ABOUT
THIS PROSPECTUS SUPPLEMENT
This
document is in two parts. The first part is this prospectus supplement, which describes the specific terms of Plan and the securities
offered under the Plan. The second part is the accompanying prospectus, which gives more general information, some of which may
not apply to this offering under the Plan. To the extent there is a conflict between the information contained in this prospectus
supplement and the information contained in the accompanying prospectus, you should rely on the information in this prospectus
supplement.
You
should rely only on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus,
and any free writing prospectus that we authorize to be distributed to you. We have not authorized anyone to provide you with
different or inconsistent information. If anyone provides you with different or inconsistent information, you should not rely
on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should
assume that the information appearing in this prospectus supplement, the accompanying prospectus, the documents incorporated by
reference into this prospectus supplement and the accompanying prospectus, and any free writing prospectus is accurate only as
of the date of those respective documents. Our business, financial condition, results of operations, and prospects may have changed
since such dates.
Unless
otherwise indicated, all references to “Zion Oil & Gas”, “Company”, “our”, “we”,
“us”, and similar terms refer to Zion Oil & Gas, Inc., a Delaware corporation.
PROSPECTUS
SUPPLEMENT SUMMARY
The
following summary highlights selected information contained elsewhere or incorporated by reference in this prospectus supplement
and the accompanying prospectus. This summary does not contain all the information that you should consider before investing in
our securities. You should carefully read this entire prospectus supplement, the accompanying prospectus and any free writing
prospectus that we authorize to be distributed to you, including the “Risk Factors” section beginning on page S-26
of this prospectus supplement and, the financial statements and related notes and other information included or incorporated by
reference in this prospectus supplement and the accompanying prospectus, before making an investment decision.
Zion
Oil & Gas, Inc.
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 believed it was 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, is being 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.
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.
Our
executive offices are located at 12655 North Central Expressway, Suite 1000, Dallas, Texas 75243, and our telephone number is
(214) 221-4610. Our office in Israel is located at 9 Halamish Street, North Industrial Park, Caesarea 3088900, and the telephone
number is +972-4-623-8500. Our website address is: www.zionoil.com.
Plan
Summary
We
are offering new investors and existing stockholders a convenient method to purchase shares of Common Stock directly from Zion
and to reinvest cash dividends paid on Zion’s Common Stock in the purchase of additional shares of Common Stock. In addition,
the Plan includes a feature whereby new investors and existing stockholders can also purchase, directly from Zion, units (each
a “Unit” and collectively the “Units”) of Zion securities, with each Unit consisting of (i) one or more
shares of our Common Stock and (ii) one or more warrants to purchase one or more additional shares of our Common Stock at a fixed
exercise price (each a “Warrant” and collectively the “Warrants”), all as described below.
The
Plan is administered by the American Stock Transfer & Trust Company, LLC, a New York limited liability trust company (“AST”),
located at 6201 15th Avenue, Brooklyn, NY 11219 (the “Plan Agent”). As Plan Agent, AST keeps
records, sends statements of account to Plan participants and performs other duties relating to the Plan.
Under
the Plan, you can make an initial investment in Zion’s Common Stock or Units, or a combination of both, with an initial
payment of $250 or more. Once you are a registered shareholder, you can increase your holdings of our Common Stock or Units (while
the Units continue to be offered) through optional monthly cash payments of $50 or more.
Investments
in excess of $10,000 in any month or an initial investment in excess of $10,000 can only be made with our approval of a “Request
for Waiver.” See Question 13. The dollar limitation of $10,000 and the approval of the “Request for Waiver”
for amounts in excess of $10,000 do not apply to Unit purchases.
Shares
Generally Recorded Daily
Checks,
bank wire payments, or electronic bank payments for purchases received by the Plan Agent, or at the offices of the Company, before
12 noon (EST) on a business day generally will be recorded as purchased on the same business day (the “Purchase Date”).
