(Name, address, including zip code, and
telephone number, including area code, of agent for service)
If an emerging
growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act ☐
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus and the documents included
or incorporated by reference in this prospectus contain statements concerning our expectations, beliefs, plans, objectives, goals,
strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These
statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of
1995. You generally can identify our forward-looking statements by the words “anticipate,” “believe,”
“budgeted,” “continue,” “could,” “estimate,” “expect,” “forecast,”
“goal,” “intend,” “may,” “objective,” “plan,” “potential,”
“predict,” “projection,” “scheduled,” “should,” “will” or other similar
words or the negative of these terms or other comparable terminology and include, without limitation, statements regarding:
|
●
|
our ability to raise
sufficient capital to successfully interpret and analyze 3-D seismic data and continue with exploratory efforts and any future
drilling activities within our license area;
|
|
●
|
the going concern qualification
in our financial statements;
|
|
●
|
our liquidity and our
ability to raise capital to maintain operations and finance our overall exploration and development activities;
|
|
●
|
the outcome of the current
SEC investigation and the resulting class action lawsuit and derivative litigation against us;
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|
●
|
our ability to obtain
new license areas to continue our petroleum exploration program;
|
|
●
|
our ability to explore
for and develop natural gas and oil resources successfully and economically within our license areas;
|
|
●
|
our ability to maintain
the exploration license rights to continue our petroleum exploration program;
|
|
●
|
the availability of equipment,
such as seismic equipment, drilling rigs, and production equipment;
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|
●
|
the impact of governmental
regulations, permitting and other legal requirements in Israel relating to onshore exploratory drilling;
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|
●
|
our estimates of the
time frame within which future exploratory activities will be undertaken;
|
|
●
|
changes in our exploration
plans and related budgets;
|
|
●
|
the quality of existing
and future license areas with regard to, among other things, the existence of reserves in economic quantities;
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|
●
|
anticipated trends in
our business;
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|
●
|
our future results of
operations;
|
|
●
|
our capital expenditure
program;
|
|
●
|
future market conditions
in the oil and gas industry; and
|
|
●
|
the demand for oil and
natural gas, both locally in Israel and globally.
|
More specifically,
our forward-looking statements include, among others, statements relating to our schedule, business plan, targets, estimates
or results of future drilling, including the number, timing and results of wells, the timing and risk involved in drilling follow-up
wells, planned expenditures, prospects budgeted and other future capital expenditures, risk profile of oil and gas exploration,
acquisition of seismic data (including number, timing and size of projects), planned evaluation of prospects, probability of prospects
having oil and natural gas, expected production or reserves, increases in reserves, acreage, working capital requirements, hedging
activities, the ability of expected sources of liquidity to implement our business strategy, future hiring, future exploration
activity, production rates, all and any other statements regarding future operations, financial results, business plans and cash
needs and other statements that are not historical facts.
Such statements involve
risks and uncertainties, including, but not limited to, those relating to our dependence on our exploratory drilling activities,
the volatility of oil and natural gas prices, the need to replace reserves depleted by production, operating risks of oil and
natural gas operations, our dependence on our key personnel, factors that affect our ability to manage our growth and achieve
our business strategy, risks relating to our limited operating history, technological changes, our significant capital requirements,
the potential impact of government regulations, adverse regulatory determinations, litigation, competition, the uncertainty of
reserve information and future net revenue estimates, property acquisition risks, industry partner issues, availability of equipment,
weather and other factors detailed herein and in our other filings with the SEC.
We have based our
forward-looking statements on our management’s beliefs and assumptions based on information available to our management
at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about
future events may and often do vary materially from actual results. Therefore, we cannot assure you that actual results will not
differ materially from those expressed or implied by our forward-looking statements.
Some of the factors
that could cause actual results to differ from those expressed or implied in forward-looking statements are described under “Risk
Factors” in this prospectus (page 10) and described under “Risk Factors” and elsewhere in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2018 and in our other periodic reports filed with the SEC. Should one or
more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially
from those indicated. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on
our forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we
undertake no duty to update any forward-looking statement.
SUMMARY
The following is only
a summary, and does not contain all of the information that you need to consider in making your investment decision. We urge you
to read this entire prospectus, including the more detailed financial statements, notes to the financial statements and other
information incorporated by reference into this prospectus under “Where You Can Find More Information” and “Incorporation
of Certain Information by Reference” from our other filings with the SEC, as well as any prospectus supplement applicable
to an offering of the securities registered pursuant to the registration statement of which this prospectus forms a part. Investing
in our securities involves risks. Therefore, please carefully consider the information provided under the heading “Risk
Factors” beginning on page 10.
Our Company
Zion Oil and Gas, Inc., a Delaware corporation,
is an oil and gas exploration company with a history of 19 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. 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 Nasdaq Capital Market
under the symbol “ZN” and our Common Stock warrant under the symbol “ZNWAA.”
The Company currently holds one active
petroleum exploration license onshore Israel, the Megiddo-Jezreel License, comprising approximately 99,000 acres. The Megiddo
Jezreel #1 (“MJ #1”) site was completed in early March 2017, after which the drilling rig and associated equipment
were mobilized to the site. Performance and endurance tests were completed, and the MJ #1 exploratory well was spud on June 5,
2017 and drilled to a total depth (“TD”) of 5,060 meters (approximately 16,600 feet). Thereafter, the Company obtained
three open-hole wireline log suites (including a formation image log), and the well was successfully cased and cemented. The Ministry
of Energy approved the well testing protocol on April 29, 2018.
During the fourth quarter of 2018, the
Company testing protocol was concluded at the MJL well. The test results confirmed that the MJ #1 well did not contain hydrocarbons
in commercial quantities in the zones tested. As a result, in the year ended December 31, 2018, the Company recorded a non-cash
impairment charge to its unproved oil and gas properties of $30,906,000. The Company recorded a post-impairment charge of $86,000
and $314,000 for the three and nine months ended September 30, 2019, respectively. During the three and nine months ended September
30, 2018, the Company did not record any post-impairment charges.
While the well was not commercially viable,
Zion learned a great deal from the drilling and testing of this well. We believe that the drilling and testing of this well carried
out the testing objectives, which may support further evaluation and potential further exploration efforts within our License
area.
As a result of the information gained
drilling the MJ#1 well, Zion believes it is prudent and consistent with good industry practice to try and answer some of the questions
raised by the drilling with a focused 3D seismic imaging shoot of approximately 72 square kilometers surrounding the MJ#1 well.
At present, we have no revenues or operating
income. Our ability to generate future revenues and operating cash flow will depend on the successful exploration and exploitation
of our current and any future petroleum rights or the acquisition of oil and/or gas producing properties, and the volume and timing
of such production. In addition, even if we are successful in producing oil and gas in commercial quantities, our results will
depend upon commodity prices for oil and gas, as well as operating expenses including taxes and royalties.
Our executive offices are located at 12655
North Central Expressway, Suite 1000, Dallas, Texas 75243, and our telephone number is (214) 221-4610. Our branch office’s
address in Israel is 9 Halamish Street, North Industrial Park, Caesarea 3088900, and the telephone number is +972-4-623-8500.
Our website address is: www.zionoil.com.
Current Exploration and Operation Efforts
Megiddo-Jezreel Petroleum License
The Company currently holds one active
petroleum exploration license onshore Israel, the Megiddo-Jezreel License, comprising approximately 99,000 acres. The Megiddo
Jezreel #1 (“MJ #1”) exploratory well was spud on June 5, 2017 and drilled to a total depth (“TD”) of
5,060 meters (approximately 16,600 feet). Thereafter, the Company successfully cased and cemented the well while awaiting the
approval of the testing protocol. The Ministry of Energy approved the well testing protocol on April 29, 2018.
During the fourth quarter of 2018, the
Company’s testing protocol was concluded at the MJ #1 well. The test results confirmed that the MJ #1 well did not contain
hydrocarbons in commercial quantities in the zones tested. The MJ#1 well provided Zion with information Zion believes is
important for potential future exploration efforts within its license area. As with many frontier wildcat wells, the MJ#1 also
left several questions unanswered.
While not meant to be an exhaustive list,
a summary of what Zion believes to be key information learned in the MJ#1 well is as follows:
|
1.
|
The MJ#1 encountered much higher subsurface temperatures at
a depth shallower than expected before drilling the well. In our opinion, this is significant because reaching a minimum temperature
threshold is necessary for the generation of hydrocarbons from an organic-rich source rock.
|
|
|
|
|
2.
|
The known organic rich (potentially hydrocarbon bearing) Senonian
age source rocks that are typically present in this part of Israel were not encountered as expected. Zion expected these source
rocks to be encountered at approximately 1,000 meters in the MJ#1 well.
|
|
|
|
|
3.
|
MJ#1 had natural fractures, permeability (the ability of fluid
to move through the rock) and porosity (pore space in rock) that allowed the sustained flow of formation fluid in the shallower
Jurassic and lower Cretaceous age formations between approximately 1,200 and 1,800 meters. While no hydrocarbons were encountered,
Zion believes this fact is nonetheless significant because it provides important information about possible reservoir pressures
and the ability of fluids to move within the formation and to the surface.
|
|
|
|
|
4.
|
MJ#1 encountered oil in the Triassic Mohilla formation, which
Zion believes suggests an active deep petroleum system is in Zion’s license area. There was no natural permeability
or porosity in the Triassic Mohilla formation to allow formation fluid to reach the surface naturally during testing, and
thus the MJ#1 was not producible or commercial.
|
|
|
|
|
5.
|
The depths and thickness of the formations we encountered varied
greatly from pre-drill estimates. This required the MJ#1 to be drilled to a much greater depth than previously expected. Zion
has tied these revised formation depths to seismic data which will allow for more accurate interpretation and mapping in the
future.
|
A summary of what Zion believes to be
some key questions left to be answered are:
|
1.
|
Is the missing shallow Senonian age source rock a result of
regional erosion, or is it missing because of a fault that cut the well-bore and could be reasonably expected to be encountered
in the vicinity of the MJ#1 drill site? Zion believes this is an important question to answer because if the Senonian source
rocks do exist in this area, the high temperatures encountered are sufficient to mature these source rocks and generate oil.
|
|
|
|
|
2.
|
Do the unusually high shallow subsurface temperatures extend
regionally beyond the MJ#1 well, which could allow for the generation of hydrocarbons in the Senonian age source rock within
our license area?
|
|
|
|
|
3.
|
As a consequence of seismic remapping, where does the MJ#1 well
lie relative to the potential traps at the Jurassic and Triassic levels, and was the well location too low on the structures
and deeper than the potential hydrocarbons within those traps?
|
Zion commenced the data acquisition portion
on the 3-D survey area consisting of 72 square kilometers focused on the eastern portion of the Megiddo-Jezreel license.
Acoustic Geophysical Services (“AGS”), our geophysical contractor, completed mobilization in late August in which
the seismic equipment was moved on location and testing completed. In mid-September 2019 all parameter selections were approved.
Following parameter selection, AGS began its seismic production activities on September 25, 2019. Approximately 50% of the survey
was completed by September 30, 2019. The remaining 50% of the survey was completed in mid-October.
