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

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have identified the accounting principles which we believe are most critical to the reported financial status by considering accounting
policies that involve the most complex of subjective decisions or assessment. 39 Impairment
of Oil and Gas Properties We
follow 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 are not 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 income from continuing operations before income taxes, and the
adjusted carrying amount of the unproved properties is amortized on the unit-of-production method. Our
oil and gas properties represent an investment in unproved properties. These costs are excluded from the amortized cost pool until proved
reserves are found or until it is determined that the costs are impaired. All costs excluded are reviewed at least quarterly to determine
if impairment has occurred. The amount of any impairment is charged to expense since a reserve base has not yet been established. A further
impairment requiring a charge to expense may be indicated through evaluation of drilling results, relinquishing drilling rights or other
information. Abandonment
of properties is accounted for as adjustments to capitalized costs. The net capitalized costs are subject to a “ceiling test”
which limits such costs to the aggregate of the estimated present value of future net revenues from proved reserves discounted at ten
percent based on current economic and operating conditions, plus the lower of cost or fair market value of unproved properties. The recoverability
of amounts capitalized for oil and gas properties is dependent upon the identification of economically recoverable reserves, together
with obtaining the necessary financing to exploit such reserves and the achievement of profitable operations. During
the three months ended September 30, 2023, and 2022, respectively, the Company recorded $36,000 and nil post-impairment charges. During
the nine months ended September 30, 2023, and 2022, respectively, the Company recorded $129,000 and nil post-impairment charges. The
total net book value of our unproved oil and gas properties under the full cost method is $16,342,000 and $15,889,000 at September 30,
2023 and at December 31, 2022, respectively. Asset
Retirement Obligation We
record a liability for asset retirement obligation at fair value in the period in which it is incurred and a corresponding increase in
the carrying amount of the related long-lived assets. Fair
Value Considerations We
follow ASC 820, “Fair Value Measurements and Disclosures,” as amended by Financial Accounting Standards Board (FASB) Financial
Staff Position (FSP) No. 157 and related guidance. Those provisions relate to the Company’s financial assets and liabilities carried
at fair value and the fair value disclosures related to financial assets and liabilities. ASC 820 defines fair value, expands related
disclosure requirements, and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair
value measures. Fair value is defined as the price that would be received from the sale of 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. There
are three levels of inputs to fair value measurements – Level 1, meaning the use of quoted prices for identical instruments in
active markets; Level 2, meaning the use of quoted prices for similar instruments in active markets or quoted prices for identical or
similar instruments in markets that are not active or are directly or indirectly observable; and Level 3, meaning the use of unobservable
inputs. We use Level 1 inputs for fair value measurements whenever there is an active market, with actual quotes, market prices, and
observable inputs on the measurement date. We use Level 2 inputs for fair value measurements whenever there are quoted prices for similar
securities in an active market or quoted prices for identical securities in an inactive market. We use observable market data whenever
available. 40 RESULTS
OF OPERATIONS For the three months ended September 30, For the nine months ended September 30, 2023 2022 2023 2022 (US $ in thousands) (US $ in thousands) Operating costs and expens General and administrative expenses 1,332 1,636 4,106 4,621 Other 379 719 1,978 2,376 Post impairment of unproved oil and gas properties 36 - 129 - Subtotal Operating costs and expenses 1,747 2,355 6,213 6,997 Other expense (income), net (4 ) 19 3 140 Net loss 1,743 2,374 6,216 7,137 Revenue. We currently have no revenue generating operations. Operating
costs and expenses. Operating costs and expenses for the three and nine months ended September 30, 2023 were $1,747,000 and $6,213,000,
respectively, compared to $2,355,000 and $6,997,000, respectively, for the three and nine months ended September 30, 2022. General
and administrative expenses. General and administrative expenses (“G&A expenses”) for the three and nine months ended
September 30, 2023 were $1,332,000 and $4,106,000, respectively, compared to $1,636,000 and $4,621,000, respectively, for the three and
nine months ended September 30, 2022. This expense grouping includes salaries, benefits, stock option expenses and professional fees.
G&A expenses decreased $304,000, or 19%, during the most recent quarter versus the prior year primarily due to lower expenses associated
with stock option grants. G&A expenses decreased $515,000, or 11%, primarily due to lower expenses associated with stock option grants. Other
expense. Other expenses during the three and nine months ended September 30, 2023 were $379,000 and $1,978,000, respectively, compared
to $719,000 and $2,376,000, respectively, for the three and nine months ended September 30, 2022. Other general and administrative expenses
are comprised of non-compensation and non-professional expenses incurred. Other expenses decreased $340,000, or about 47%, for the three
months ended September 30, 2023 as a result of lower annual meeting expenses in 2023 and lower travel expenses. Other expenses for the
nine months ended September 30, 2023 decreased $398,000, or 17%, primarily due to lower annual meeting expenses. Post
Impairment of unproved oil and gas properties. Post Impairment of unproved oil and gas properties expenses during the three
and nine months ended September 30, 2023 were $36,000 and $129,000 compared to nil and nil for the three and nine months ended September
30, 2022. The expenses recorded in 2023 are post impairment charges to the impairment recorded during 2022 related to the MJ-2 well. Other
expense (income), net. Other expenses (income) during the three and nine months ended September 30, 2023 were ($4,000) and $3,000,
respectively, compared to $19,000 and $140,000, respectively, for the three and nine months ended September 30, 2022. The expenses in
this category are comprised of foreign currency exchange costs, primarily the New Israeli Shekel (NIS) to the US dollar, and financial
expenses/income. Overall, for the nine months ended September 30, 2022, total expenses in this category are $121,000 lower due to the
relative strengthening of the USD to the NIS during 2023. Net Loss. Net loss
for the three and nine months ended September 30, 2023 was $1,743,000 and $6,216,000 compared to $2,374,000 and $7,137,000 for the three
and nine months ended September 30, 2022. Liquidity
and Capital Resources 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. 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. As we have expressed earlier in this Form 10-Q, our operations
are temporarily suspended due to the Israel-Hamas war. Although the war’s impact on our cash generation is not specifically known,
the Company has been able to generate needed capital under our DSPP since 2013 and through various equity private placements prior to
2013. The Company plans to continue issuing its common shares through the DSPP (see Footnote 3 for a new Unit program announced on November
6, 2023). 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, 2023 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. 41 At
September 30, 2023, we had approximately $510,000 in cash and cash equivalents compared to $1,735,000 at December 31, 2022, which does
not include any restricted funds. Our working capital (current assets minus current liabilities) was ($108,000) at September 30, 2023
and $661,000 at December 31, 2022. As
of September 30, 2023, we provided bank guarantees to various governmental bodies (approximately $930,000) and others (approximately
$85,000) in respect of our drilling operation in the aggregate amount of approximately $1,015,000. 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 fixed short-term
bank deposits restricted. During
the nine months ended September 30, 2023, cash used in operating activities totaled $3,909,000. Cash provided by financing activities
during the nine months ended September 30, 2023 was $4,370,000 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 $2,045,000 for the nine months ended September 30, 2023. During
the nine months ended September 30, 2022, cash used in operating activities totaled $4,719,000. Cash provided by financing activities
during the nine months ended September 30, 2022 was $16,473,000 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 $13,333,000 for the nine months ended September 30, 2022. 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 $391,000 during the period
October 1, 2023 through November 7, 2023, 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