The Plan Agent has online interactive purchase facilities (www.amstock.com) to handle electronic enrollment and electronic check
processing. In addition, the same electronic services are offered through the Company’s website (www.zionoil.com). Checks,
bank wire payments, or electronic bank payments for purchases received by the Plan Agent, or at the offices of Company, after
12 noon (EST) on a business day generally will be recorded as purchased on the next business day for the Purchase Date. Electronic
bank payments are treated as received and recorded on the date of receipt of the funds into the Plan Agent’s or the Company’s
bank account.
Since
only shares are purchased directly from the Company, the investor’s Plan account will be credited with the number of shares
(including fractional shares, computed to three decimals) of the Company’s Common Stock that was purchased. The price at
which shares will be deemed purchased and credited to the investor’s account will be at the average of the high and low
sale prices of the Company’s publicly traded Common Stock as reported on the NASDAQ or any other exchange or securities
market on the Purchase Date. Transaction confirmations are communicated daily by the Plan Agent and also quarterly and year-end
statements are mailed by the Plan Agent.
Electronic
Enrollment and Payment Procedures
For
Automated Clearing House debits (ACH) withdrawals that have been set up by the Plan Agent, the Plan Agent would debit a bank account.
We have successfully implemented an electronic enrollment procedure with the Telecheck Internet Check Acceptance service as a
payment method. In addition to the enrollment procedures otherwise specified with the mailing to the Plan Agent of the signed
Plan Enrollment Form and check payment, current stockholders and prospective investors may enroll in the Plan by the procedures
that allow for an acceptance of an electronic signature and date to the Plan Enrollment Form and a secure internet check acceptance
by First Data/Citibank Merchant Services as coordinated with the Plan Agent.
Electronic
enrollment and payment procedures have expanded, in which AST can accept electronic enrollment and electronic bank payments in
U.S. Dollars and international shareholders and investors can make payments in British Pounds, Euros, Swiss Francs, or Canadian
Dollars for DSPP purchases through the Company as coordinated with AST. Funds received in foreign currency will be recorded by
AST in US Dollars based upon the New York Closing Foreign Exchange Rate (5:00 p.m. EST) on the Purchase Date as published online
in the Wall Street Journal, Market Data Center under Currencies (www.wsj.com/mdc).
Automatic
Monthly Investments
If
you elect this option, your funds will be debited from your bank account on the 25th day of each month (the “Purchase
Date”). If the 25th day of the month is a weekend or holiday, the debit date will be the next succeeding business
day. The price at which shares will be deemed purchased and credited to the investor’s Plan account will be at the average
of the daily averages of the high and low sale prices of the Company’s publicly traded Common Stock as reported on the NASDAQ
or any other exchange or securities market for the five trading day period ending on the Purchase Date (hereinafter the “Market
Price of the Publicly Traded Stock”). You may change the amount of funds to be deducted or terminate an automatic monthly
investment of funds by either accessing your account online (www.amstock.com) or by completing
and submitting to AST a new automatic investment form.
Obtaining
Certificates and Transferring or Selling Shares
Initially,
all shares that are purchased will be held by the Plan Agent and reflected in book-entry form in the shareholder’s account
on the records of the Plan Agent. A shareholder may request a certificate (at no cost) for some of or all whole shares (or issuable
warrants) at any time by a request to the Plan Agent by internet (www.amstock.com), calling
1-844-699-6645 (International 1-718-921-8205), or sending in the form attached to the DSPP account statement. Certificates are
normally issued within three business days after receipt of the request and mailed no later than the day after the issuance. No
certificates will be issued for fractional shares; instead, the market value of any fractional share will be paid in cash.
You
may transfer (at no cost) ownership (or make gifts) of some or all shares (or issuable warrants) held through the Plan Agent by
calling the Plan Agent at 1-844-699-6645 (International 1-718-921-8205) for complete transfer instructions, or online at (www.amstock.com/shareholder/
sh_transfinst.asp). The transfer form must be completed, signed and returned to American Stock Transfer & Trust Company,
LLC, 6201 15th Avenue, Brooklyn, NY 11219. The Medallion Guarantee form may be downloaded from www.amstock.com/shareholder/sh_downloads.asp.
