ZION OIL & GAS INC

Previous wording

Zion Oil and Gas, Inc., a Texas corporation, is an oil and gas exploration company with a history of 25 years of oil and gas exploration in Israel. We were incorporated in Florida on April 6, 2000 and reincorporated in Delaware on July 9, 2003. The shareholders of Zion Oil & Gas, Inc. approved the redomestication of its incorporation to Texas on June 4, 2025. We completed our initial public offering in January 2007. Our common stock, par value $0.01 per share (the “Common Stock”) currently trades on the OTCQB marketplace of OTC Markets, Inc. under the symbol “ZNOG” and our Common Stock warrant under the symbol “ZNOGW.” On January 24, 2020, Zion incorporated a wholly owned subsidiary, Zion Drilling, Inc., originally as a Delaware corporation, but now a Texas 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., originally as a Delaware corporation, but now a Texas corporation to act as the contractor providing such drilling services. When Zion is not using the rig for its own exploration activities, Zion Drilling Services may contract with other operators in Israel to provide drilling services at market rates then in effect. On October 19, 2022, Zion incorporated a wholly owned subsidiary in Israel, Zion Drilling Israel Ltd, for the purpose of owning a drilling rig and related equipment and spare parts. On this date, the entity was created as a placeholder only. A bank account was created in November 2024 and a tax file was created in January 2025. Zion Drilling Israel LTD did not have any activities during the six months ended June 30, 2025.

Current wording

Zion Oil and Gas, Inc., a Texas corporation, is an oil and gas exploration company with a history of 25 years of oil and gas exploration in Israel. We were incorporated in Florida on April 6, 2000 and reincorporated in Delaware on July 9, 2003. The shareholders of Zion Oil & Gas, Inc. approved the redomestication of its incorporation to Texas on June 4, 2025. We completed our initial public offering in January 2007. Our common stock, par value $0.01 per share (the “Common Stock”) currently trades on the OTCQB marketplace of OTC Markets, Inc. under the symbol “ZNOG” and our Common Stock warrant under the symbol “ZNOGW.” On January 24, 2020, Zion incorporated a wholly owned subsidiary, Zion Drilling, Inc., originally as a Delaware corporation, but now a Texas 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., originally as a Delaware corporation, but now a Texas corporation to act as the contractor providing such drilling services. When Zion is not using the rig for its own exploration activities, Zion Drilling Services may contract with other operators in Israel to provide drilling services at market rates then in effect. On October 19, 2022, Zion incorporated a wholly owned subsidiary in Israel, Zion Drilling Israel Ltd, for the purpose of owning a drilling rig and related equipment and spare parts. On this date, the entity was created as a placeholder only. A bank account was created in November 2024 and a tax file was created in January 2025. Zion Drilling Israel LTD did not have any activities during the nine months ended September 30, 2025.

Previous wording

After six years of inactivity in a well over three miles deep, the MJ-01 wellbore presented 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 over 4,000 meters from surface. Attempts to overpull the BHA were unsuccessful, and the crew completed a backoff operation which left over 500 meters of the BHA remaining downhole. This is not 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.

Current wording

After six years of inactivity in a well over three miles deep, the MJ-01 wellbore presented a challenging environment. The wellbore appeared to have experienced elastic and partial collapse of the casing in some areas. This led to the bottom hole assembly (“BHA”) becoming stuck over 4,000 meters from surface. Attempts to overpull the BHA were unsuccessful, and the crew completed a backoff operation which left over 500 meters of the BHA remaining downhole. This is not 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.

Previous wording

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 is not 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 has changed their 90-day visa renewals from resetting at the end of the year to resetting after six months after expiration. We are working with the Ministry of Interior on this issue. As a side note, the crew had to enter Israel under 90-day visas and not six months visas in order to comply with the labor law requirements in place at the time the operations commenced.

Current wording

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 is not 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 has changed their 90-day visa renewals from resetting at the end of the year to resetting six months after expiration. We are working with the Ministry of Interior on this issue. As a side note, the crew had to enter Israel under 90-day visas and not six months visas in order to comply with the labor law requirements in place at the time the operations commenced.

Previous wording

While our MJ-01 re-completion project has faced a multitude of hurdles, including an active conflict, downhole issues and logistical challenges, we continue to move forward each time a safe opportunity permits continuation of operations. However, we will only move forward in coordination with Israeli authorities. We are actively monitoring the port situation to import the items needed to complete the current work program. We remain optimistic about making significant progress in the coming months.