have identified the accounting principles which we believe are most critical to the reported financial status by considering accounting

policies that involve the most complex of subjective decisions or assessment. 39 Impairment

of Oil and Gas Properties We

follow 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 are not 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 income from continuing operations before income taxes, and the

adjusted carrying amount of the unproved properties is amortized on the unit-of-production method. Our

oil and gas properties represent an investment in unproved properties. These costs are excluded from the amortized cost pool until proved

reserves are found or until it is determined that the costs are impaired. All costs excluded are reviewed at least quarterly to determine

if impairment has occurred. The amount of any impairment is charged to expense since a reserve base has not yet been established. A further

impairment requiring a charge to expense may be indicated through evaluation of drilling results, relinquishing drilling rights or other

information. Abandonment

of properties is accounted for as adjustments to capitalized costs. The net capitalized costs are subject to a “ceiling test”

which limits such costs to the aggregate of the estimated present value of future net revenues from proved reserves discounted at ten

percent based on current economic and operating conditions, plus the lower of cost or fair market value of unproved properties. The recoverability

of amounts capitalized for oil and gas properties is dependent upon the identification of economically recoverable reserves, together

with obtaining the necessary financing to exploit such reserves and the achievement of profitable operations. During

the three months ended September 30, 2023, and 2022, respectively, the Company recorded $36,000 and nil post-impairment charges. During

the nine months ended September 30, 2023, and 2022, respectively, the Company recorded $129,000 and nil post-impairment charges. The

total net book value of our unproved oil and gas properties under the full cost method is $16,342,000 and $15,889,000 at September 30,

2023 and at December 31, 2022, respectively. Asset

Retirement Obligation We

record a liability for asset retirement obligation at fair value in the period in which it is incurred and a corresponding increase in

the carrying amount of the related long-lived assets. Fair

Value Considerations We

follow ASC 820, “Fair Value Measurements and Disclosures,” as amended by Financial Accounting Standards Board (FASB) Financial