You
may sell shares through the Plan Agent by accessing www.amstock.com on the internet, by calling the Plan Agent at 1-844-699-6645
(International 1-718-921-8205), or by mailing the form attached to the DSPP account statement to the Plan Agent. On receipt of
a request to sell some of or all the Plan shares, the Plan Agent will sell the shares on the open market no later than three business
days after receipt of the request and will send the proceeds less a service charge of $12 and applicable brokerage commissions
of only $0.10 per share sold (e.g., if 100 shares sold, commission is $10). All sell orders received by the Plan Agent by noon
Eastern Time will result in shares being sold the next business day. Sell orders received after noon Eastern Time will result
in shares being sold the second business day after receipt. The market value of any fractional share will be paid in cash. Proceeds
are normally paid by check, which is distributed within five business days after the sale. Tradable warrants will be treated the
same above as shares with respect to obtaining certificates and transferring or selling warrants.
DSPP Transaction Processing:
|
General Mailing Inquires:
|
|
|
Zion Oil & Gas, Inc.
|
Zion Oil & Gas, Inc.
|
c/o American Stock Transfer & Trust Co., LLC
|
c/o American Stock Transfer & Trust Co., LLC
|
Plan Administration Department
|
6201 15th Avenue
|
Post Office Box 922
|
Brooklyn, NY 11219
|
Wall Street Station
|
Domestic (844) 699-6645
|
New York, NY 10269-0560
|
International (718) 921-8205
|
|
www.amstock.com
|
Domestic
and Foreign Multi-Lingual Call Center
If
you have any questions about the DSPP, resident shareholders and investors of the United States and Canada can call the Plan Agent
toll free at 1-844-699-6645 (844-MYZNOIL) and other foreign resident shareholders and investors can call the Plan Agent at 1-718-921-8205.
Customer service representatives with multi-lingual capability for both domestic and foreign callers are available between the
hours of 8:00 a.m. and 8:00 p.m. EST, Monday through Friday. After hours, all calls will be forwarded to the AST automated line
24 hours a day, seven days a week.
Purchasing
Shares under the Plan
Your
Plan account will be credited with the number of shares (including fractional shares, computed to four decimals) of our Common
Stock that you purchased. Management may, in its sole discretion, determine to provide a discount off the Market Price of the
Publicly Traded Stock, which will in no event exceed 10% off Market Price of the Publicly Traded Stock. Zion shall have the sole
discretion to determine, if there is to be a discount, the amount of such discount, if any (the “Discount Amount”),
and the period in which such discount is to remain in effect (the “Discount Period”). The Discount Period and the
Discount amount will be posted on the Zion website and the Plan Agent’s website at least two business days prior to the
next succeeding Purchase Date. Modifications of the Discount Amount and the Discount Period will become effective on such succeeding
Purchase Date following the announcement of such change.
As
a participant, you are required to have your Common Stock held in book entry in the Plan with the Plan Agent during the initial
six (6) months after the date of your purchase of any discounted shares. Any shares withdrawn from the Plan Account within six
(6) months after the date of purchase will be subject to a withdrawal fee equal to the discount to the Market Price of the Publicly
Traded Stock that you received, if any, when purchasing the shares being withdrawn, if any discount.
Subject
to compliance with all applicable laws, you may transfer ownership of some or all of your Plan shares by sending the Plan Agent
written, signed transfer instructions and acceptable to the Plan Agent and endorsed by the Participant with a medallion guarantee
applied to the endorsement. You will be responsible for any applicable taxes in connection with the transfer.
You
will also be credited with dividends on fractions of shares you hold in the Plan. You can elect to reinvest all or a portion of
your dividends. To date, Zion has not paid dividends on its common stock and no assurance can be given as to when, if ever,
Zion will be able to pay dividends on its common stock.
Purchasing
Units under the Plan
The
Plan provides a feature whereby new investors and existing stockholders may also purchase, directly from Zion, Units of Zion securities,
with each Unit consisting of (i) one or more shares of our Common Stock and (ii) one or more warrants to purchase additional shares
of our Common Stock.