Zion has engaged Agile Seismic Processing
Services (“ASPS”), with offices located in Houston, Texas and Belgrade, Serbia, to handle the seismic data processing
and interpretation services. The geophysical dataset, which was delivered to ASPS in late October 2019, will be processed using
enhanced technologies.
Zion received a multi-year license extension
through December 2, 2020.
Zion’s ability to fully undertake
all of these aforementioned activities is subject to its raising the needed capital from its continuing offerings, of which no
assurance can be provided.
Map 1. Zion’s Megiddo-Jezreel
Petroleum Exploration License as of September 30, 2019.
The Megiddo-Jezreel License (No. 401)
was awarded on December 3, 2013 for a three-year primary term through December 2, 2016 with the possibility of additional one-year
extensions up to a maximum of seven years. The Megiddo-Jezreel License lies onshore, south and west of the Sea of Galilee, and
we continue our exploration focus here as it appears to possess the key geologic ingredients of an active petroleum system with
significant exploration potential.
On November 20, 2017, Israel’s Petroleum
Commissioner officially approved Zion’s multi-year extension request on its Megiddo-Jezreel License No. 401, extending its
validity to December 2, 2019, and on February 28, 2019, a further extension to December 2, 2020 was granted. The Megiddo-Jezreel
License is therefore scheduled to terminate on December 2, 2020. In addition, on July 1, 2019, the Company’s surface use
agreement was extended through December 3, 2020 by the Israel Land Authority.
The Company remained subject to the following
updated key license terms:
No.
|
|
Activity Description
|
|
Execution by:
|
1
|
|
Submit final report on the results of drilling
|
|
31 May 2018
|
2
|
|
Submit program for continuation of work under license
|
|
30 June 2018
|
On June 1, 2018, Zion submitted its Megiddo-Jezreel
#1 End of Well Report (EOWR) for the Megiddo-Jezreel License No. 401, thus fulfilling our No. 1 End of Well Report license work
plan obligation, shown above.
On June 14, 2018 Zion submitted its Application
for Extension of Continued Work Program Due Date on the Megiddo-Jezreel License No. 401. The additional time was necessary because
we had still not completed testing and evaluating all planned testing zones. On July 1, 2018, Israel’s Petroleum Commissioner
granted our work program report extension to November 1, 2018.
No.
|
|
Activity Description
|
|
Execution by:
|
1
|
|
Submit program for continuation of work under
license
|
|
1 November 2018
|
On October 29, 2018 Zion received approval
from the Petroleum Commissioner for an Application for Extension of Continued Work Program Due Date on the Megiddo-Jezreel License
No. 401. The additional time was necessary because we had still not completed testing and evaluating all planned testing zones.
No.
|
|
Activity Description
|
|
Execution by:
|
1
|
|
Submit program for continuation of work under
license
|
|
31 January 2019
|
On January 31, 2019, Zion submitted its
Application for Extension of Continued Work Program Due Date on the Megiddo-Jezreel License No. 401. The additional time was necessary
to finalize the work program. On February 3, 2019 Israel’s Petroleum Commissioner granted Zion’s work program report
extension to February 28, 2019, as shown below:
Number
|
|
Activity
Description
|
|
Execution
by:
|
1
|
|
Submit program for continuation of work under license
|
|
28 February 2019
|
On February 24, 2019 and thereafter on
February 26, 2019 Zion submitted its proposed 2019 WORK PROGRAM ON the Megiddo-Jezreel
License No. 401.
On February 28, 2019 Israel’s Petroleum
Commissioner officially approved the revised and updated Work Program on the Megiddo-Jezreel License No. 401 as shown below:
Number
|
|
Activity description
|
|
Execution by:
|
1
|
|
Submission of seismic survey plan to the Commissioner and execution
of an agreement with a contractor to perform
|
|
30 April 2019
|
2
|
|
Commence 3D seismic survey in an area of approximately 50 square
kilometers
|
|
1 August 2019
|
3
|
|
Transfer of field material configuration and processed material
to the Ministry pursuant to Ministry guidelines
|
|
15 December 2019
|
4
|
|
Submit interpretation report
|
|
20 February 2020
|
On February 24, 2019 Zion submitted a
request to the Commissioner to extend the Megiddo-Jezreel License No. 401 up to December 2, 2020.
On February 28, 2019 the Commissioner
approved the extension of the Megiddo-Jezreel License No. 401 up to December 2, 2020.
On April 30, 2019 Zion submitted its Application
for Extension of Continued Work Program Due Date on the Megiddo-Jezreel License No. 401. The additional time is necessary
for Zion to conduct a 3D survey in an area of approximately 72 square kilometers. This requires, among others, extensive permitting
activities with relevant local landowners, the ILA, certain authorities and others, and the seismic survey area may not conclude
prior to the beginning of the Jewish holidays in October and rainy season. This in turn would result in additional delay, as rain
and mud are not conducive to the performance of a seismic survey, which includes extensive use of vibrators.
Zion’s proposed new timelines and
activity descriptions are shown below:
Number
|
|
Activity description
|
|
Execution by:
|
1
|
|
Submission of seismic survey plan to the Commissioner and execution
of an agreement with a contractor to perform
|
|
30 November 2019
|
2
|
|
Commence 3D seismic survey in an area of approximately 72 square
kilometers
|
|
1 April 2020
|
3
|
|
Transfer of field material configuration and processed material
to the Ministry pursuant to Ministry guidelines
|
|
15 August 2020
|
4
|
|
Submit interpretation report
|
|
15 November, 2020
|
On May 1, 2019, Israel’s Petroleum
Commissioner granted Zion’s work program report extension.
As previously disclosed, the Company required
authorization from the ILA, the formal lessor of the land to Kibbutz Sde Eliyahu, on whose property the drilling pad is currently
situated, to access and utilize the drill site (“surface use agreement”). The Company received this authorization
on July 4, 2016. This was preceded by the Company’s May 15, 2016 signed agreement with the kibbutz. On January 11, 2017,
an agreement was signed by the Company and the ILA by which the surface usage agreement was extended through December 3, 2017.
On December 31, 2017, an agreement was signed by the Company and the ILA by which the surface usage agreement was extended through
December 3, 2019. On July 1, 2019, an agreement was signed by the Company and the ILA by which the surface usage agreement was
extended through December 3, 2020.
Zion’s Former Asher-Menashe and Joseph Licenses
Zion has plugged all of its exploratory
wells on its former Asher-Menashe and Joseph License areas, and the reserve pits have been evacuated, but acknowledges its obligation
to complete the abandonment of these well sites in accordance with guidance from the Energy Ministry, Environmental Ministry and
local officials.
Onshore Licensing, Oil and Gas Exploration
and Environmental Guidelines
The Company is engaged in oil and gas
exploration and production and may become subject to certain liabilities as they relate to environmental cleanup 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, the
Energy Ministry, and the Environmental Ministry in recent years as it pertains to oil and gas activities. Mention of these guidelines
was included in previous Zion Oil & Gas filings.
We acknowledge that these new regulations
are likely to increase the expenditures associated with obtaining new exploration rights and drilling new wells. The Company expects
that additional financial burdens could occur as a result of the Ministry requiring cash reserves that could otherwise be used
for operational purposes.
Financing Activities
We need to raise significant funds to
finance the continued exploration efforts and maintain orderly operations. To date, we have funded our operations through the
issuance of our securities and convertible debt. We will need to continue to raise funds through the issuance of equity and/or
debt securities (or securities convertible into or exchangeable for equity securities). No assurance can be provided that we will
be successful in raising the needed capital on terms favorable to us (or at all).
The Dividend Reinvestment and Stock
Purchase Plan
On March 27, 2014, the Company launched
its Dividend Reinvestment and Stock Purchase Plan (the “DSPP”) pursuant to which stockholders and interested investors
could purchase shares of the Company’s Common Stock as well as units of the Company’s securities directly from the
Company. The terms of the DSPP are described in the Prospectus Supplement originally filed on March 31, 2014 (the “Original
Prospectus Supplement”) with the Securities and Exchange Commission (“SEC”) under the Company’s effective
registration Statement on Form S-3, as thereafter amended.
On February 23, 2017, the Company filed
a Form S-3 with the SEC (Registration No. 333-216191) as a replacement for the Form S-3 (Registration No. 333-193336), in which
the three (3) year period was ending 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 Registration No. 333-216191 describes the terms of the
DSPP and replaces the prior Prospectus Supplement, as amended, under the prior Registration No. 333-193336.
For the three and nine months ended September
30, 2019, approximately $3,262,000 and $8,898,000 was raised under the DSPP program.
The Warrants transactions
since January 1, 2019 are shown in the table below:
Warrants
|
|
Exercise Price
|
|
|
Warrant Termination Date
|
|
Outstanding Balance, 12/31/18
|
|
|
Warrants Issued
|
|
|
Warrants Exercised
|
|
|
Warrants Expired
|
|
|
Outstanding Balance, 9/30/19
|
|
ZNWAA
|
|
$
|
2.00
|
|
|
01/31/2021
|
|
|
1,498,804
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,498,804
|
|
ZNWAD
|
|
$
|
1.00
|
|
|
05/02/2021
|
|
|
243,853
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
243,853
|
|
ZNWAE
|
|
$
|
1.00
|
|
|
05/02/2021
|
|
|
2,144,510
|
|
|
|
0
|
|
|
|
(40
|
)
|
|
|
0
|
|
|
|
2,144,470
|
|
ZNWAF
|
|
$
|
1.00
|
|
|
08/14/2021
|
|
|
359,610
|
|
|
|
0
|
|
|
|
(25
|
)
|
|
|
0
|
|
|
|
359,585
|
|
ZNWAG
|
|
$
|
1.00
|
|
|
01/08/2021
|
|
|
240,578
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
240,578
|
|
ZNWAH
|
|
$
|
5.00
|
|
|
04/19/2021
|
|
|
372,400
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
372,400
|
|
ZNWAI
|
|
$
|
3.00
|
|
|
06/29/2021
|
|
|
640,735
|
|
|
|
0
|
|
|
|
(5
|
)
|
|
|
0
|
|
|
|
640,730
|
|
ZNWAJ
|
|
$
|
1.00
|
|
|
10/29/2021
|
|
|
546,050
|
|
|
|
0
|
|
|
|
(50
|
)
|
|
|
0
|
|
|
|
546,000
|
|
ZNWAK
|
|
$
|
0.01
|
|
|
02/25/2021
|
|
|
0
|
|
|
|
673,600
|
|
|
|
(214,100
|
)
|
|
|
0
|
|
|
|
459,500
|
|
ZNWAL
|
|
$
|
2.00
|
|
|
08/26/2021
|
|
|
0
|
|
|
|
517,925
|
|
|
|
0
|
|
|
|
0
|
|
|
|
517,925
|
|
Outstanding warrants
|
|
|
|
|
|
|
|
|
6,046,540
|
|
|
|
1,191,525
|
|
|
|
(214,200
|
)
|
|
|
0
|
|
|
|
7,023,845
|
|
According to the warrant table, the Company
could potentially raise up to approximately $11,357,000 if all outstanding warrants were exercised by its holders.