Staff Position (FSP) No. 157 and related guidance. Those provisions relate to the Company’s financial assets and liabilities carried

at fair value and the fair value disclosures related to financial assets and liabilities. ASC 820 defines fair value, expands related

disclosure requirements, and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair

value measures. Fair value is defined as the price that would be received from the sale of 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. There

are three levels of inputs to fair value measurements – Level 1, meaning the use of quoted prices for identical instruments in

active markets; Level 2, meaning the use of quoted prices for similar instruments in active markets or quoted prices for identical or

similar instruments in markets that are not active or are directly or indirectly observable; and Level 3, meaning the use of unobservable

inputs. We use Level 1 inputs for fair value measurements whenever there is an active market, with actual quotes, market prices, and

observable inputs on the measurement date. We use Level 2 inputs for fair value measurements whenever there are quoted prices for similar

securities in an active market or quoted prices for identical securities in an inactive market. We use observable market data whenever

available. 40 RESULTS

OF OPERATIONS For the three months ended September 30, For the nine months ended September 30, 2023 2022 2023 2022 (US $ in thousands) (US $ in thousands) Operating costs and expens General and administrative expenses 1,332 1,636 4,106 4,621 Other 379 719 1,978 2,376 Post impairment of unproved oil and gas properties 36 - 129 - Subtotal Operating costs and expenses 1,747 2,355 6,213 6,997 Other expense (income), net (4 ) 19 3 140 Net loss 1,743 2,374 6,216 7,137 Revenue. We currently have no revenue generating operations. Operating

costs and expenses. Operating costs and expenses for the three and nine months ended September 30, 2023 were $1,747,000 and $6,213,000,

respectively, compared to $2,355,000 and $6,997,000, respectively, for the three and nine months ended September 30, 2022. General

and administrative expenses. General and administrative expenses (“G&A expenses”) for the three and nine months ended

September 30, 2023 were $1,332,000 and $4,106,000, respectively, compared to $1,636,000 and $4,621,000, respectively, for the three and

nine months ended September 30, 2022. This expense grouping includes salaries, benefits, stock option expenses and professional fees.

G&A expenses decreased $304,000, or 19%, during the most recent quarter versus the prior year primarily due to lower expenses associated

with stock option grants. G&A expenses decreased $515,000, or 11%, primarily due to lower expenses associated with stock option grants. Other

expense. Other expenses during the three and nine months ended September 30, 2023 were $379,000 and $1,978,000, respectively, compared

to $719,000 and $2,376,000, respectively, for the three and nine months ended September 30, 2022. Other general and administrative expenses

are comprised of non-compensation and non-professional expenses incurred. Other expenses decreased $340,000, or about 47%, for the three

months ended September 30, 2023 as a result of lower annual meeting expenses in 2023 and lower travel expenses. Other expenses for the

nine months ended September 30, 2023 decreased $398,000, or 17%, primarily due to lower annual meeting expenses. Post

Impairment of unproved oil and gas properties. Post Impairment of unproved oil and gas properties expenses during the three

and nine months ended September 30, 2023 were $36,000 and $129,000 compared to nil and nil for the three and nine months ended September

30, 2022. The expenses recorded in 2023 are post impairment charges to the impairment recorded during 2022 related to the MJ-2 well. Other

expense (income), net. Other expenses (income) during the three and nine months ended September 30, 2023 were ($4,000) and $3,000,

respectively, compared to $19,000 and $140,000, respectively, for the three and nine months ended September 30, 2022. The expenses in

this category are comprised of foreign currency exchange costs, primarily the New Israeli Shekel (NIS) to the US dollar, and financial

expenses/income. Overall, for the nine months ended September 30, 2022, total expenses in this category are $121,000 lower due to the

relative strengthening of the USD to the NIS during 2023. Net Loss. Net loss

for the three and nine months ended September 30, 2023 was $1,743,000 and $6,216,000 compared to $2,374,000 and $7,137,000 for the three

and nine months ended September 30, 2022. Liquidity

and Capital Resources 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. 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. As we have expressed earlier in this Form 10-Q, our operations

are temporarily suspended due to the Israel-Hamas war. Although the war’s impact on our cash generation is not specifically known,

the Company has been able to generate needed capital under our DSPP since 2013 and through various equity private placements prior to

2013. The Company plans to continue issuing its common shares through the DSPP (see Footnote 3 for a new Unit program announced on November

6, 2023). 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, 2023 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. 41 At

September 30, 2023, we had approximately $510,000 in cash and cash equivalents compared to $1,735,000 at December 31, 2022, which does

not include any restricted funds. Our working capital (current assets minus current liabilities) was ($108,000) at September 30, 2023

and $661,000 at December 31, 2022. As

of September 30, 2023, we provided bank guarantees to various governmental bodies (approximately $930,000) and others (approximately

$85,000) in respect of our drilling operation in the aggregate amount of approximately $1,015,000. 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 fixed short-term

bank deposits restricted. During

the nine months ended September 30, 2023, cash used in operating activities totaled $3,909,000. Cash provided by financing activities

during the nine months ended September 30, 2023 was $4,370,000 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 $2,045,000 for the nine months ended September 30, 2023. During

the nine months ended September 30, 2022, cash used in operating activities totaled $4,719,000. Cash provided by financing activities

during the nine months ended September 30, 2022 was $16,473,000 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 $13,333,000 for the nine months ended September 30, 2022. 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 $391,000 during the period

October 1, 2023 through November 7, 2023, 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