The
Unit will be offered directly to Plan participants at a price per Unit to be fixed periodically by Zion. Changes to the per Unit
purchase price will be posted on the Zion website and the Plan Agent’s at least two business days prior to next succeeding
Purchase Date. No changes will be made to the Warrant exercise price, which will be fixed at a price per share at the time of
the Unit offering.
The
Warrants to be issued as part of Units purchased under the Plan may be separately transferable following their issuance and through
their expiration date. The Warrants will remain a book-keeping entry by the Plan Agent until the Participant requests delivery
of the certificate representing the Warrant. The Warrants will become first exercisable on the 31st day following the
Unit Option Termination Date and continue to be exercisable through the expiration date. The Warrants are not exercisable prior
to such date. We may file an application with NASDAQ or any other exchange or securities market to list the Warrants; however,
no assurance can be provided that any warrants will be approved for listing on any exchange or securities market.
Unlike
shares purchased under the Plan, share of Common Stock and the Warrants purchased as part of the Units are not subject to the
mandatory deposit requirement, nor to the Withdrawal fee.
THE
SIGNATURE TO THE ASSIGNMENT OF THE SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE
IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR
TRUST COMPANY OR A MEMBER FIRM OF THE AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR CHICAGO STOCK
EXCHANGE.
ASSIGNMENT
To
Be Executed by the Registered Holder in Order to Assign Warrants
For
Value Received, _____________________hereby sell, assign, and transfer unto
_____________________________________________________
(PLEASE
TYPE OR PRINT NAME AND ADDRESS)
_____________________________________________________
_____________________________________________________
_____________________________________________________
(SOCIAL
SECURITY OR TAX IDENTIFICATION NUMBER)
and
be delivered to_________________________________________________________________________________
(PLEASE
PRINT OR TYPE NAME AND ADDRESS)
Of
the Warrants represented by this Warrant Certificate, and hereby irrevocably constitute and
Appoint
________________________________Attorney to transfer this Warrant Certificate on the books of the Company, with full power of
substitution in the premises.
Dated:
(SIGNATURE)
Notice:
The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular,
without alteration or enlargement or any change whatever.
Signature(s)
Guaranteed:
THE
SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT
UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).
PROSPECTUS
$154,000,000
ZION OIL &
GAS, INC.
Common Stock, Debt Securities, Warrants
and Units
This prospectus is
both (1) a new registration statement and (2) a replacement registration statement that we filed with the Securities and Exchange
Commission (the “SEC”) using a “shelf” registration process on March 10, 2017. From time to time, we may
offer up to an aggregate of approximately $154,000,000 of any combination of the securities described in this prospectus, either
individually or in units. This prospectus provides a general description of the securities we may offer. Each time we sell
securities, we will provide specific terms of the securities offered in a supplement to this prospectus. The prospectus
supplement may also add, update or change information contained in this prospectus. You should read this prospectus and the
applicable prospectus supplement carefully before you invest in any securities.
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 and our public float was approximately $22 million. Under our Dividend Reinvestment and
Common Stock Purchase Plan, we also have a common stock purchase warrant at an exercise price of $2.00, expiring January 31, 2021,
that was issued and quoted on the NASDAQ Capital Market under the symbol “ZNWAA.” On March 10, 2017, the Company filed
with the SEC the prospectus supplement dated as of March 10, 2017 and the accompanying base prospectus dated February 23, 2017
relating to the Company’s Dividend Reinvestment and Direct Stock Purchase Plan (the “DSPP”). The base prospectus
and prospectus supplement formed part of the Company’s Registration Statement on Form S-3 (File No. 333-216191), as amended,
which was declared effective by the SEC on March 10, 2017. The applicable prospectus supplement will contain information, where
applicable, as to the above and any other listing on the NASDAQ Capital Market or any securities market or other exchange of the
securities, if any, covered by the prospectus supplement.
