ZION OIL & GAS INC

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

A. Nature of Operations

Zion Oil & Gas, Inc., a Texas 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. The shareholders of Zion Oil & Gas, Inc. approved the re-domestication of its incorporation to Texas on* June 4, 2025.As of March 31, 2026*, 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* maycontract with other operators in Israel to provide drilling services at market rates then in effect. On May 14, 2025,*Zion Drilling, Inc. and Zion Drilling Services, Inc. were re-domesticated and converted from Delaware corporations to Texas corporations pursuant to plans of conversion approved unanimously by the directors and shareholders of each corporation.

On* October 19, 2022,Zion incorporated a wholly owned subsidiary in Israel, Zion Drilling Israel Ltd, for the purpose of owning a drilling rig and related equipment and spare parts. On this date, the entity was created as a placeholder only. A bank account was created in November 2024and a tax file was created in January 2025.The bank account is denominated in Israeli Shekels. When there are 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, 2026*.

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 NMVL434,* allowing for oil and gas exploration on approximately 75,000 acres or 302 square kilometers. NMVL434 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.

Our rig crew arrived in Israel in* January 2026to begin a new phase of operations at both MJ-01 and MJ-02 in Israel. The team completed routine rig repair and maintenance, including a much-needed upgrade to the generator system, ensuring reliable power for the drilling ahead. A mandatoryfive*-year re-certification and inspection of the rig was also completed and the results indicated that the rig is in good working condition. The crew re-entered the MJ-01 wellbore and completed necessary cleanup, installed a seal below the water aquifer zone, and re-established the mandated water monitoring well as required by the Ministry of Energy and Ministry of Water. Following this work, we rigged down awaiting the next operational phase.

Due to the Israel-Iran war which began on* February 28, 2026,*and related impacts on logistics and shipping, we demobilized our rig crew. We are monitoring daily the hostilities in the Middle East for the next best opportunity to bring back the rig crew to the wellsite in Israel. The next phase of operations will be to rig up over the MJ-02 well, plug and abandon the lower sections of that wellbore, set the direction, and begin the planned horizontal drilling operations into the target reservoir zone.

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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, 2025*. 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, 2026* arenot necessarily indicative of the operating results for the year ending* December 31,*2026 or for any other subsequent interim period.

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications hadno effect on the reported results of operations.

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, 2026*, the Company incurred a net loss of approximately $2.1 million and had an accumulated deficit of approximately $304 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 for2026 as the inclusion of 29,481,325 in stock options and 190,687,495 in warrants would be anti-dilutive.

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.

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.

We have made the same estimates as to the potential impact the Israel-United States-Iran war, Israel-Hezbollah war, and the Israel-Hamas war have 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.

Currently, the Company hasno economically recoverable reserves andno amortization base. The Company’s unproved oil and gas properties consist of capitalized exploration costs of $30,964,000 and $27,673,000 as of* March 31, 2026* and* December 31, 2025*, 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, 2026*, and* December 31, 2025*, 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).

F. Warrants

In connection with the Dividend Reinvestment and Stock Purchase Plan (“DSPP” or the "Plan") financing arrangements as further described in Note3, 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 Note3E and3F.

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.

A hardship loan of $30,000 was given to an executive vice president in* March 2025with the stipulation of monthly repayments of $2,500 beginning in April 2025.All of monthly repayments were collected as of March 31, 2026* andno balance remains. Zion hadno other related party transactions during the period ended* March 31, 2026*

H. Prepaid Expenses

The Company makes prepayments for various types of goods and services, including, butnot limited to, operational and logistics costs, insurance, professional subscriptions, licenses and other fees.