Rights Offering -10% Senior Convertible
Notes due May 2, 2021
On October 21, 2015, the Company filed
with the SEC a prospectus supplement for a rights offering. Under the rights offering, the Company distributed at no cost, 360,000
non-transferable subscription rights to subscribe for, on a per right basis, two 10% Convertible Senior Bonds par $100 due May
2, 2021 (the “Notes”), to shareholders of the Company’s Common Stock on October 15, 2015, the record date for
the offering. Each whole subscription right entitled the participant to purchase two convertible bonds at a purchase price of
$100 per bond. Effective October 21, 2015, the Company executed a Supplemental Indenture, as issuer, with the American Stock Transfer&
Trust Company, LLC, a New York limited liability trust company (“AST”), as trustee for the Notes (the “Indenture”).
On March 31, 2016, the rights offering terminated.
On May 2, 2016, the Company issued approximately
$3,470,000 aggregate principal amount of Notes in connection with the rights offering. The Company received net proceeds
of approximately $3,334,000, from the issuance of the Notes, after deducting fees and expenses of $136,000 incurred in connection
with the offering. These costs have been discounted as deferred offering costs.
During the three and nine months ended
September 30, 2019, the Company recorded approximately $7,000 and 20,000, respectively, in amortization expense related to the
deferred financing costs, approximately $72,000 and $259,000, respectively, in debt discount amortization, and approximately $1,000
and $11,000, respectively, related to financing gains associated with notes converted to shares. During the three and nine months
ended September 30, 2018, the Company recorded approximately $7,000 and $20,000, respectively, in amortization expense related
to the deferred financing costs, approximately $59,000 and $220,000, respectively in debt discount amortization, and approximately
$1,000 and $85,000, respectively, related to financing expenses associated with notes converted to shares.
The Notes are governed by the terms of
the Indenture. The Notes are senior unsecured obligations of the Company and bear interest at a rate of 10% per year, payable
annually in arrears on May 2 of each year, commencing May 2, 2017. The Notes will mature on May 2, 2021, unless earlier redeemed
by the Company or converted by the holder.
Interest and principal may be paid, at
the Company’s option, in cash or in shares of the Company’s Common Stock. The number of shares for the payment of
interest in shares of Common Stock, in lieu of the cash amount, will be based on the average of the closing prices of the Company’s
Common Stock as reported by Bloomberg L.P. for the 30 trading days preceding the record date for the payment of interest; such
record date has been designated and will always be the 10th business day prior to the interest payment date on May
2 of each year. The number of shares for the payment of principal, in lieu of the cash amount, shall be based upon the average
of the closing price of the Company’s Common Stock as reported by Bloomberg L.P. for the 30 trading days preceding the principal
repayment date; such record date has been designated as the trading day immediately prior to the 30-day period preceding the maturity
date of May 2, 2021. Fractional shares were not issued, and the final number of shares were rounded up to the next whole share.
On May 2, 2019, the Company paid
its annual 10% interest to its bondholders of record on April 18, 2019. The interest was paid-in-kind (“PIK”) in the
form of Common Stock. An average of the Company stock price of $0.774 was determined based on the 30 trading days prior to the
record date of April 18, 2019. This figure was used to divide into 10% of the par value of the bonds held by the holders. The
Company issued 422,426 shares to the accounts of its bondholders.
At any time prior to the close of business
on the business day immediately preceding April 2, 2021, holders may convert their notes into Common Stock at the conversion rate
of 44 shares per $100 bond (which is equivalent to a conversion rate of approximately $2.27 per share). The conversion rate is
subject to adjustment from time to time upon the occurrence of certain events, including, but not limited to, the issuance of
stock dividends and payment of cash dividends.
Beginning May 3, 2018, the Company was
entitled to redeem for cash the outstanding Notes at an amount equal to the principal and accrued and unpaid interest, plus a
10% premium. No “sinking fund” is provided for the Notes due May 2, 2021, which means that the Company is not required
to periodically redeem or retire the Notes due May 2, 2021.
The Securities We May Offer
We may offer shares
of our common stock, various series of debt securities and warrants to purchase any of such securities, either individually or
in units, with a total value of up to approximately $154,000,000 from time to time under this prospectus at prices and on terms
to be determined by market conditions at the time of offering. This prospectus provides you with a general description of the
securities we may offer. Each time we offer a type or series of securities, we will provide a prospectus supplement that
will describe the specific amounts, prices and other important terms of the securities, including, to the extent applicable:
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aggregate principal amount
or aggregate offering price;
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maturity, if applicable;
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original issue discount,
if any;
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rates and times of payment
of interest, if any;
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redemption, conversion,
exchange or sinking fund terms, if any;
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conversion or exchange prices or rates, if any, and,
if applicable, any provisions for changes to or adjustments in the conversion or exchange prices or rates and in the securities
or other property receivable upon conversion or exchange;
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restrictive covenants,
if any;
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voting or other rights,
if any; and
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important federal income
tax considerations.
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The prospectus supplement
also may add, update or change information contained in this prospectus or in documents we have incorporated by reference into
this prospectus. However, no prospectus supplement will offer a security that is not registered and described in this prospectus
at the time of the effectiveness of the registration statement of which this prospectus is a part.
We may sell the securities
directly to or through underwriters, dealers or agents. We, and our underwriters or agents, reserve the right to accept
or reject all or part of any proposed purchase of securities. Currently, we sell securities directly through our Dividend
Reinvestment and Common Stock Purchase Plan. If we do offer securities through underwriters or agents, we will include in the
applicable prospectus supplement:
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the names of those underwriters
or agents;
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applicable fees, discounts
and commissions to be paid to them;
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details regarding over-allotment
options, if any; and
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the net proceeds to us.
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The following is a summary of the
securities we may offer with this prospectus.
Common Stock.
We currently have authorized 200,000,000 shares of common stock, par value $0.01 per share. We may offer shares of our common
stock either alone or underlying other registered securities convertible into or exercisable for our common stock from time to
time. Holders of our common stock are entitled to one vote per share for the election of directors and on all other matters that
require stockholder approval. In the event of our liquidation, dissolution or winding up, holders of our common stock
are entitled to share ratably in the assets remaining after payment of liabilities. Currently, we do not pay any dividends.
Our common stock does not carry any preemptive rights enabling a holder to subscribe for, or receive shares of, any class of our
common stock or any other securities convertible into shares of any class of our common stock, or any redemption rights.
Debt Securities.
We may offer debt securities from time to time, in one or more series, as either senior or subordinated debt or as senior or subordinated
convertible debt. The senior debt securities will rank equally with any other unsubordinated debt that we may have and may
be secured or unsecured. The subordinated debt securities will be subordinate and junior in right of payment, to the extent
and in the manner described in the instrument governing the debt, to all or some portion of our indebtedness. Any convertible
debt securities that we issue will be convertible into or exchangeable for our common stock or other securities of ours.
Conversion may be mandatory or at your option and would be at prescribed conversion rates.
Any debt securities
will be issued under one or more documents called indentures, which are contracts between us and a trustee for the holders of
the debt securities. In this prospectus, we have summarized certain general and standard features of the debt securities
we may issue. We urge you, however, to read the prospectus supplements related to the series of debt securities being offered,
as well as the complete indentures that contain the terms of the debt securities. We will file as exhibits to the registration
statement of which this prospectus is a part, or will incorporate by reference into such registration statement from a Current
Report on Form 8-K that we file with the SEC, the forms of indentures and any supplemental indentures and the forms of debt securities
containing the terms of debt securities we are offering before the issuance of any series of debt pursuant to the Registration
Statement of which this prospectus forms a part.
Warrants.
We may offer warrants for the purchase of our common stock, and/or debt securities in one or more series, from time to
time. We may issue warrants independently or together with common stock, and/or debt securities and the warrants may be
attached to or separate from those securities.
The warrants will be
evidenced by warrant certificates issued under one or more warrant agreements, which are contracts between us and an agent for
the holders of the warrants. In this prospectus, we have summarized certain general and standard features of the warrants.
We urge you, however, to read the prospectus supplements related to the series of warrants being offered, as well as the warrant
agreements and warrant certificates that contain the terms of the warrants. We will file as exhibits to the registration
statement of which this prospectus is a part, or will incorporate by reference into such registration statement from a Current
Report on Form 8-K that we file with the SEC, the form of warrant agreements and form of warrant certificates relating to warrants
for the purchase of common stock and debt securities we are offering before the issuance of any such warrants pursuant to the
Registration Statement of which this prospectus forms a part.
Units.
We may offer units consisting of common stock, debt securities and/or warrants to purchase any of such securities in one
or more series. In this prospectus, we have summarized certain general and standard features of the units. We urge you, however,
to read the prospectus supplements related to the series of units being offered, as well as the unit agreements that contain the
terms of the units. We will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate
by reference from a Current Report on Form 8-K that we file with the SEC, the form of unit agreement and any supplemental agreements
that describe the terms of the series of units we are offering before the issuance of the related series of units pursuant to
the Registration Statement of which this prospectus forms a part.
We will evidence each
series of units by unit certificates that we will issue under a separate agreement. We will enter into the unit agreements with
a unit agent. Each unit agent will be a bank or trust company that we select. We will indicate the name and address of the unit
agent in the applicable prospectus supplement relating to a particular series of units.
THIS PROSPECTUS MAY NOT BE USED TO OFFER
OR SELL ANY SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
RISK FACTORS
Before making an investment
decision, you should carefully consider the risks described under “Risks Related to our Business” below and in the
applicable prospectus supplement, together with all of the other information appearing in this prospectus or incorporated by reference
into this prospectus and any applicable prospectus supplement, in light of your particular investment objectives and financial
circumstances. Our business, financial condition or results of operations could be materially adversely affected by any of these
risks. The trading price of our securities could decline due to any of these risk factors, and you may lose all or any part of
your investment.
Risks Related to our Business
We are an oil and
gas exploration company with no current source of revenue. Our ability to continue in business depends upon our continued ability
to obtain significant financing from external sources and the success of our exploration efforts, none of which can be assured.
During the quarter
ended September 30, 2019, there were no material changes to the risk factors previously reported in our Annual Report on Form
10-K for the year ended December 31, 2018.
USE OF PROCEEDS
Unless otherwise indicated
in the prospectus supplement applicable to an offering, we intend to use any net proceeds from the sale of our securities to fund
our operations and for other general corporate purposes, such as additions to working capital, expansion of our drilling and other
exploration efforts and further our efforts to possibly acquire a majority working interest in a deep-drilling capacity onshore
drilling rig. We have not determined the amount of net proceeds to be used specifically for the foregoing purposes.
When we offer a particular
series of securities, we will describe the intended use of the net proceeds from that offering in a prospectus supplement. The
actual amount of net proceeds we spend on a particular use will depend on many factors, including, our future capital expenditures,
the amount of cash required by our operations, and our future revenue growth, if any. Therefore, we will retain broad discretion
in the use of the net proceeds.