Investing in our
securities involves a high degree of risk. We urge you to carefully consider the risks that we have described on page 10 of
this prospectus under the caption “Risk Factors.” We may also include specific risk factors in supplements to this
prospectus under the caption “Risk Factors.” This prospectus may not be used to offer or sell our securities unless
accompanied by a prospectus supplement.
We will sell these
securities directly to investors, through agents designated from time to time or to or through underwriters or dealers. For additional
information on the methods of sale, you should refer to the section entitled “Plan of Distribution” in this prospectus.
If any underwriters are involved in the sale of any securities with respect to which this prospectus is being delivered, the names
of such underwriters and any applicable commissions or discounts will be set forth in a prospectus supplement. The price
to the public of such securities and the net proceeds we expect to receive from such sale will also be set forth in a prospectus
supplement.
NEITHER THE SECURITIES
AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is _______,
2019.
Table of Contents
ABOUT THIS PROSPECTUS
This prospectus is
both (1) a new registration statement and (2) a replacement registration statement that we filed with the Securities and Exchange
Commission, or SEC, on March 10, 2017, utilizing a “shelf” registration process. Under this shelf registration process,
we may sell any combination of the securities described in this prospectus in one or more offerings up to a total dollar amount
of approximately $154,000,000. This prospectus provides you with a general description of the securities we may offer.
Each time we sell securities under this shelf registration, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may also add, update or change information contained
in this prospectus. You should read both this prospectus and any prospectus supplement together with additional information
described on page 29 under the heading “Where You Can Find More Information.”
You should rely only
on the information provided or incorporated by reference in this prospectus or any prospectus supplement. We have not authorized
any dealer, salesman or other person to give any information or to make any representation other than those contained or incorporated
by reference in this prospectus and the accompanying supplement to this prospectus. You must not rely upon any information or
representation not contained or incorporated by reference in this prospectus or the accompanying prospectus supplement. This prospectus
and the accompanying supplement to this prospectus do not constitute an offer to sell or the solicitation of an offer to buy any
securities other than the registered securities to which they relate, nor do this prospectus and the accompanying supplement
to this prospectus constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction to any person
to whom it is unlawful to make such offer or solicitation in such jurisdiction. You should not assume that the information contained
in this prospectus and the accompanying prospectus supplement is accurate on any date subsequent to the date set forth on the
front of the document or that any information we have incorporated by reference is correct on any date subsequent to the date
of the document incorporated by reference, even though this prospectus and any accompanying prospectus supplement is delivered
or securities sold on a later date. In this prospectus and any prospectus supplement, unless otherwise indicated, the terms
“Company,” “we,” “our” and “us” refer to Zion Oil & Gas, Inc., a corporation
incorporated in the State of Delaware.
THIS PROSPECTUS
MAY NOT BE USED TO OFFER AND SELL SECURITIES UNLESS IT IS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
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;
|
|
●
|
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;
|
|
●
|
the impact of governmental
regulations, permitting and other legal requirements in Israel relating to onshore exploratory drilling;
|
|
●
|
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;
|
|
●
|
anticipated trends in
our business;
|
|
●
|
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:
|
●
|
aggregate principal amount
or aggregate offering price;
|
|
●
|
maturity, if applicable;
|
|
●
|
original issue discount,
if any;
|
|
●
|
rates and times of payment
of interest, if any;
|
|
●
|
redemption, conversion,
exchange or sinking fund terms, if any;
|
|
●
|
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;
|
|
●
|
restrictive covenants,
if any;
|
|
●
|
voting or other rights,
if any; and
|
|
●
|
important federal income
tax considerations.
|
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:
|
●
|
the names of those underwriters
or agents;
|
|
●
|
applicable fees, discounts
and commissions to be paid to them;
|
|
●
|
details regarding over-allotment
options, if any; and
|
|
●
|
the net proceeds to us.
|
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:
|
●
|
restrictions on the rights
of shareholders to remove directors;
|
|
●
|
limitations against shareholders calling a Special
Meeting of shareholders or acting by unanimous written consent in lieu of a meeting;
|
|
●
|
requirements for advance notice of actions proposed
by shareholders for consideration at meetings of the shareholders; and
|
|
●
|
restrictions on business
combination transactions with “related persons.”
