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