DESCRIPTION OF CAPITAL STOCK
Our authorized share
capital consists of 200,000,000 shares of common stock, par value $0.01 per share. As of September 30, 2019, there were 89,856,859
common shares outstanding. All outstanding shares of common stock are fully paid and non-assessable.
The following description
of our common stock, together with any additional information we include in any applicable prospectus supplement, summarizes the
material terms and provisions of our common stock that we may offer under this prospectus. While the terms we have summarized
below will apply generally to any future common stock that we may offer, we will describe the particular terms of any class or
series of these securities in more detail in the applicable prospectus supplement. For the complete terms of our common stock,
please refer to our certificate of incorporation and our bylaws that are incorporated by reference into the registration statement
of which this prospectus is a part or may be incorporated by reference in this prospectus or any applicable prospectus supplement.
The summary below and that contained in any applicable prospectus supplement are qualified in their entirety by reference to our
certificate of incorporation and bylaws.
Common Stock
Voting. Holders
of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. They are
not entitled to cumulative voting rights.
Dividends and Other
Distributions. Holders of our common stock are entitled to share in an equal amount per share in any dividends declared by
our board of directors on the common stock and paid out of legally available assets.
Distributions on
Dissolution. In the event of our liquidation, dissolution or winding up, holders of our common stock are entitled to share
ratably in the assets remaining after payment of liabilities.
Other Rights.
Our common stock does not carry any preemptive rights enabling a holder to subscribe for, or receive shares of, any class of our
common stock or any other securities convertible into shares of any class of our common stock. There are no conversion or redemption
rights or sinking funds provided for our stockholders.
Certificate of Incorporation and Bylaws
Provisions
The following summary
describes provisions of our certificate of incorporation and bylaws. They may have the effect of discouraging a tender offer,
proxy contest or other takeover attempt that is opposed by our board of directors. These provisions include:
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restrictions on the rights
of shareholders to remove directors;
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limitations against shareholders calling a Special
Meeting of shareholders or acting by unanimous written consent in lieu of a meeting;
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requirements for advance notice of actions proposed
by shareholders for consideration at meetings of the shareholders; and
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restrictions on business
combination transactions with “related persons.”
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Classified board of directors and removal
Our certificate of
incorporation provides that the board of directors shall be divided into three classes, designated Class I, Class II and Class
III, with the classes to be as nearly equal in number as possible. The term of office of each class expires at the third Annual
Meeting of Shareholders for the election of directors following the election of such class (except for the initial classes). Directors
may be removed only for cause and only upon the affirmative vote of holders of at least 66 2/3% of our voting stock at a Special
Meeting of Shareholders called expressly for that purpose. The classification of directors could have the effect of making it
more difficult for shareholders to change the composition of the board of directors. At least two Annual Meetings of Shareholders,
instead of one, are generally required to effect a change in a majority of the board of directors.
The classification
provisions could also have the effect of discouraging a third party from initiating a proxy contest, making a tender offer or
otherwise attempting to obtain control of our company, even though such an attempt might be beneficial to us and our shareholders.
The classification of the board of directors could thus increase the likelihood that incumbent directors will retain their positions.
In addition, because the classification provisions may discourage accumulations of large blocks of stock by purchasers whose objective
is to take control of our company and remove a majority of the board of directors, the classification of the board of directors
could tend to reduce the likelihood of fluctuations in the market price of the common stock that might result from accumulations
of large blocks. Accordingly, shareholders could be deprived of opportunities to sell their shares of common stock at a higher
market price than might otherwise be the case.
Shareholder action by written consent
and special meetings
Our bylaws provide
that shareholder action can be taken only at an Annual or Special Meeting of shareholders and may not be taken by written consent
in lieu of a meeting once our number of shareholders exceeded sixty, which occurred in the first quarter of 2003. Special Meetings
of shareholders can be called only upon a resolution adopted by the board of directors. Moreover, the business permitted to be
conducted at any Special Meeting of shareholders is limited to the business brought before the meeting under the Notice of Meeting
given by us. These provisions may have the effect of delaying consideration of a shareholder proposal until the next Annual Meeting.
These provisions would also prevent the holders of a majority of our voting stock from unilaterally using the written consent
or Special Meeting procedure to take shareholder action.
Advance notice provisions for shareholder
nominations and shareholder proposals
Our bylaws establish
an advance notice procedure for shareholders to make nominations of candidates for election as directors or bring other business
before a meeting of shareholders. The shareholder notice procedure provides that only persons who are nominated by, or at the
direction of, the board of directors, or by a shareholder who has given timely written notice containing specified information
to our secretary prior to the meeting at which directors are to be elected, will be eligible for election as our directors. The
shareholder notice procedure also provides that at a meeting of the shareholders only such business may be conducted as has been
brought before the meeting by, or at the direction of, the chairman of the board of directors, or in the absence of the chairman
of the board, the chief executive officer, the president, or by a shareholder who has given timely written notice containing specified
information to our secretary of such shareholder’s intention to bring such business before such meeting.
Although our bylaws
do not give the board of directors any power to approve or disapprove shareholder nominations for the election of directors or
proposals for action, they may have the effect of precluding a contest for the election of directors or the consideration of shareholder
proposals if the proper procedures are not followed, and of discouraging or deterring a third party from conducting a solicitation
of proxies to elect its own slate of directors or to approve its own proposal, without regard to whether consideration of such
nominees or proposals might be harmful or beneficial to Zion and our shareholders.
Business combination provision
Our certificate of
incorporation contains a provision for approval of specified business combination transactions involving any person, entity or
group that beneficially owns at least 10% of our aggregate voting stock. Such person, entity or group is sometimes referred to
as a “related person”. This provision requires the affirmative vote of the holders of not less than 66 2/3% of our
voting stock to approve specified transactions between a related person and Zion, including:
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any merger or consolidation;
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any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of our assets having a fair market value of more than 10% of our total assets, or assets representing more
than 10% of our cash flow or earning power, or 10% of stockholders’ equity, which is referred to as a “substantial
part”;
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any sale, lease, exchange, mortgage, pledge, transfer
or other disposition to or with us of all or a substantial part of the assets of a related person;
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any reclassification of securities, recapitalization,
or any other transaction involving us that would have the effect of increasing the voting power of a related person;
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the adoption of a plan or proposal for our liquidation
or dissolution proposed by or on behalf of a related person; and
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the entering into of any agreement, contract or other
arrangement providing for any of the transactions described above.
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This voting requirement
will not apply to certain transactions, including any transaction approved by a majority vote of the directors (called “Disinterested
Directors”) who are not affiliated or associated with the related person described above, provided that there are at least
three Disinterested Directors. This provision could have the effect of delaying or preventing a change in control of Zion in a
transaction or series of transactions.
Liability of directors and indemnification
Our certificate of
incorporation provides that a director will not be personally liable to us or our shareholders for breach of fiduciary duty as
a director, except to the extent that such exemption or limitation of liability is not permitted under Delaware General Corporation
Law. Any amendment or repeal of such provisions may not adversely affect any right or protection of a director existing under
our certificate of incorporation for any act or omission occurring prior to such amendment or repeal.
Our certificate of
incorporation and bylaws provide that each person who at any time serves or served as one of our directors or officers, or any
person who, while one of our directors or officers, is or was serving at our request as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, is entitled to indemnification and the advancement of expenses from us,
to the fullest extent permitted by applicable Delaware law. However, as provided under applicable Delaware General Corporation
Law, this indemnification will only be provided if the indemnitee acted in good faith and in a manner he or she reasonably believed
to be in, or not opposed to, the best interests of our company.
Amendments
Our certificate of
incorporation provides that we reserve the right to amend, alter, change, or repeal any provision contained in our certificate
of incorporation, and all rights conferred to shareholders are granted subject to such reservation. The affirmative vote of holders
of not less than 80% of our voting stock, voting together as a single class, is required to alter, amend, adopt any provision
inconsistent with, or to repeal certain specified provisions of our certificate of incorporation. However, the 80% vote described
in the prior sentence is not required for any alteration, amendment, adoption of inconsistent provision or repeal of the “business
combination” provision discussed under the “Business combination provision” paragraph above which is recommended
to the shareholders by two-thirds of our Disinterested Directors, and such alteration, amendment, adoption of inconsistent provision
or repeal shall require the vote, if any, required under the applicable provisions of the Delaware General Corporation Law, our
certificate of incorporation and our bylaws. In addition, our bylaws provide that shareholders may only adopt, amend or repeal
our bylaws by the affirmative vote of holders of not less than 66-2/3% of our voting stock, voting together as a single class.
Our bylaws may also be amended by the affirmative vote of two-thirds of our board of directors.
Listing Symbols on the securities market
Our common stock is
quoted on the NASDAQ Capital Market under the symbol “ZN.” The sale price of our common stock on the NASDAQ Capital
Market on November 4, 2019 was $0.2369. We also have one common stock purchase warrant quoted on the NASDAQ Capital Market under
the symbol “ZNWAA” since March 31, 2014. The applicable prospectus supplement will contain information, where applicable,
as to any other listing on NASDAQ Capital Market or any securities market or other exchange of the securities, if any, covered
by the prospectus supplement.
Transfer Agent and Registrar
The transfer agent
and registrar for our common stock is American Stock Transfer & Trust Company, LLC, Brooklyn, New York.
DESCRIPTION OF DEBT SECURITIES
The following description,
together with the additional information we include in any applicable prospectus supplements, summarizes the general terms and
provisions of the debt securities that we may offer under this prospectus. While the terms we have summarized below will
generally apply to any future debt securities we may offer under this prospectus, we will describe the particular terms of any
debt securities that we may offer in more detail in the applicable prospectus supplement. The terms of any debt securities
we offer under a prospectus supplement may differ from the terms we describe below. However, no prospectus supplement
shall fundamentally change the terms that are set forth in this prospectus or offer a security that is not registered and described
in this prospectus at the time of its effectiveness. As of the date of this prospectus, we have no outstanding registered
debt securities.
We may issue one or
more series of notes under indentures, which we will enter into with the trustee to be named therein. If we issue debt securities,
we will file these documents as exhibits to the registration statement of which this prospectus is a part, or incorporate them
by reference from a Current Report on Form 8-K that we file with the SEC. We use the term “indentures” to refer
to any and all indentures that we may enter into with respect to debt securities issued and sold pursuant to this Registration
Statement.
The indentures will
be qualified under the Trust Indenture Act of 1939. We use the term “debenture trustee” to refer to either the
senior trustee or the subordinated trustee, as applicable.
The following summaries
of material provisions of the debt securities are subject to, and qualified in their entirety by reference to, all the provisions
of the indenture applicable to a particular series of debt securities. We urge you to read the applicable prospectus supplements
related to the debt securities that we sell under this prospectus, as well as the complete indentures that contain the terms of
the debt securities. Except as we may otherwise indicate, the terms of the senior and the subordinated indentures are identical.