Current wording

While our MJ-01 re-completion project has faced a multitude of hurdles, including recent hostilities with Hamas, Hezbollah, Iran and Yemen, downhole issues and logistical challenges, we continue to move forward each time a safe opportunity permits continuation of operations. However, we will only move forward in coordination with Israeli authorities. We are actively monitoring the port situation to import the items needed to complete the current work program. We remain optimistic about making significant progress in the coming months.

Previous wording

Map 1. Zion’s New Megiddo License 434 as ofJune 30, 2025**.**

Current wording

Map 1. Zion’s New Megiddo License 434 as ofSeptember 30, 2025**.**

Previous wording

For the three and six months ended June 30, 2025, approximately $33,000 and $179,000, respectively, were recorded under the Company’s Statement of Changes in Stockholders’ Equity as Subscriptions Receivables.

Current wording

For the three and nine months ended September 30, 2025, approximately $180,000 and $359,000, respectively, were recorded under the Company’s Statement of Changes in Stockholders’ Equity as Subscriptions Receivables. Approximately $156,000 of the $359,000 receivable at September 30, 2025 pertains to an exercise of stock options by a former director. These funds were later received in October 2025.

Previous wording

For the three and six months ended June 30, 2024, approximately $985,000 and $985,000, respectively, were recorded under the Company’s Statement of Changes in Stockholders’ Equity as Subscriptions Receivables.

Current wording

For the three and nine months ended September 30, 2024, approximately $985,000 and $985,000, respectively, were recorded under the Company’s Statement of Changes in Stockholders’ Equity as Subscriptions Receivables.

Previous wording

For the three and six months ended June 30, 2025, approximately $7,740,000 and $13,780,000, respectively, were raised under the DSPP program. The Company did not pay any equity issuance costs for the three and six months ended June 30, 2025

Current wording

For the three and nine months ended September 30, 2025, approximately $4,791,000 and $18,571,000, respectively, were raised under the DSPP program. The Company did not pay any equity issuance costs for the three and nine months ended September 30, 2025

Previous wording

For the three and six months ended June 30, 2024, approximately $5,896,000 and $9,453,000 were raised under the DSPP program, respectively. The $5,896,000 and $9,453,000 figures were reduced by $947,000 and $1,763,000, respectively, in equity issuance costs to an outside party resulting in net cash provided of $4,949,000 and $7,690,000, respectively.

Current wording

For the three and nine months ended September 30, 2024, approximately $3,692,000 and $12,160,000 were raised under the DSPP program, respectively. The $3,692,000 and $12,160,000 figures were reduced by $536,000 and $2,299,000, respectively, in equity issuance costs to an outside party resulting in net cash provided of $3,156,000 and $9,861,000, respectively.

Previous wording

On or about January 19, 2025, Israel and Hamas agreed to a ceasefire. After that date, various agreements have been reached between Israel and Hamas regarding the release of Israeli hostages and the simultaneous release of Hamas prisoners while maintaining a ceasefire. However, hostilities recently began again pending release of the remaining Israeli hostages.

Current wording

On or about January 19, 2025, Israel and Hamas agreed to a ceasefire. After that date, various agreements have been reached between Israel and Hamas regarding the release of Israeli hostages and the simultaneous release of Hamas prisoners while maintaining a ceasefire. However, hostilities began again pending release of the remaining Israeli hostages.

Previous wording

On June 13, 2025, Israel launched Operation Rising Lion by surprise attacks on key military and nuclear facilities in Iran. This was a targeted operation to roll back the Iranian threat to Israel’s very survival In the opening hours of the war, Israeli air force assassinated some of Iran's prominent military leaders and nuclear scientists, and damaged or destroyed Iran's air defenses and some of its nuclear and military facilities. Israel launched hundreds of airstrikes throughout the war. Iran retaliated with waves of missile and drone strikes against Israeli cities and military sites; over 550 ballistic missiles and more than 1,000 explosive drones were launched by Iran during the war. The Iran-allied Houthis in Yemen also fired several missiles at Israel. On the ninth day of the war the United States bombed three Iranian nuclear sites. On June 24, 2025, Israel and Iran agreed to a ceasefire. As of the date of this report, both sides are holding to its terms.