|
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:
|
●
|
any merger or consolidation;
|
|
●
|
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”;
|
|
●
|
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;
|
|
●
|
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;
|
|
●
|
the adoption of a plan or proposal for our liquidation
or dissolution proposed by or on behalf of a related person; and
|
|
●
|
the entering into of any agreement, contract or other
arrangement providing for any of the transactions described above.
|
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:
|
●
|
the principal amount
being offered, and, if a series, the total amount authorized and the total amount outstanding;
|
|
●
|
any limit on the amount
that may be issued;
|
|
●
|
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;
|
|
●
|
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;
|
|
●
|
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;
|
|
●
|
whether or not the debt
securities will be secured or unsecured, and the terms of any secured debt;
|
|
●
|
the terms of the subordination
of any series of subordinated debt;
|
|
●
|
the place where payments
will be payable;
|
|
●
|
restrictions on transfer,
sale or other assignment, if any;
|
|
●
|
our right, if any, to
defer payment of interest and the maximum length of any such deferral period;
|
|
●
|
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;
|
|
●
|
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;
|
|
●
|
whether the indenture
will restrict our ability to:
|
|
●
|
incur additional indebtedness;
|
|
●
|
issue additional securities;
|
|
●
|
pay dividends and make
distributions in respect of our capital stock;
|
|
●
|
place restrictions on
our subsidiaries’ ability to pay dividends, make distributions or transfer assets;
|
|
●
|
make investments or
other restricted payments;
|
|
●
|
sell or otherwise dispose
of assets;
|
|
●
|
enter into sale-leaseback
transactions;
|
|
●
|
engage in transactions
with stockholders and affiliates;
|
|
●
|
issue or sell stock
of our subsidiaries; or
|
|
●
|
effect a consolidation
or merger;
|
|
●
|
whether the indenture
will require us to maintain any interest coverage, fixed charge, cash flow-based, asset-based or other financial ratios;
|
|
●
|
a discussion of any material
or special United States federal income tax considerations applicable to the debt securities;
|
|
●
|
information describing
any book-entry features;
|
|
●
|
provisions for a sinking
fund purchase or other analogous fund, if any;
|
|
●
|
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;
|
|
●
|
the procedures for any
auction and remarketing, if any;
|
|
●
|
the denominations in which we will issue the series
of debt securities, if other than denominations of $1,000 and any integral multiple thereof;
|
|
●
|
if other than dollars,
the currency in which the series of debt securities will be denominated; and
|
|
●
|
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.
|
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:
|
●
|
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
|
|
●
|
certain other conditions
are met.
|
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:
|
●
|
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;
|
|
●
|
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;
|
|
●
|
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;
|
|
●
|
if specified events of
bankruptcy, insolvency or reorganization occur; and
|
|
●
|
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.
|
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:
|
●
|
the direction so given
by the holder is not in conflict with any law or the applicable indenture; and
|
|
●
|
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.
|
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:
|
●
|
the holder has given
written notice to the debenture trustee of a continuing event of default with respect to that series;
|
|
●
|
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
|
|
●
|
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.
|
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:
|
●
|
to fix any ambiguity,
defect or inconsistency in the indenture;
|
|
●
|
to comply with the provisions
described above under “Consolidation, Merger or Sale”;
|
|
●
|
to comply with any requirements of the SEC in connection
with the qualification of any indenture under the Trust Indenture Act of 1939;
|
|
●
|
to evidence and provide
for the acceptance of appointment by a successor trustee;
|
|
●
|
to provide for uncertificated
debt securities and to make all appropriate changes for such purpose;
|
|
●
|
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;
|
|
●
|
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;
|
|
●
|
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
|
|
●
|
to change anything that
does not materially adversely affect the interests of any holder of debt securities of any series.
|
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:
|
●
|
extending the fixed maturity
of the series of debt securities;
|
|
●
|
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
|
|
●
|
reducing the percentage of debt securities, the holders
of which are required to consent to any amendment, supplement, modification or waiver.