General
The indentures may
limit the aggregate principal amount of the debt securities which we may issue and will provide that we may issue the debt securities
from time to time in one or more series. The indentures may or may not limit the amount of our other indebtedness or the debt
securities which we may issue. The particular terms of each series of debt securities will be described in a prospectus supplement
relating to such series, including any pricing supplement. The prospectus supplement will set forth:
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the principal amount
being offered, and, if a series, the total amount authorized and the total amount outstanding;
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any limit on the amount
that may be issued;
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whether or not we will
issue the series of debt securities in global form and, if so, the terms and who the depositary will be;
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whether and under what circumstances, if any, we will
pay additional amounts on any debt securities held by a person who is not a United States person for tax purposes, and whether
we can redeem the debt securities if we have to pay such additional amounts;
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the annual interest rate,
which may be fixed or variable, or the method for determining the rate, the date interest will begin to accrue, the dates interest
will be payable and the regular record dates for interest payment dates or the method for determining such dates;
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whether or not the debt
securities will be secured or unsecured, and the terms of any secured debt;
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the terms of the subordination
of any series of subordinated debt;
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the place where payments
will be payable;
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restrictions on transfer,
sale or other assignment, if any;
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our right, if any, to
defer payment of interest and the maximum length of any such deferral period;
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the date, if any, after
which, the conditions upon which, and the price at which we may, at our option, redeem the series of debt securities pursuant
to any optional or provisional redemption provisions, and any other applicable terms of those redemption provisions;
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the date, if any, on
which, and the price at which we are obligated, pursuant to any mandatory sinking fund or analogous fund provisions or otherwise,
to redeem, or at the holder’s option to purchase, the series of debt securities and the currency or currency unit in which
the debt securities are payable;
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whether the indenture
will restrict our ability to:
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incur additional indebtedness;
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issue additional securities;
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pay dividends and make
distributions in respect of our capital stock;
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place restrictions on
our subsidiaries’ ability to pay dividends, make distributions or transfer assets;
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make investments or
other restricted payments;
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sell or otherwise dispose
of assets;
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enter into sale-leaseback
transactions;
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engage in transactions
with stockholders and affiliates;
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issue or sell stock
of our subsidiaries; or
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effect a consolidation
or merger;
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whether the indenture
will require us to maintain any interest coverage, fixed charge, cash flow-based, asset-based or other financial ratios;
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a discussion of any material
or special United States federal income tax considerations applicable to the debt securities;
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information describing
any book-entry features;
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provisions for a sinking
fund purchase or other analogous fund, if any;
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whether the debt securities
are to be offered at a price such that they will be deemed to be offered at an “original issue discount” as defined
in paragraph (a) of Section 1273 of the Internal Revenue Code;
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the procedures for any
auction and remarketing, if any;
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the denominations in which we will issue the series
of debt securities, if other than denominations of $1,000 and any integral multiple thereof;
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if other than dollars,
the currency in which the series of debt securities will be denominated; and
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any other specific terms,
preferences, rights or limitations of, or restrictions on, the debt securities, including any events of default that are in addition
to those described in this prospectus or any covenants provided with respect to the debt securities that are in addition to those
described above, and any terms which may be required by us or advisable under applicable laws or regulations or advisable in connection
with the marketing of the debt securities.
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Conversion or Exchange Rights
We will set forth in
the prospectus supplement the terms on which a series of debt securities may be convertible into or exchangeable for common stock
or other securities of ours or a third party, including the conversion or exchange rate, as applicable, or how it will be calculated,
and the applicable conversion or exchange period. We will include provisions as to whether conversion or exchange is mandatory,
at the option of the holder or at our option. We may include provisions pursuant to which the number of our securities or
the securities of a third party that the holders of the series of debt securities receive upon conversion or exchange would, under the
circumstances described in those provisions, be subject to adjustment, or pursuant to which those holders would, under those circumstances,
receive other property upon conversion or exchange, for example in the event of our merger or consolidation with another entity.
Consolidation, Merger or Sale
The description of
the debt securities in the prospectus supplement or the indentures may provide that we may not consolidate or amalgamate with
or merge into any person or convey, transfer or lease our properties or assets as an entirety or substantially as an entirety
to any person, and we may not permit any person to consolidate or amalgamate with or merge into us, or convey, transfer or lease
its properties and assets as an entirety or substantially as an entirety to us, unless:
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immediately after giving
effect to the transaction, no event of default, and no event which after notice or lapse of time or both would become an event
of default, will have occurred and be continuing; and
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certain other conditions
are met.
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If the debt securities
are convertible for our other securities, the person with whom we consolidate or merge or to whom we sell all of our property
must make provisions for the conversion of the debt securities into securities that the holders of the debt securities would have
received if they had converted the debt securities before the consolidation, merger or sale.
Events of Default under the Indenture
Each of the following
constitute reasonably standard events of default that may be included in any finalized indenture or prospectus supplement as constituting
an event of default with respect to any series of debt securities that we may issue:
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if we fail to pay interest
when due and payable and our failure continues for 30 days and the time for payment has not been extended or deferred;
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if we fail to pay the
principal, sinking fund payment or premium, if any, when due and payable and the time for payment has not been extended or delayed;
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if we fail to observe
or perform any other covenant contained in the debt securities or the indentures, other than a covenant specifically relating
to another series of debt securities, and our failure continues for 90 days after we receive notice from the debenture trustee
or holders of at least 25% in aggregate principal amount of the outstanding debt securities of the applicable series;
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if specified events of
bankruptcy, insolvency or reorganization occur; and
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any other event of default
provided in or pursuant to the applicable indenture or prospectus supplement with respect to the debt securities of that series.
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If an event of default
with respect to debt securities of any series occurs and is continuing, other than an event of default in the event of bankruptcy,
insolvency or reorganization, the debenture trustee or the holders of at least 25% in aggregate principal amount of the outstanding
debt securities of that series, by notice to us in writing, and to the debenture trustee if notice is given by such holders, may
declare the unpaid principal of, premium, if any, and accrued interest, if any, due and payable immediately. If an
event of default due to bankruptcy, insolvency or reorganization occurs with respect to us, the principal amount of and accrued
interest, if any, of each issue of debt securities then outstanding shall be due and payable without any notice or other action
on the part of the debenture trustee or any holder.
The holders of a majority
in principal amount of the outstanding debt securities of an affected series may waive any default or event of default with respect
to the series and its consequences, except defaults or events of default regarding payment of principal, premium, if any, or interest,
unless we have cured the default or event of default in accordance with the indenture.
Subject to the terms
of the indentures, if an event of default under an indenture shall occur and be continuing, the debenture trustee will be under
no obligation to exercise any of its rights or powers under such indenture at the request or direction of any of the holders of
the applicable series of debt securities, unless such holders have offered the debenture trustee reasonable indemnity. The
holders of a majority in principal amount of the outstanding debt securities of any series will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the debenture trustee, or exercising any trust or power
conferred on the debenture trustee, with respect to the debt securities of that series, provided that:
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the direction so given
by the holder is not in conflict with any law or the applicable indenture; and
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subject to its duties
under the Trust Indenture Act of 1939, the debenture trustee need not take any action that might involve it in personal liability
or might be unduly prejudicial to the holders not involved in the proceeding.
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A holder of the debt
securities of any series will only have the right to institute a proceeding under the indentures or to appoint a receiver or trustee,
or to seek other remedies if:
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the holder has given
written notice to the debenture trustee of a continuing event of default with respect to that series;
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the holders of at least
25% in aggregate principal amount of the outstanding debt securities of that series have made written request, and such holders
have offered reasonable indemnity to the debenture trustee to institute the proceeding as trustee; and
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the debenture trustee
does not institute the proceeding, and does not receive from the holders of a majority in aggregate principal amount of the outstanding
debt securities of that series other conflicting directions within 90 days after the notice, request and offer.
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These limitations do
not apply to a suit instituted by a holder of debt securities if we default in the payment of the principal, premium, if any,
or interest on, the debt securities.
We will periodically
file statements with the debenture trustee regarding our compliance with specified covenants in the indentures.
Modification of Indenture; Waiver
We and the debenture
trustee may change an indenture without the consent of any holders with respect to specific matters, including:
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to fix any ambiguity,
defect or inconsistency in the indenture;
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to comply with the provisions
described above under “Consolidation, Merger or Sale”;
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to comply with any requirements of the SEC in connection
with the qualification of any indenture under the Trust Indenture Act of 1939;
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to evidence and provide
for the acceptance of appointment by a successor trustee;
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to provide for uncertificated
debt securities and to make all appropriate changes for such purpose;
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to add to, delete from, or revise the conditions, limitations
and restrictions on the authorized amount, terms or purposes of issuance, authorization and delivery of debt securities or any
series, as set forth in the indenture;
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to provide for the issuance of and establish the form
and terms and conditions of the debt securities of any series as provided under “General,” to establish the form of
any certifications required to be furnished pursuant to the terms of the indenture or any series of debt securities, or to add
to the rights of the holders of any series of debt securities;
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to add to our covenants such new covenants, restrictions,
conditions or provisions for the protection of the holders, to make the occurrence, or the occurrence and the continuance, of
a default in any such additional covenants, restrictions, conditions or provisions an event of default, or to surrender any of
our rights or powers under the indenture; or
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to change anything that
does not materially adversely affect the interests of any holder of debt securities of any series.
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In addition, under
the indentures, the rights of holders of a series of debt securities may be changed by us and the debenture trustee with the written
consent of the holders of at least a majority in aggregate principal amount of the outstanding debt securities of each series
that is affected. However, we and the debenture trustee may only make the following changes with the consent of each holder
of any outstanding debt securities affected:
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extending the fixed maturity
of the series of debt securities;
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reducing the principal amount, reducing the rate of
or extending the time of payment of interest, or reducing any premium payable upon the redemption of any debt securities; or
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reducing the percentage of debt securities, the holders
of which are required to consent to any amendment, supplement, modification or waiver.
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Discharge
Each indenture will
provide that we can elect to be discharged from our obligations with respect to one or more series of debt securities, except
for obligations to:
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register the transfer
or exchange of debt securities of the series;
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replace stolen, lost
or mutilated debt securities of the series;
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maintain paying agencies;
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hold monies for payment
in trust;
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recover excess money
held by the debenture trustee;
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compensate and indemnify
the debenture trustee; and
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appoint any successor
trustee.
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In order to exercise
our rights to be discharged, we must deposit with the debenture trustee money or government obligations sufficient to pay all
the principal of, any premium, if any, and interest on, the debt securities of the series on the dates payments are due.
Form, Exchange and Transfer
We will issue the debt
securities of each series only in fully registered form without coupons and, unless we otherwise specify in the applicable prospectus
supplement, in denominations of $1,000 and any integral multiple thereof. The indenture will provide that we may issue debt
securities of a series in temporary or permanent global form and as book-entry securities that will be deposited with, or on behalf
of, The Depository Trust Company, New York, New York, known as DTC, or another depositary named by us and identified in a
prospectus supplement with respect to that series. See “Legal Ownership of Securities” for a further description
of the terms relating to any book-entry securities.
At the option of the
holder, subject to the terms of the indentures and the limitations applicable to global securities described in the applicable
prospectus supplement, the holder of the debt securities of any series can exchange the debt securities for other debt securities
of the same series, in any authorized denomination and of like tenor and aggregate principal amount.