Current wording

On June 13, 2025, Israel launched Operation Rising Lion by surprise attacks on key military and nuclear facilities in Iran. This was a targeted operation to roll back the Iranian threat to Israel’s very survival In the opening hours of the war, Israeli air force assassinated some of Iran's prominent military leaders and nuclear scientists, and damaged or destroyed Iran's air defenses and some of its nuclear and military facilities. Israel launched hundreds of airstrikes throughout the war. Iran retaliated with waves of missile and drone strikes against Israeli cities and military sites; over 550 ballistic missiles and more than 1,000 explosive drones were launched by Iran during the war. The Iran-allied Houthis in Yemen also fired several missiles at Israel. On the ninth day of the war the United States bombed three Iranian nuclear sites. On June 24, 2025, Israel and Iran agreed to a ceasefire.

Previous wording

During the six months ended June 30, 2025, and 2024, the Company did not record any post-impairment charges.

Current wording

During the nine months ended September 30, 2025 and 2024, the Company did not record any post-impairment charges.

Previous wording

The total net book value of our unproved oil and gas properties under the full cost method is $26,585,000 and $21,682,000 at June 30, 2025 and at December 31, 2024, respectively.

Current wording

The total net book value of our unproved oil and gas properties under the full cost method is $26,967,000 and $21,682,000 at September 30, 2025 and at December 31, 2024, respectively.

Previous wording

*Operating costs and expenses.*Operating costs and expenses for the three and six months ended June 30, 2025 were $1,996,000 and $3,696,000, respectively, compared to $2,083,000 and $3,857,000, respectively, for the three and six months ended June 30, 2024. Operating costs and expenses for the three months ended June 30, 2025 were $87,000 (4.2%) lower compared to the three months ended June 30, 2024. Operating costs and expenses for the six months ended June 30, 2025 were $161,000 (4.2%) lower compared to the six months ended June 30, 2024.

Current wording

*Operating costs and expenses.*Operating costs and expenses for the three and nine months ended September 30, 2025 were $1,693,000 and $5,389,000, respectively, compared to $1,775,000 and $5,632,000, respectively, for the three and nine months ended September 30, 2024. Operating costs and expenses for the three months ended September 30, 2025 were $82,000 (4.6%) lower compared to the three months ended September 30, 2024. Operating costs and expenses for the nine months ended September 30, 2025 were $243,000 (4.3%) lower compared to the nine months ended September 30, 2024.

Previous wording

*General and administrative expenses.*General and administrative expenses (“G&A expenses”) for the three and six months ended June 30, 2025 were $1,101,000 and $2,202,000, respectively, compared to $1,201,000 and $2,376,000, respectively, for the three and six months ended June 30, 2024. This expense grouping includes salaries, benefits, stock option expenses and professional fees. G&A expenses were lower by $100,000, or 8.3%, during the most recent quarter versus the prior year quarter primarily due to lower expenses associated with stock option grants. G&A expenses decreased $174,000, or 7.3%, during the first six months of 2025 as compared to the six months of 2024, primarily due to lower expenses associated with stock option grants.

Current wording

*General and administrative expenses.*General and administrative expenses (“G&A expenses”) for the three and nine months ended September 30, 2025 were $1,117,000 and $3,319,000, respectively, compared to $1,143,000 and $3,519,000, respectively, for the three and nine months ended September 30, 2024. This expense grouping includes salaries, benefits, stock option expenses and professional fees. G&A expenses were lower by $26,000, or (2.3%), during the most recent quarter versus the prior year quarter primarily due to lower expenses associated with stock option grants. G&A expenses decreased $200,000, or (5.7%), during the first nine months of 2025 as compared to the nine months of 2024, primarily due to lower expenses associated with stock option grants.

Previous wording

*Other expense.*Other expenses during the three and six months ended June 30, 2025 were $895,000 and $1,494,000, respectively, compared to $882,000 and $1,481,000, respectively, for the three and six months ended June 30, 2024. Other general and administrative expenses are comprised of non-cash compensation and non-professional expenses incurred. Other expenses increased by $13,000, or about 1.5%, and by $13,000, or about 0.9%, for the three and six months ended June 30, 2025, respectively. Zion incurred higher annual meeting expenses, but this was partially offset by lower marketing and investor relations expenses and lower insurance premium expenses.