|
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:
|
●
|
register the transfer
or exchange of debt securities of the series;
|
|
●
|
replace stolen, lost
or mutilated debt securities of the series;
|
|
●
|
maintain paying agencies;
|
|
●
|
hold monies for payment
in trust;
|
|
●
|
recover excess money
held by the debenture trustee;
|
|
●
|
compensate and indemnify
the debenture trustee; and
|
|
●
|
appoint any successor
trustee.
|
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:
|
●
|
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
|
|
●
|
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.
|
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:
|
●
|
the offering price and
aggregate number of warrants offered;
|
|
●
|
the currency for which
the warrants may be purchased;
|
|
●
|
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;
|
|
●
|
if applicable, the date
on and after which the warrants and the related securities will be separately transferable;
|
|
●
|
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;
|
|
●
|
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;
|
|
●
|
the effect of any merger, consolidation, sale or other
disposition of our business on the warrant agreements and the warrants;
|
|
●
|
the terms of any rights
to redeem or call the warrants;
|
|
●
|
any provisions for changes to or adjustments in the
exercise price or number of securities issuable upon exercise of the warrants;
|
|
●
|
the dates on which the
right to exercise the warrants will commence and expire;
|
|
●
|
the manner in which the
warrant agreements and warrants may be modified;
|
|
●
|
federal income tax consequences
of holding or exercising the warrants;
|
|
●
|
the terms of the securities
issuable upon exercise of the warrants; and
|
|
●
|
any other specific terms,
preferences, rights or limitations of or restrictions on the warrants.
|
Before exercising their
warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise, including:
|
●
|
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
|
|
●
|
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.
|
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:
|
●
|
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;
|
|
●
|
any provisions of the
governing unit agreement that differ from those described below; and
|
|
●
|
any provisions for the issuance, payment, settlement,
transfer or exchange of the units or of the securities comprising the units.
|
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:
|
●
|
how it handles securities
payments and notices;
|
|
●
|
whether it imposes fees
or charges;
|
|
●
|
how it would handle a
request for the holders’ consent, if ever required;
|
|
●
|
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;
|
|
●
|
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
|
|
●
|
if the securities are
in book-entry form, how the depositary’s rules and procedures will affect these matters.
|
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:
|
●
|
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;
|
|
●
|
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;
|
|
●
|
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;
|
|
●
|
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;
|
|
●
|
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;
|
|
●
|
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
|
|
●
|
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.
|
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:
|
●
|
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;
|
|
●
|
if we notify any applicable
trustee that we wish to terminate that global security; or
|
|
●
|
if an event of default has occurred with regard to
securities represented by that global security and has not been cured or waived.
|
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:
|
●
|
the name or names of
any underwriters or agents;
|
|
●
|
the purchase price of
the securities and the proceeds we will receive from the sale;
|
|
●
|
any over-allotment options
under which underwriters may purchase additional securities from us;
|
|
●
|
any agency fees or underwriting
discounts and other items constituting agents’ or underwriters’ compensation;
|
|
●
|
any public offering price;
|
|
●
|
any discounts or concessions
allowed or re-allowed or paid to dealers; and
|
|
●
|
any securities exchange
or market on which the securities may be listed.
|
We may distribute the securities from time to time
in one or more transactions at:
|
●
|
fixed price or prices,
which may be changed from time to time;
|
|
●
|
market prices prevailing
at the time of sale;
|
|
●
|
prices related to such
prevailing market prices; or
|
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:
|
●
|
our annual report on
Form 10-K for the year ended December 31, 2018 filed on March 8, 2019;
|
|
●
|
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;
|
|
●
|
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
|
|
●
|
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.
|
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.
29
Zion Oil and Gas (QB) (USOTC:ZNOG)
Historical Stock Chart
From Aug 2024 to Sep 2024
Zion Oil and Gas (QB) (USOTC:ZNOG)
Historical Stock Chart
From Sep 2023 to Sep 2024