Subject to the terms
of the indentures and the limitations applicable to global securities set forth in the applicable prospectus supplement, holders
of the debt securities may present the debt securities for exchange or for registration of transfer, duly endorsed or with the
form of transfer endorsed thereon duly executed if so required by us or the security registrar, at the office of the security
registrar or at the office of any transfer agent designated by us for this purpose. Unless otherwise provided in the debt
securities that the holder presents for transfer or exchange, we will make no service charge for any registration of transfer
or exchange, but we may require payment of any taxes or other governmental charges.
We will name in the
applicable prospectus supplement the security registrar, and any transfer agent in addition to the security registrar, that we
initially designate for any debt securities. We may at any time designate additional transfer agents or rescind the designation
of any transfer agent or approve a change in the office through which any transfer agent acts, except that we will be required
to maintain a transfer agent in each place of payment for the debt securities of each series.
If we elect to redeem the debt securities
of any series, we will not be required to:
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issue, register the transfer of, or exchange any debt
securities of any series being redeemed in part during a period beginning at the opening of business 15 days before the day of
mailing of a notice of redemption of any debt securities that may be selected for redemption and ending at the close of business
on the day of the mailing; or
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register the transfer of or exchange any debt securities
so selected for redemption, in whole or in part, except the unredeemed portion of any debt securities we are redeeming in part.
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Information Concerning the Debenture Trustee
The debenture trustee,
other than during the occurrence and continuance of an event of default under an indenture, will undertake to perform only those
duties as are specifically set forth in the applicable indenture. Upon an event of default under an indenture, the debenture
trustee must use the same degree of care as a prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the debenture trustee is under no obligation to exercise any of the powers given it by the indentures at
the request of any holder of debt securities unless it is offered reasonable security and indemnity against the costs, expenses
and liabilities that it might incur.
Payment and Paying Agents
Unless we otherwise
indicate in the applicable prospectus supplement, we will make payment of the interest on any debt securities on any interest
payment date to the person in whose name the debt securities, or one or more predecessor securities, are registered at the close
of business on the regular record date for the interest.
We will pay principal
of and any premium and interest on the debt securities of a particular series at the office of the paying agents designated by
us, except that, unless we otherwise indicate in the applicable prospectus supplement, we may make interest payments by check
which we will mail to the holder or by wire transfer to certain holders. Unless we otherwise indicate in a prospectus supplement,
we will designate the corporate office of the debenture trustee in the City of Dallas, Texas as our sole paying agent for payments
with respect to debt securities of each series. We will name in the applicable prospectus supplement any other paying agents
that we initially designate for the debt securities of a particular series. We will maintain a paying agent in each place
of payment for the debt securities of a particular series.
All money we pay to
a paying agent or the debenture trustee for the payment of the principal of or any premium or interest on any debt securities
which remains unclaimed at the end of two years after such principal, premium or interest has become due and payable will be repaid
to us, and the holder of the debt security thereafter may look only to us for payment thereof.
Subordination of Subordinated Debt Securities
The subordinated debt
securities will be subordinate and junior in priority of payment to certain of our other indebtedness to the extent described
in a prospectus supplement. The indentures will not limit the amount of indebtedness which we may incur, including senior
indebtedness or subordinated indebtedness, and will not limit us from issuing any other debt, including secured debt or unsecured
debt.
DESCRIPTION OF WARRANTS
The following description,
together with the additional information we may include in any applicable prospectus supplements, summarizes the material terms
and provisions of the warrants that we may offer under this prospectus. While the terms we have summarized below will apply generally
to any warrants that we may offer under this prospectus, we will describe the particular terms of any series of warrants in more
detail in the applicable prospectus supplement. The terms of any warrants offered under a prospectus supplement may differ
from the terms described below. However, no prospectus supplement will fundamentally change the terms that are set forth in this
prospectus or offer a security that is not registered and described in this prospectus at the time of its effectiveness.
We will file as exhibits
to the registration statement of which this prospectus is a part, or will incorporate by reference from a Current Report on Form
8-K that we file with the SEC, the form of warrant agreement, including a form of warrant certificate, that describes the terms
of the particular series of warrants we are offering before the issuance of the related series of warrants. The following summaries
of material provisions of the warrants and the warrant agreements are subject to, and qualified in their entirety by reference
to, all the provisions of the warrant agreement and warrant certificate applicable to a particular series of warrants. We urge
you to read the applicable prospectus supplements related to the particular series of warrants that we sell under this prospectus,
as well as the complete warrant agreements and warrant certificates that contain the terms of the warrants.
General
We will describe in the applicable prospectus
supplement the terms relating to a series of warrants, including:
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the offering price and
aggregate number of warrants offered;
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the currency for which
the warrants may be purchased;
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if applicable, the designation and terms of the securities
with which the warrants are issued and the number of warrants issued with each such security or each principal amount of such
security;
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if applicable, the date
on and after which the warrants and the related securities will be separately transferable;
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in the case of warrants to purchase debt securities,
the principal amount of debt securities purchasable upon exercise of one warrant and the price at which, and currency in which,
this principal amount of debt securities may be purchased upon such exercise;
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in the case of warrants to purchase common stock, the
number of shares of common stock may be, purchasable upon the exercise of one warrant and the price at which these shares may
be purchased upon such exercise;
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the effect of any merger, consolidation, sale or other
disposition of our business on the warrant agreements and the warrants;
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the terms of any rights
to redeem or call the warrants;
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any provisions for changes to or adjustments in the
exercise price or number of securities issuable upon exercise of the warrants;
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the dates on which the
right to exercise the warrants will commence and expire;
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the manner in which the
warrant agreements and warrants may be modified;
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federal income tax consequences
of holding or exercising the warrants;
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the terms of the securities
issuable upon exercise of the warrants; and
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any other specific terms,
preferences, rights or limitations of or restrictions on the warrants.
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Before exercising their
warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise, including:
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in the case of warrants to purchase debt securities,
the right to receive payments of principal of, or premium, if any, or interest on, the debt securities purchasable upon exercise
or to enforce covenants in the applicable indenture; and
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in the case of warrants to purchase common stock, the
rights of common stock holders such as, but not limited to, the right to participate in voting on shareholder and/or company matters.
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Exercise of Warrants
Each warrant will entitle
the holder to purchase the securities that we specify in the applicable prospectus supplement at the exercise price that we describe
in the applicable prospectus supplement. Unless we otherwise specify in the applicable prospectus supplement, holders of the warrants
may exercise the warrants at any time up to the specified time on the expiration date that we set forth in the applicable prospectus
supplement. After the close of business on the expiration date, unexercised warrants will become void.
Holders of the warrants
may exercise the warrants by delivering the warrant certificate representing the warrants to be exercised together with specified
information, and paying the required amount to the warrant agent in immediately available funds, as provided in the applicable
prospectus supplement. We will set forth on the reverse side of the warrant certificate and in the applicable prospectus supplement
the information that the holder of the warrant will be required to deliver to the warrant agent.
Upon receipt of the
required payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant
agent or any other office indicated in the applicable prospectus supplement, we will issue and deliver the securities purchasable
upon such exercise. If fewer than all of the warrants represented by the warrant certificate are exercised, then we will issue
a new warrant certificate for the remaining amount of warrants. If we so indicate in the applicable prospectus supplement, holders
of the warrants may surrender securities as all or part of the exercise price for warrants.
Enforceability of Rights by Holders of Warrants
Each warrant agent
will act solely as our agent under the applicable warrant agreement and will not assume any obligation or relationship of agency
or trust with any holder of any warrant. A single bank or trust company may act as warrant agent for more than one issue
of warrants. A warrant agent will have no duty or responsibility in case of any default by us under the applicable warrant
agreement or warrant, including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand
upon us. Any holder of a warrant may, without the consent of the related warrant agent or the holder of any other warrant,
enforce by appropriate legal action its right to exercise, and receive the securities purchasable upon exercise of, its warrants.
DESCRIPTION OF UNITS
The following description,
together with the additional information we may include in any applicable prospectus supplements, summarizes the material terms
and provisions of the units that we may offer under this prospectus. While the terms we have summarized below will apply generally
to any units that we may offer under this prospectus, we will describe the particular terms of any series of units in more detail
in the applicable prospectus supplement. The terms of any units offered under a prospectus supplement may differ from the terms
described below. However, no prospectus supplement will fundamentally change the terms that are set forth in this prospectus or
offer a security that is not registered and described in this prospectus at the time of its effectiveness.
We will file as exhibits
to the registration statement of which this prospectus is a part, or will incorporate by reference from a Current Report on Form
8-K that we file with the SEC, the form of unit agreement that describes the terms of the series of units we are offering, and
any supplemental agreements, before the issuance of the related series of units. The following summaries of material terms and
provisions of the units are subject to, and qualified in their entirety by reference to, all the provisions of the unit agreement
and any supplemental agreements applicable to a particular series of units. We urge you to read the applicable prospectus supplements
related to the particular series of units that we sell under this prospectus, as well as the complete unit agreement and any supplemental
agreements that contain the terms of the units.
General
We may issue units
comprised of one or more debt securities, shares of common stock and warrants in any combination. Each unit will be issued so
that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the
rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that
the securities included in the unit may not be held or transferred separately, at any time or at any time before a specified date.
We will describe in the applicable prospectus
supplement the terms of the series of units, including:
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the designation and terms of the units and of the securities
comprising the units, including whether and under what circumstances those securities may be held or transferred separately;
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any provisions of the
governing unit agreement that differ from those described below; and
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any provisions for the issuance, payment, settlement,
transfer or exchange of the units or of the securities comprising the units.
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The provisions described
in this section, as well as those described under “Description of Capital Stock,” “Description of Debt Securities”
and “Description of Warrants” will apply to each unit and to any common stock, debt security or warrant included in
each unit, respectively.
Issuance in Series
We may issue units in such amounts and in
numerous distinct series as we determine.
Enforceability of Rights by Holders of Units
Each unit agent will
act solely as our agent under the applicable unit agreement and will not assume any obligation or relationship of agency or trust
with any holder of any unit. A single bank or trust company may act as unit agent for more than one series of units. A unit agent
will have no duty or responsibility in case of any default by us under the applicable unit agreement or unit, including any duty
or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a unit may, without
the consent of the related unit agent or the holder of any other unit, enforce by appropriate legal action its rights as holder
under any security included in the unit.
Title
We, the unit agents
and any of their agents may treat the registered holder of any unit certificate as an absolute owner of the units evidenced by
that certificate for any purpose and as the person entitled to exercise the rights attaching to the units so requested, despite
any notice to the contrary. See “Legal Ownership of Securities.”
LEGAL OWNERSHIP OF SECURITIES
We can issue securities
in registered form or in the form of one or more global securities. We describe global securities in greater detail below.