Current wording

*Other expense.*Other expenses during the three and nine months ended September 30, 2025 were $576,000 and $2,070,000, respectively, compared to $632,000 and $2,113,000, respectively, for the three and nine months ended September 30, 2024. Other general and administrative expenses are comprised of non-cash compensation and non-professional expenses incurred. Other expenses decreased by $56,000, or about (8.9%), and by $43,000, or about (2.0%), for the three and nine months ended September 30, 2025, respectively. Zion incurred lower marketing and investor relations expenses and lower insurance premium expenses.

Previous wording

Other (income), net. Other (income) during the three and six months ended June 30, 2025 were ($85,000) and ($110,000), respectively, compared to ($19,000) and ($31,000), respectively, for the three and six months ended June 30, 2024. The expenses in this category are comprised of foreign currency exchange costs, primarily the New Israeli Shekel (NIS) to the US dollar, and the financial expenses/income. Zion earned higher interest income during the three months ended June 30, 2025, due to higher average cash balances.

Current wording

Other expense (income), net. Other expense (income) during the three and nine months ended September 30, 2025 were $26,000 and ($84,000), respectively, compared to $16,000 and ($15,000), respectively, for the three and nine months ended September 30, 2024. The expenses/income in this category are comprised of foreign currency exchange costs, primarily the New Israeli Shekel (NIS) to the US dollar, and the financial expenses/income. Zion earned higher interest income during the three and nine months ended September 30, 2025, due to higher average cash balances.

Previous wording

Net Loss. Net losses for the three and six months ended June 30, 2025 were $1,911,000 and $3,586,000 compared to $2,064,000 and $3,826,000 for the three and six months ended June 30, 2024.

Current wording

Net Loss. Net losses for the three and nine months ended September 30, 2025 were $1,719,000 and $5,305,000 compared to $1,791,000 and $5,617,000 for the three and nine months ended September 30, 2024.

Previous wording

Liquidity is a measure of a company’s ability to meet potential cash requirements. As discussed above, we have historically met our capital requirements through the issuance of common stock as well as proceeds from the exercise of warrants and options to purchase common shares. As disclosed on our Balance Sheet, the company has 1,600,000,000 shares of authorized common stock and 1,109,567,465 shares issued as of June 30, 2025. We increased our authorized shares during the past proxy season in 2025.

Current wording

Liquidity is a measure of a company’s ability to meet potential cash requirements. As discussed above, we have historically met our capital requirements through the issuance of common stock as well as proceeds from the exercise of warrants and options to purchase common shares. As disclosed on our Balance Sheet, the company has 1,600,000,000 shares of authorized common stock and 1,139,174,393 shares issued as of September 30, 2025. We increased our authorized shares during the past proxy season in 2025.

Previous wording

Our ability to continue as a going concern is dependent upon obtaining the necessary financing to complete further exploration and development activities and generate profitable operations from our oil and natural gas interests in the future. Our current operations are dependent upon the adequacy of our current assets to meet our current expenditure requirements and the accuracy of management’s estimates of those requirements. Should those estimates be materially incorrect, our ability to continue as a going concern will be impaired. Our financial statements for the six months ended June 30, 2025 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We have incurred a history of operating losses and negative cash flows from operations. Therefore, there is substantial doubt about our ability to continue as a going concern for one year from the date the financials were issued.

Current wording

Our ability to continue as a going concern is dependent upon obtaining the necessary financing to complete further exploration and development activities and generate profitable operations from our oil and natural gas interests in the future. Our current operations are dependent upon the adequacy of our current assets to meet our current expenditure requirements and the accuracy of management’s estimates of those requirements. Should those estimates be materially incorrect, our ability to continue as a going concern will be impaired. Our financial statements for the nine months ended September 30, 2025 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We have incurred a history of operating losses and negative cash flows from operations. Therefore, there is substantial doubt about our ability to continue as a going concern for one year from the date the financials were issued.

Previous wording

At June 30, 2025, we had approximately $8,605,000 in cash and cash equivalents compared to $2,272,000 at December 31, 2024, which does not include any restricted funds. Our working capital (current assets minus current liabilities) was $7,310,000 at June 30, 2025 and $1,702,000 at December 31, 2024.

Current wording

At September 30, 2025, we had approximately $10,373,000 in cash and cash equivalents compared to $2,272,000 at December 31, 2024, which does not include any restricted funds. Our working capital (current assets minus current liabilities) was $10,187,000 at September 30, 2025 and $1,702,000 at December 31, 2024.