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I. Recently Adopted Accounting Pronouncements

In* December 2023,the FASB issued ASU2023*-09, “Improvements to Income Tax Disclosures.” This ASU enhances income tax disclosures under topic740 to increase transparency for investors. Key changes include more detailed rate reconciliations, disaggregation of taxes paid by jurisdiction, and increased disclosure of income before taxes. The effect of this ASU became effective for fiscal years beginning after* December 15, 2024.Zion adopted this ASU effective January 1, 2025.The adoption of this ASU 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 had a significant impact on our consolidated condensed financial position, results of operations, or cash flow.

J. Depreciation and Accounting for Drilling Rig and Related Equipment

In* March 2020,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.

During thethree months ended* March 31, 2026* Zion added approximately $294,000 in costs associated with its drilling rig, approximately $307,000 in rig spare parts and approximately $485,000 in other drilling assets, for total combined additions of $1,086,000. We also recorded approximately $150,000 in self-consumption of rig spare parts.

See the table below for a reconciliation of the rig-related activity during the period ended* March 31, 2026*:

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 1,200,000,000 shares to 1,600,000,000 shares, effective* June 4, 2025.*

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, 2026*, 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, 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:

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B. Stock Options

The stock option transactions since* January 1,*2026 are shown in the table below:

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The following table summarizes information about stock options outstanding as of* March 31, 2026*:

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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:

Granted to non-employees

The Company didnot grant any options to non-employees during thethree months ended* March 31, 2026* and2025, respectively.

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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:

As of* March 31, 2026*, and2025, there was$nil and$nil, respectively, of unrecognized compensation cost, related to non-vested stock options granted under the Company’s various stock option plans.

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

On* March 13, 2014,Zion filed a registration statement on Form S-3 that was part of a replacement registration statement that was filed with the SEC using a “shelf” registration process. The registration statement was declared effective by the SEC on March 31, 2014.On February 23, 2017,the Company filed a Form S-3 with the SEC (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.

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 provided the participant the opportunity to purchaseone share of our Common Stock at a warrant exercise price of $1.00. The warrant has the company notation of “ZNWAM.” The warrants werenot registered for trading on the OTCQX or any other stock market or trading market. The warrants became exercisable on* January 15, 2021and continued to be exercisable through March 31, 2025.*

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.

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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* 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 provided the participant the opportunity to purchaseone share of our Common Stock at a warrant exercise price of$.25. The warrant shall have the company notation of “ZNWAQ.” The warrants werenot* registered for trading on the OTCQX or any other stock market or trading market. The warrants were issued on* May 5, 2022and were exercisable through March 31, 2025*at a revised per share exercise price of$.05.

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.

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 provides 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 OTCQX or any other stock market or trading market.

On* January 15, 2026,the Company issued 145,180,117 of the ZNWAS warrants toone* participant, with an expiration date of* June 30, 2026.*The exercise price of the ZNWAS warrants is$.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 provides 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 OTCQX or any other stock market or trading market.

On* August 27, 2025,the Company issued 9,019,652 warrants toone* participant, with an expiration date of* December 31, 2025.*The exercise price of the ZNWAT warrants was lowered from$.25 to $.18.

On* November 17, 2025,the Company extended the termination date of the ZNWAT warrants from December 31, 2025to March 31, 2026.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

On* March 20, 2026,the Company extended the termination date of the ZNWAT warrants from March 31, 2026to April 30, 2026.Zion considers this warrant as permanent equity per ASC815*-40-35-2. As such, there isno value assigned to this extension.

On* April 15, 2026,the Company extended the termination date of the ZNWAT warrants from April 30, 2026to May 31, 2026.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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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 provides 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 OTCQX or any other stock market or trading market.

On* January 15, 2026,the Company issued 19,147,462 of the ZNWAU warrants toone* participant, with an expiration date of* June 30, 2026.*The exercise price of the ZNWAU warrant is$.25.

On* November 6, 2023,under AmendmentNo.* 4, the Company began a new Unit Option under our Plan consisting of units of shares of stock and warrants. Each warrant provides the participant the opportunity to purchaseone share of our Common Stock at a warrant exercise price of$.25 and shall have the Company notation of “ZNWBA.” The warrants willnot be registered for trading on the OTCQX or any other stock or trading market.