We refer to those persons who have securities registered in their own names on the books that we or any applicable trustee or
depositary or warrant agent maintain for this purpose as the “holders” of those securities. These persons are
the legal holders of the securities. We refer to those persons who, indirectly through others, own beneficial interests
in securities that are not registered in their own names, as “indirect holders” of those securities. As we discuss
below, indirect holders are not legal holders, and investors in securities issued in book-entry form or in street name will be
indirect holders.
Book-Entry Holders
We may issue securities
in book-entry form only, as we will specify in the applicable prospectus supplement. This means securities may be represented
by one or more global securities registered in the name of a financial institution that holds them as depositary on behalf of
other financial institutions that participate in the depositary’s book-entry system. These participating institutions,
which are referred to as participants, in turn, hold beneficial interests in the securities on behalf of themselves or their
customers.
Only the person in
whose name a security is registered is recognized as the holder of that security. Global securities will be registered in
the name of the depositary. Consequently, for global securities, we will recognize only the depositary as the holder of
the securities, and we will make all payments on the securities to the depositary. The depositary passes along the payments
it receives to its participants, which in turn pass the payments along to their customers who are the beneficial owners.
The depositary and its participants do so under agreements they have made with one another or with their customers; they are not
obligated to do so under the terms of the securities.
As a result, investors
in a global security will not own securities directly. Instead, they will own beneficial interests in a global security,
through a bank, broker or other financial institution that participates in the depositary’s book-entry system or holds an
interest through a participant. As long as the securities are issued in global form, investors will be indirect holders,
and not holders, of the securities.
Street Name Holders
We may terminate global
securities or issue securities that are not issued in global form. In these cases, investors may choose to hold their securities
in their own names or in “street name.” Securities held by an investor in street name would be registered in the name
of a bank, broker or other financial institution that the investor chooses, and the investor would hold only a beneficial interest
in those securities through an account he or she maintains at that institution.
For securities held
in street name, we or any applicable trustee or depositary will recognize only the intermediary banks, brokers and other financial
institutions in whose names the securities are registered as the holders of those securities, and we or any such trustee or depositary
will make all payments on those securities to them. These institutions pass along the payments they receive to their customers
who are the beneficial owners, but only because they agree to do so in their customer agreements or because they are legally required
to do so. Investors who hold securities in street name will be indirect holders, not holders, of those securities.
Legal Holders
Our obligations, as
well as the obligations of any applicable trustee or third party employed by us or a trustee, run only to the legal holders of
the securities. We do not have obligations to investors who hold beneficial interests in global securities, in street name
or by any other indirect means. This will be the case whether an investor chooses to be an indirect holder of a security
or has no choice because we are issuing the securities only in global form.
For example, once we
make a payment or give a notice to the holder, we have no further responsibility for the payment or notice even if that holder
is required, under agreements with its participants or customers or by law, to pass it along to the indirect holders but does
not do so. Similarly, we may want to obtain the approval of the holders to amend an indenture, to relieve us of the consequences
of a default or of our obligation to comply with a particular provision of an indenture, or for other purposes. In such
an event, we would seek approval only from the holders, and not the indirect holders, of the securities. Whether and how
the holders contact the indirect holders is up to the holders.
Special Considerations for Indirect Holders
If you hold securities
through a bank, broker or other financial institution, either in book-entry form because the securities are represented by one
or more global securities or in street name, you should check with your own institution to find out:
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how it handles securities
payments and notices;
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whether it imposes fees
or charges;
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how it would handle a
request for the holders’ consent, if ever required;
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whether and how you can instruct it to send you securities
registered in your own name so you can be a holder, if that is permitted in the future;
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how it would exercise rights under the securities if
there were a default or other event triggering the need for holders to act to protect their interests; and
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if the securities are
in book-entry form, how the depositary’s rules and procedures will affect these matters.
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Global Securities
A global security is
a security that represents one or any other number of individual securities held by a depositary. Generally, all securities
represented by the same global securities will have the same terms.
Each security issued
in book-entry form will be represented by a global security that we issue to, deposit with and register in the name of a financial
institution or its nominee that we select. The financial institution that we select for this purpose is called the depositary.
Unless we specify otherwise in the applicable prospectus supplement, The Depository Trust Company, New York, New York, known as
DTC, will be the depositary for all securities issued in book-entry form.
A global security may
not be transferred to or registered in the name of anyone other than the depositary, its nominee or a successor depositary, unless
special termination situations arise. We describe those situations below under “Special Situations When a Global Security
Will Be Terminated.” As a result of these arrangements, the depositary, or its nominee, will be the sole registered owner
and holder of all securities represented by a global security, and investors will be permitted to own only beneficial interests
in a global security. Beneficial interests must be held by means of an account with a broker, bank or other financial institution
that in turn has an account with the depositary or with another institution that does. Thus, an investor whose security
is represented by a global security will not be a holder of the security, but only an indirect holder of a beneficial interest
in the global security.
If the prospectus supplement
for a particular security indicates that the security will be issued as a global security, then the security will be represented
by a global security at all times unless and until the global security is terminated. If termination occurs, we may issue
the securities through another book-entry clearing system or decide that the securities may no longer be held through any book-entry
clearing system.
Special Considerations For Global Securities
As an indirect holder,
an investor’s rights relating to a global security will be governed by the account rules of the investor’s financial
institution and of the depositary, as well as general laws relating to securities transfers. We do not recognize an indirect
holder as a holder of securities and instead deal only with the depositary that holds the global security.
If securities are issued
only as global securities, an investor should be aware of the following:
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an investor cannot cause the securities to be registered
in his or her name, and cannot obtain non-global certificates for his or her interest in the securities, except in the special
situations we describe below;
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an investor will be an indirect holder and must look
to his or her own bank or broker for payments on the securities and protection of his or her legal rights relating to the securities,
as we describe above;
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an investor may not be able to sell interests in the
securities to some insurance companies and to other institutions that are required by law to own their securities in non-book-entry
form;
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an investor may not be able to pledge his or her interest
in the global security in circumstances where certificates representing the securities must be delivered to the lender or other
beneficiary of the pledge in order for the pledge to be effective;
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the depositary’s policies, which may change from
time to time, will govern payments, transfers, exchanges and other matters relating to an investor’s interest in the global
security. We and any applicable trustee have no responsibility for any aspect of the depositary’s actions or for its records
of ownership interests in the global security. We and the trustee also do not supervise the depositary in any way;
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the depositary may, and we understand that DTC will,
require that those who purchase and sell interests in the global security within its book-entry system use immediately available
funds, and your broker or bank may require you to do so as well; and
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financial institutions that participate in the depositary’s
book-entry system, and through which an investor holds its interest in the global security, may also have their own policies affecting
payments, notices and other matters relating to the securities. There may be more than one financial intermediary in the chain
of ownership for an investor. We do not monitor and are not responsible for the actions of any of those intermediaries.
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Special Situations When A Global Security Will Be Terminated
In a few special situations
described below, a global security will terminate and interests in it will be exchanged for physical certificates representing
those interests. After that exchange, the choice of whether to hold securities directly or in street name will be up to
the investor. Investors must consult their own banks or brokers to find out how to have their interests in securities transferred
to their own names, so that they will be direct holders. We have described the rights of holders and street name investors
above.
A global security will
terminate when the following special situations occur:
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if the depositary notifies us that it is unwilling,
unable or no longer qualified to continue as depositary for that global security and we do not appoint another institution to
act as depositary within 90 days;
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if we notify any applicable
trustee that we wish to terminate that global security; or
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if an event of default has occurred with regard to
securities represented by that global security and has not been cured or waived.
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The prospectus supplement
may also list additional situations for terminating a global security that would apply only to the particular series of securities
covered by the prospectus supplement. When a global security terminates, the depositary, and not we or any applicable trustee,
is responsible for deciding the names of the institutions that will be the initial direct holders.
PLAN OF DISTRIBUTION
We may sell the securities
to or through underwriters or dealers, through agents, or directly to one or more purchasers. A prospectus supplement or
supplements will describe the terms of the offering of the securities, including, to the extent applicable:
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the name or names of
any underwriters or agents;
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the purchase price of
the securities and the proceeds we will receive from the sale;
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any over-allotment options
under which underwriters may purchase additional securities from us;
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any agency fees or underwriting
discounts and other items constituting agents’ or underwriters’ compensation;
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any public offering price;
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any discounts or concessions
allowed or re-allowed or paid to dealers; and
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any securities exchange
or market on which the securities may be listed.
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We may distribute the securities from time to time
in one or more transactions at:
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fixed price or prices,
which may be changed from time to time;
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market prices prevailing
at the time of sale;
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prices related to such
prevailing market prices; or
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Underwriters
If we use underwriters
for a sale of securities, the underwriters will acquire the securities for their own account. The underwriters may resell the
securities in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The obligations of the underwriters to purchase the securities will be subject to the conditions
set forth in the applicable underwriting agreement. We may offer the securities to the public through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate. Subject to certain conditions, the underwriters
will be obligated to purchase all the securities of the series offered if they purchase any of the securities of that series.
We may change from time to time any public offering price and any discounts or concessions the underwriters allow or pay to dealers.
We may use underwriters with whom we have a material relationship. We will describe the nature of any such relationship in any
applicable prospectus supplement naming any such underwriter. Only underwriters we name in the prospectus supplement are underwriters
of the securities offered by the prospectus supplement.
We may provide agents
and underwriters with indemnification against civil liabilities related to offerings under this prospectus, including liabilities
under the Securities Act, or contribution with respect to payments that the agents or underwriters may make with respect to these
liabilities.
Agents
We may designate agents
who agree to use their reasonable efforts to solicit purchases of our securities for the period of their appointment or to sell
our securities on a continuing basis. We will name any agent involved in the offering and sale of securities and we will describe
any commissions we will pay the agent in the applicable prospectus supplement. Unless the prospectus supplement states otherwise,
our agent will act on a best-efforts basis for the period of its appointment.
We may authorize agents
or underwriters to solicit offers by certain types of institutional investors to purchase securities from us at the public offering
price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified
date in the future. We will describe the conditions to these contracts and the commissions we must pay for solicitation
of these contracts in the prospectus supplement.
We may provide agents
and underwriters with indemnification against civil liabilities related to this offering, including liabilities under the Securities
Act, or contribution with respect to payments that the agents or underwriters may make with respect to these liabilities.
Agents and underwriters may engage in transactions with, or perform services for, us in the ordinary course of business.
Direct Sales
We
may also sell securities directly to one or more purchasers without using underwriters or agents. We intend to offer securities
direct to investors through our Dividend Reinvestment and Common Stock Purchase Plan.
Trading Markets and Listing of Securities
Unless
otherwise specified in the applicable prospectus supplement, each class or series of securities will be a new issue with no established
trading market, other than our common stock, which is currently listed on the NASDAQ Capital Market. We may elect to list our
common stock or any other class or series of securities on any exchange or market, but we are not obligated to do so. It is possible
that one or more underwriters may make a market in a class or series of securities, but the underwriters will not be obligated
to do so and may discontinue any market making at any time without notice. We cannot give any assurance as to the liquidity of
the trading market for any of the securities.