Previous wording

As of June 30, 2025, we provided bank guarantees to various governmental bodies (approximately $946,000) and others (approximately $102,000) in respect of our drilling operation in the aggregate amount of approximately $1,048,000. 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.

Current wording

As of September 30, 2025, we provided bank guarantees to various governmental bodies (approximately $977,000) and others (approximately $105,000) in respect of our drilling operation in the aggregate amount of approximately $1,082,000. 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.

Previous wording

During the six months ended June 30, 2025, cash used in operating activities totaled $3,141,000. Cash provided by financing activities during the six months ended June 30, 2025 was $13,467,000 and is primarily attributable to proceeds received from the Dividend Reinvestment and Stock Purchase Plan (the “DSPP” or the “Plan”). Net cash used in investing activities such as unproved oil and gas properties, equipment and spare parts was $3,977,000 for the six months ended June 30, 2025.

Current wording

During the nine months ended September 30, 2025, cash used in operating activities totaled $4,613,000. Cash provided by financing activities during the nine months ended September 30, 2025 was $18,126,000 and is primarily attributable to proceeds received from the Dividend Reinvestment and Stock Purchase Plan (the “DSPP” or the “Plan”). Net cash used in investing activities such as unproved oil and gas properties, equipment and spare parts was $5,392,000 for the nine months ended September 30, 2025.

Previous wording

During the six months ended June 30, 2024, cash used in operating activities totaled $3,575,000. Cash provided by financing activities during the six months ended June 30, 2024 was $6,347,000 and is primarily attributable to proceeds received from the Dividend Reinvestment and Stock Purchase Plan (the “DSPP” or the “Plan”). Net cash used in investing activities such as unproved oil and gas properties, equipment and spare parts was $882,000 for the six months ended June 30, 2024.

Current wording

During the nine months ended September 30, 2024, cash used in operating activities totaled $4,745,000. Cash provided by financing activities during the nine months ended September 30, 2024 was $9,346,000 and is primarily attributable to proceeds received from the Dividend Reinvestment and Stock Purchase Plan (the “DSPP” or the “Plan”). Net cash used in investing activities such as unproved oil and gas properties, equipment and spare parts was $4,389,000 for the nine months ended September 30, 2024.

Previous wording

Accounting standards require management to evaluate our ability to continue as a going concern for a period of one year subsequent to the date of the filing of this Form 10-Q. We expect to incur additional significant expenditures to further our exploration and development programs. While we raised approximately $947,000 during the period July 1, 2025 through August 5, 2025, which includes collection of the $179,000 stock subscription receivable at June 30, 2025, we will need to raise additional funds in order to continue our exploration and development activities in our license area. Additionally, we estimate that, when we are not actively drilling a well, our expenditures are approximately $600,000 per month excluding exploratory operational activities. However, when we are actively drilling a well, we estimate an additional minimum expenditure of approximately $2,500,000 per month. The above estimates are subject to change. Subject to the qualifications specified below, management believes that our existing cash balance, coupled with anticipated proceeds under the DSPP, will be sufficient to finance our plan of operations through January 2026.

Current wording

Accounting standards require management to evaluate our ability to continue as a going concern for a period of one year subsequent to the date of the filing of this Form 10-Q. We expect to incur additional significant expenditures to further our exploration and development programs. While we raised approximately $931,000 during the period October 1, 2025 through November 5, 2025, which includes collection of the $359,000 stock subscription receivable at September 30, 2025, we will need to raise additional funds in order to continue our exploration and development activities in our license area. Additionally, we estimate that, when we are not actively drilling a well, our expenditures are approximately $600,000 per month excluding exploratory operational activities. However, when we are actively drilling a well, we estimate an additional minimum expenditure of approximately $2,500,000 per month. The above estimates are subject to change. Subject to the qualifications specified below, management believes that our existing cash balance, coupled with anticipated proceeds under the DSPP, will be sufficient to finance our plan of operations through June 2026.

Previous wording

Similar uncertainties are posed by the Israel-Hamas war, the Israel-Hezbollah war, as well as the Israel-Iran war. The duration of those wars and the impacts on the region and world is not fully known at this point in time.

Current wording

Similar uncertainties are posed by the Israel-Hamas war, the Israel-Hezbollah war, as well as the Israel-Iran war. The duration of those wars and the impacts on the region and world are not fully known at this point in time.