After numerous previous extensions by Amendment to the Prospectus Supplement, in which all references in the Original Prospectus Supplement and Amendment Nos.1 and4, concerning the Unit Option continued except for the substitution of the revised Unit Option dates and other features, with all other Plan features, conditions and terms remaining unchanged, on* December 10, 2024,under AmendmentNo.* 13, the termination date of the Unit Option was extended to* February 28, 2025.*

The ZNWBA warrants now became exercisable on* March 31, 2025,and continued to be exercisable through March 31, 2026,as 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.

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

On* April 1, 2024,*the Company executed a Waiver Term Sheet of a unit program 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.*

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 the Waiver Term Sheet was signed with the participant. The Pricing Plan of the program terminated 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,*the above referenced 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.

On* May 19, 2025,*a total of 15,000,000 warrants were issued to the participant with the internal designation as the “ZNWBB” warrants.

Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet effective* August 27, 2025of shares of stock to a participant. This program had a maximum investment of $2,500,000. After conclusion of the program on or around September 30, 2025,*the participant’s Plan account was credited with the number of shares of the Company’s Common Stock that were acquired.

Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program effective* November 4, 2025consisting of shares of stock and warrants to a participant. This program had a maximum investment of $250,000 excluding the exercise of any warrants. After conclusion of the program on or around November 18, 2025,the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and warrants that were acquired. Each warrant provided the participant the opportunity to purchaseone* share of our Common Stock at a warrant exercise price of$.05. The warrant shall have the company notation of “ZNWBC.” The warrants willnot be registered for trading on the OTCQX or any other stock market or trading market.

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On* November 19, 2025,a total of 1,519,136 warrants were issued to the participant with the internal designation of the “ZNWBC” warrants. The participant had until March 15, 2026*in which to exercise the warrants.

On* November 26, 2025,all of the ZNWBC warrants were exercised, resulting in approximately $76,000 to the Company. As of that date, there wereno* ZNWBC warrants outstanding.

Under our Plan, the Company under a Request for Waiver Program executed a Waiver Term Sheet effective* November 17, 2025of shares of stock to a participant. This program had a maximum investment of $1,500,000 by December 31, 2025.*After conclusion of the program, the participant’s Plan account was to be credited with the number of shares of the Company’s Common Stock that were acquired.

On* December 22, 2025,afirst* amendment to the Waiver Term Sheet was executed whereby the date was extended from* December 31, 2025to January 31, 2026*in which to reach the maximum investment.

On* January 14, 2026,asecond* amendment to the Waiver Term Sheet was executed whereby the maximum investment was raised from $1,500,000 to $5,000,000. The termination date of* January 31, 2026remained in effect. This Waiver Term Sheet terminated on January 31, 2026*with the maximum investment being reached.

During thethree months ended* March 31, 2026*,one participant who participated in the “Request for Waiver” aspect of the DSPP contributed approximately 34% of the net cash raised through the DSPP.

During thethree months ended* March 31, 2025*, one participant who participated in the “Request for Waiver” aspect of the DSPP contributed approximately 56% of the net cash raised through the DSPP.

For thethree months ended* March 31, 2026and2025*, approximately $30,000 and $212,000, respectively, were recorded under the Company’s Statement of Changes in Stockholders’ Equity as Subscriptions Receivables. These funds were later received in* April**2026*, and2025, respectively.

For thethree months ended* March 31, 2026and2025*, approximately $8,009,000 and $6,040,000, respectively, were raised under the DSPP program.

The Company raised approximately $974,000 from the period* April 1, 2026through May 5, 2026*, under the DSPP program, which includes collection of the $30,000 stock subscription receivable at* March 31, 2026*.