Stabilization Activities
Any
underwriter may engage in overallotment, stabilizing transactions, short covering transactions and penalty bids in accordance
with Regulation M under the Exchange Act. Overallotment involves sales in excess of the offering size, which create a short
position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed
a specified maximum. Short covering transactions involve purchases of the securities in the open market after the distribution
is completed to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer
when the securities originally sold by the dealer are purchased in a covering transaction to cover short positions. Those activities
may cause the price of the securities to be higher than it would otherwise be. If commenced, the underwriters may discontinue
any of these activities at any time.
LEGAL MATTERS
The
validity of the securities being offered by this prospectus will be passed upon for us by Aboudi Legal Group PLLC. If the validity
of any securities is also passed upon by counsel for any underwriters, dealers or agents, that counsel will be named in the prospectus
supplement relating to that specific offering.
EXPERTS
The audited financial
statements of Zion Oil & Gas, Inc. as of December 31, 2018 and management’s assessment of the effectiveness of internal
control over financial reporting as of December 31, 2018 have been incorporated by reference herein in reliance upon the reports
of RBSM LLP, an independent registered public accounting firm. The audited financial statements of Zion Oil & Gas, Inc. as
of December 31, 2017 and management’s assessment of the effectiveness of internal control over financial reporting as of
December 31, 2017 have been incorporated by reference herein in reliance upon the reports of Malone Bailey LLP, an independent
registered public accounting firm.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the
reporting requirements of the Exchange Act and file annual, quarterly and current reports, proxy statements and other information
with the SEC. You may read and copy these reports, proxy statements and other information at the SEC’s Public Reference
Room at 100 F Street, N.E., Washington, DC 20549. You can request copies of these documents by writing to the SEC and paying a
fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The SEC
also maintains an Internet site that contains reports, proxy statements and other information about issuers, like us, who file
electronically with the SEC. The address of the SEC’s web site is http://www.sec.gov. Our common stock is
listed for trading on the NASDAQ under the symbol “ZN” and our warrant is listed for trading on the NASDAQ under the
symbol “ZNWAA”
We have filed a registration
statement converting a Form S-3 into a Form S-1 with the SEC to register the securities that may be offered pursuant to this prospectus.
This prospectus is part of that registration statement and, as permitted by the SEC’s rules, does not contain all of the
information included in the registration statement. For further information about us, this offering and our common stock, you
may refer to the registration statement and its exhibits and schedules as well as the documents described herein or incorporated
herein by reference. You can review and copy these documents, without charge, at the public reference facilities maintained by
the SEC or on the SEC’s website as described above or you may obtain a copy from the SEC upon payment of the fees prescribed
by the SEC.
INCORPORATION OF CERTAIN INFORMATION
BY REFERENCE
As a Smaller Reporting
Company, the SEC allows us to “incorporate by reference” the information we file with them, which means that we can
disclose important information to you by referring you to those documents. The information we incorporate by reference is considered
to be an important part of this prospectus, and information that we file with the SEC at a later date will automatically
add to, update or supersede this information.
We incorporate
by reference into this prospectus the documents listed below:
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our annual report on
Form 10-K for the year ended December 31, 2018 filed on March 8, 2019;
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Current Reports on Form 8-K: January 14, 2019; March 6, 2019; April 17, 2019; April 24, 2019; May 29, 2019; June 5, 2019; June 13, 2019; June 14, 2019; June 18, 2019; July 2, 2019;
July 11, 2019; August 9, 2019; August 20, 2019; November 21, 2019;
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the description of our common stock in our registration
statement on Form 8-A filed with the SEC on December 29, 2006, including any amendments or reports filed for the purpose of updating
such description; and the description of our 10% Convertible Senior Note due 2021 on Form 8-A/A filed with the SEC on April 28,
2016; and
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all future filings that we make with the SEC under
Section 13(a), 13(c), 14, or 15(d) of the Exchange Act after the date of filing of the registration statement on Form S-1 of which
this prospectus is a part and prior to the termination or completion of any offering of securities under this prospectus and all
applicable prospectus supplements (except, in each case, for information contained in any such filing that is furnished and not
“filed” under the Exchange Act), which filings will be deemed to be incorporated by reference in this prospectus,
as supplemented by the applicable prospectus supplement, and to be a part hereof from the respective dates of such filings.
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We will provide without
charge to each person, including any beneficial owner, to whom this prospectus is delivered, upon written or oral request of such
person, a copy of any or all of the information that is incorporated by reference in this prospectus. Requests for such documents
should be directed to: Shareholder Relations, Zion Oil & Gas, Inc., 12655 North Central Expressway, Suite 1000, Dallas, TX
75243.
This prospectus
is part of a registration statement on Form S-1 that we filed with the SEC. That registration statement contains more information
than this prospectus regarding us and our common stock, including certain exhibits and schedules. You can obtain a copy of the
registration statement from the SEC at the address listed above or from the SEC’s Internet website.
You should rely only on the information provided
in and incorporated by reference into this prospectus or any prospectus supplement. We have not authorized anyone else to provide
you with different information. You should not assume that the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front cover of these documents.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance
and Distribution.
The following table sets forth the costs
and expenses to be paid by us in connection with the offerings described in this Registration Statement. All amounts are estimates,
except for the SEC registration fee.
SEC registration fee
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$
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12,980.00
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Transfer agent’s and trustee’s fees and expenses
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*
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Printing and engraving expenses
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*
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Accounting fees and expenses
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*
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Legal fees and expenses
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*
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Miscellaneous expenses
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*
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Total
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$
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12,980.00
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*
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*
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These fees and expenses will be determined based on the
amount and type of securities that may be issued from time to time under this Registration Statement.
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Item 15. Indemnification of Directors
and Officers
Section 145 of the Delaware General Corporation
Law and our certificate of incorporation and bylaws contain provisions for indemnification of our officers and directors, and under
certain circumstances, our employees and other persons. Our bylaws require us to indemnify such persons to the fullest extent permitted
by Delaware law. Each such person will be indemnified in any proceeding if such person acted in good faith and in a manner that
such person reasonably believed to be in, or not opposed to, our best interests. The indemnification would cover expenses, including
attorney’s fees, judgments, fines and amounts paid in settlement. Our bylaws also provide that we may purchase and maintain insurance
on behalf of any of our present or past directors or officers insuring against any liability asserted against such person incurred
in their capacity as a director or officer or arising out of such status, whether or not we would have the power to indemnify such
person.
We have no other indemnification provisions
in our certificate of incorporation, bylaws or otherwise specifically providing for indemnification of directors, officers and
controlling persons against liability under the Securities Act.
Item 16. Exhibits.
See the Exhibit Index on page II-4, which
is incorporated into this registration statement by reference.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which
offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required
by Section 10(a)(3) of the Securities Act;
(ii) To reflect
in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the
“Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include
any material information with respect to the plan of distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement.
Provided, however, that the undertakings
set forth in paragraphs (1)(i), (1)(ii) and (1)(iii) above do not apply if the registration statement is on Form S-3 or Form F-3
or a Form S-1 for a Smaller Reporting Company and the information required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement or is contained in a form
of prospectus filed pursuant to Rule 424(b) that is a part of the registration statement.
(2) That, for the purpose
of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration
by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the
purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the
date the filed prospectus was deemed part of and included in the registration statement; and
(ii) Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on
Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information
required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement
as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract
of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with
a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
(5) That, for the
purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution
of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant
pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if
the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant
will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: (i) any preliminary
prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; (ii)
any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant; (iii) the portion of any other free writing prospectus relating to the offering containing material
information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and (iv)
any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(6) That: (i) for
purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed
as part of the registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as
of the time it was declared effective; and (ii) for the purpose of determining any liability under the Securities Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(7) That, for purposes
of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s
annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(8) To file an application
for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture
Act in accordance with the rules and regulations prescribed by the SEC under Section 305(b)(2) of the Act.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing
on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Dallas, State of Texas, on November 27, 2019.
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ZION OIL & GAS, INC.
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By:
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/s/ John M. Brown
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Name: John M. Brown
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Title: Chief Executive Officer
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(Principal Executive Officer)
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Pursuant to the requirements of the Securities Act of
1933, as amended, this registration statement has been signed below by the following persons in the capacities and on the dates
indicated:
Signature
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Title
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Date
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/s/ John M. Brown
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Executive Chairman of the Board of Directors,
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November 27, 2019
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John M. Brown
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Chief Executive Officer
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/s/ William H. Avery
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President, General Counsel, Director
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November 27, 2019
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William H. Avery
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/s/ Robert Dunn
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Chief Operating Officer
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November 27, 2019
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Robert Dunn
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/s/ Michael B.
Croswell
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Chief Financial Officer, Director
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November 27, 2019
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Michael B. Croswell
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(Principal Financial Officer and Principal Accounting Officer)
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/s/ Paul Oroian
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Director
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November 27, 2019
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Paul Oroian
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/s/ Jeffery Moskowitz
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Director
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November 27, 2019
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Jeffery Moskowitz
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/s/ Forrest A. Garb
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Director
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November 27, 2019
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Forrest A. Garb
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/s/
Kent Siegel
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Director
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November 27, 2019
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Kent Siegel
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/s/ Gene Scammahorn
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Director
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November 27, 2019
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Gene Scammahorn
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/s/
John Seery
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Director
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November 27, 2019
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John Seery
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/s/ Virginia Prodan
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Director
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November 27, 2019
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Virginia Prodan
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/s/ Martin M. van Brauman
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Director
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November 27, 2019
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Martin M. van Brauman
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/s/ Lee Russell
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Director
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November 27, 2019
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Lee Russell
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/s/
Amotz Agnon
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Director
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November 27, 2019
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Amotz Agnon
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EXHIBIT INDEX
Exhibit
Number
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Description
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1.1
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Form of Underwriting Agreement
(1)
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3.1-I
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Certificate of Amendment to Amended and Restated Certificate of Incorporation (incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011, Exhibit 3.1 and to the Company’s Form 8-K, filed with the SEC on June 11, 2015, Exhibit 3(i).1.)
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3.2
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Amended and Restated Bylaws of Zion Oil & Gas, Inc. (incorporated herein by reference to Exhibit 3(i).1 to the Company’s Form 8-K filed with the SEC on December 21, 2017)
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4.1
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Specimen Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the Company’s Registration Statement on Form SB-2 as filed with the SEC on January 25, 2006)
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4.2
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Form of Indenture for Debt Securities
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4.3
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Form of Notes (1)
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4.4
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Form of Warrant (1)
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4.5
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Form of Unit Agreement (1)
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5.1
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Opinion of Aboudi Legal Group PLLC
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23.1
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Consent of Aboudi Legal Group PLLC (included in Exhibit 5.1).
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23.2
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Consent of RBSM, LLP
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23.3
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Consent of Malone Bailey LLP
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25.1
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Form T-1 Statement of Eligibility of Trustee for Indenture under the Trust Indenture Act of 1939 (1)
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(1)
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To the extent applicable,
to be filed by an amendment to this registration statement or as an exhibit to a report pursuant to Section 13(a), 13(c)
or 15(d) of the Exchange Act.
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II-4
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