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

E. Warrant Table

The warrant balances at* December 31, 2025* and transactions since* January 1,*2026 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:

Changes in Unproved oil and gas properties during thethree months ended* March 31, 2026and2025* are as follows:

* Inclusive of non-cash amounts of approximately $1,032,000, and $693,000 during the three months ended March 31, 2026 and 2025, 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, 2026* and* December 31, 2025*:

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.

Dallas office lease

On* November 25, 2025,the Company and LLL Four Forest, LP (“LLL”) signed an Office Lease Agreement (“Agreement”) whereby approximately 8,006 rentable square feet of space, of which approximately 5,577 rentable square feet are located in Suite1450* located on thefourteenth floor, and approximately 2,429 square feet are located in Suite1740 located on theseventeenth floor. The lease commencement date is* January 1, 2026and the term is forthree years andfive* months with the lease termination being on or around* May 31, 2029.The Agreement provided five (5) months of abated rent at the beginning of the lease term. A security deposit of $16,679 was paid in December 2025and prepaid rent of $192,144 was also paid in December 2025.With the payment of the prepaid rent in December 2025,the Company’s rent is paid through May 2027.Beginning on June 1, 2027and extending through May 31, 2028,the Company will pay monthly rent at $24.50 per square foot. Beginning on June 1, 2028and extending through May 31, 2029,*the Company will pay monthly rent at $25.00 per square foot. The Company will also pay its prorata share of electricity, taxes and common area maintenance in the building.

The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of* March 31, 2026* 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, 2026*:

Operating lease costs were $86,000 and $62,000 for thethree months ended* March 31, 2026*, and2025, 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 $16,000 and $39,000 for thethree months ended* March 31, 2026*, and2025, 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$nil and$nil for thethree months ended* March 31, 2026*, and2025, 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.

On* June 3, 2025,the Company received a notification via summons that it was being sued in the Superior Court of California, County of Los Angeles, under the state’s “Trap and Trace” law. California’s Trap and Trace law, part of the California Invasion of Privacy Act (CIPA) Penal Code Section638.51* prohibits installing or using devices or processes to capture incoming electronic signaling information (like IP addresses or routing data) without a court order or user consent. The company retained counsel in the state of California. Approximately $25,000 in legal expenses was recognized in2025 and another approximately $17,000 in2026.

On* March 9, 2026,*the Company was advised by the Superior Court of California, County of Los Angeles, that the lawsuit was dismissed without prejudice against the Company.

The Company isnot subject to any litigation or claims as of* March 31, 2026.*

B. Recent Market Conditions–** Israel-United States-Iran War, the Israel-Hezbollah War and** the Israel-Hamas War

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; over550* ballistic missiles and more than1,000 explosive drones were launched by Iran during the war. The Iran-allied Houthis in Yemen also fired several missiles at Israel. On theninth day of the war, the United States bombedthree Iranian nuclear sites. On* June 24, 2025,*Israel and Iran agreed to a ceasefire.

On* February 28, 2026,Israel and the United States jointly attacked Iran. The attacks took the form of missile strikes throughout Iran targeting regime leadership, nuclear sites, ballistic missile sites and other military infrastructure. Iran’s former supreme leader, Ali Khomenei, was killed on this day. There have been daily attacks during March 2026and into April 2026.*While there has been a temporary ceasefire recently, tensions remain high between the US, Israel, and Iran.

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.

On or around* October 13, 2025,following more thantwo* years after the initial invasion by Hamas, a ceasefire was negotiated between Israel and Hamas. The ceasefire deal containsthree phases and thefirst phase involves the release of all living and dead Israeli hostages held by Hamas, along with the release of approximately1,950 Palestinian prisoners being held in Israeli prisons. All of the20 living hostages were released and all of the remains of the dead hostages have been released to Israeli families. The next phase (phase2) of the ceasefire deal is underway and involves the disarmament of Hamas.

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. During thethird* quarter of2024, 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.

In early* March 2026,*Hezbollah resumed the war against Israel by launching daily attacks, primarily missiles, into northern Israel. Israel responded by launching its own missiles into Beirut and southern Lebanon and moving ground forces into southern Lebanon.

There is uncertainty as to the degree of stability that will be seen in the Middle East, and Israel in particular, due to these present hostilities. While we acknowledge that uncertainty, the Company is moving forward with its MJ-01 re-entry project.

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 guidelines was included in previous Zion filings.

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, 2026*, and* December 31, 2025*, the Company accrued$nil and$nil for license regulatory matters.

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Note6 - Commitments and Contingencies(cont’d)

D. Bank Guarantees

As of* March 31, 2026*, and* December 31, 2025*, the Company provided Israeli-required bank guarantees to various governmental bodies (approximately $1,429,000 and $1,424,000, respectively) and others (approximately $109,000 and $109,000, respectively) with respect to its drilling operation in an aggregate amount of approximately $1,538,000 and $1,533,000, respectively. The (cash) funds backing these guarantees are held in restricted interest-bearing accounts in Israel and are reported on the Company’s balance sheets as cash and cash equivalents – restricted.

E. Vendor Concentration

The Company’s financial instruments that are exposed to a concentration of credit risk are accounts payable. At* March 31, 2026*, there were three suppliers that represent 10% or more of the Company’s accounts payable balance. At* December 31, 2025*, there were four suppliers that represent 10% or more of the Company’s accounts payable balance.

F. 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 1,2026 through March 31, 2026*, the USD has fluctuated by approximately 0.8% against the NIS (the USD weakened relative to the NIS). During the period* January 1,2025 through December 31, 2025*, the USD fluctuated by approximately 12.5% against the NIS (the USD weakened relative to the NIS). Continued weakening of the US dollar against the NIS will result in higher 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 maturity 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, 2026*, and* December 31, 2025*, we had cash, cash equivalents, and short-term and long-term bank deposits of approximately $12,250,000 and $9,862,000, respectively. The weighted average annual interest rate related to our cash and cash equivalents for thethree months ended* March 31, 2026*, and for the year ended* December 31, 2025*, exclusive of funds at US banks that earnno interest, was approximately 2.7% and 2.8%, respectively.

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 - Operating Segments

The Company hasone operating segment and its Chief Operating Decision Maker (“CODM”) is its CEO. Consistent with its mission and vision, the Company explores for hydrocarbons in onshore Israel. The CODM manages exploration activities considering the following areas, at a minimum: (1) geological prospects within its license area and related feasibility to produce hydrocarbons, (2) the regulatory, administrative and political climate in Israel, (3) competition in Israel, (4) equipment and labor sourcing and (5) operational financing.

Within unproved oil and gas properties costs, the CODM monitors the costs of permitting and regulatory compliance, logistics and supply chain considerations associated with importation of labor and equipment, including managing the amounts and timing of prepayments to international service providers. The CODM works closely with its vice president of operations and CFO on capital expenditures to ensure adequate capital is available when needed.

Within our Statement of Operations, the Company hastwo primary categories of expenses: (1) “General and Administrative” costs, which consists primarily of salaries, payroll taxes and benefits, and (2) “Other”, which consists of a broad range of non-compensation related expenses, including fees for directors, accounting, legal and information technology services, as well as other professional fees. This "Other" category also includes costs for various lines of insurance, investor relations activities, office facilities, depreciation and annual meeting expenses. Zion has had very low employee turnover in recent years and our CODM monitors the salaries paid to its existing workforce. Additionally, the CODM is the decision maker in its annual insurance renewals for directors and officers, cybersecurity, rig andthird-party liability insurance, both in Dallas and in Israel.

Note8 - Subsequent Events

The Company has evaluated subsequent events through* May 7, 2026*, 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 condensed consolidated financial statements, other than the following:

(i) Approximately $974,000 was collected through the Company’s DSPP program during the period* April 1, 2026through May 5, 2026*, which includes collection of the $30,000 stock subscription receivable at* March 31, 2026*.

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