10-K - ZNOG - Equibles

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

FORM 10-K

MARK ONE:

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year ended December 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number**:** 001-33228

ZION OIL & GAS, INC.

(Exact name of registrant as specified in its charter)

Texas	20-0065053
(State or other Jurisdiction of<br> Incorporation or Organization)	(I.R.S. Employer<br> Identification No.)
12222 Merit Drive, Suite 1450, Dallas, TX	75251
---	---
(Address of Principal Executive Offices)	(Zip Code)

(214) 221-4610 (Registrant’s telephone number, including area code)

Securities registered under Section 12 (b) of the Exchange Act: None

Securities registered under Section 12 (g) of the Exchange Act:

Common Stock, par value $0.01 per share	OTCQX
(Title of Class)	(Name of each exchange on which registered)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, date indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2025, the last business day of the registrant’s most recently completed second quarter, was approximately $210,818,000.

The registrant had 1,179,449,952 shares of common stock, par value $0.01, outstanding as of March 13, 2026.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant intends to file a definitive proxy statement pursuant to Regulation 14A in connection with its 2026 Annual Meeting of Stockholders within 120 days after the close of the fiscal year covered by this Form 10-K. Portions of such proxy statement are incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this report.

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2025 ANNUAL REPORT (SEC FORM 10-K)

INDEX

Securities and Exchange Commission Item Number and Description

	PART I
Item 1	Business	1
Item 1A	Risk Factors	12
Item 1B	Unresolved Staff Comments	23
Item 1C	Cyber Security	23
Item 2	Properties	23
Item 3	Legal Proceedings	24
Item 4	Mine Safety Disclosures	24
	PART II
Item 5	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
Item 6	Reserved	25
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	42
Item 8	Financial Statements and Supplementary Data	42
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	42
Item 9A	Controls and Procedures	42
Item 9B	Other Information	43
Item 9C	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	43
	PART III
Item 10	Directors, Executives Officers and Corporate Governance	44
Item 11	Executive Compensation	44
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	44
Item 13	Certain Relationship and Related Transactions and Director Independence	44
Item 14	Principal Accountant Fees and Services	44
	PART IV
Item 15	Exhibits, Financial Statement Schedules	45
Item 16	Form 10-K Summary	47

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FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K (herein, “Annual Report”) and the documents included or incorporated by reference in this Annual Report 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. These forward-looking statements include, among others, statements regarding:

●	the Israel-Hamas war which began in October 2023 and the impact of the negotiated October 2025 ceasefire will have on our exploration program;
●	the Israel-Iran war which began and ended in June 2025 and the possibility of subsequent sporadic hostilities and their effect on our exploration program;
●	the Israel-Hezbollah war which began in 2024, along with wider regional hostilities towards Israel, and their effect on our exploration program;
●	the going concern qualification in our consolidated financial statements;
●	our ability to obtain new license areas to continue our exploration program;
●	our liquidity and our ability to raise capital to finance our overall exploration and development activities within our license area;
---	---
●	our ability to continue meeting the requisite continued listing requirements by the OTCQX market;
---	---
●	interruptions, increased consolidated financial costs and other adverse impacts of the Israel-Hamas war, the Israel-Hezbollah war, the Israel-Iran war and the Russia-Ukraine war on the drilling and testing of our petroleum exploration program and our capital raising efforts;
---	---
●	our ability to explore for and develop natural gas and oil resources successfully and economically within a license area;
---	---
●	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 as well as access to qualified personnel;
---	---
●	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 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
---	---
●	the demand for oil and natural gas, both locally in Israel and globally; and
---	---
●	the impact of fluctuating oil and gas prices on our exploration efforts
---	---

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More specifically, our forward-looking statements may include, among others, statements relating to our schedule, business plan, targets, estimates or results of our applications for new exploration rights and future exploration plans, 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 and interpretation 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, acreage, working capital requirements, hedging activities, the availability 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, consolidated financial results, business plans and cash needs and other statements that are not historical fact.

Such statements involve risks and uncertainties, including, but not limited to, those relating to the uncertainties inherent in exploratory drilling activities, the volatility of oil and natural gas prices, 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 Securities and Exchange Commission (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 Annual Report 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.

All references in this Annual Report to the “Company”, “Zion”, “we”, “us”, or “our”, are to Zion Oil and Gas, Inc., a Delaware corporation, and its wholly-owned subsidiaries, Zion Drilling, Inc. and Zion Drilling Services, Inc. described below.

iii

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PART I

ITEM 1. BUSINESS

Overview

Zion Oil and Gas, Inc., a Texas corporation, is an oil and gas exploration company with a history of 25 years of oil and gas exploration in Israel. We were incorporated in Florida on April 6, 2000 and reincorporated in Delaware on July 9, 2003. The shareholders of Zion Oil & Gas, Inc. approved the re-domestication of its incorporation to Texas on June 4, 2025. We completed our initial public offering in January 2007. Our common stock, par value $0.01 per share (the “Common Stock”) currently trades on the OTCQX marketplace of OTC Markets, Inc. under the symbol “ZNOG” and our Common Stock warrant under the symbol “ZNOGW”. On January 24, 2020, Zion incorporated a wholly owned subsidiary, Zion Drilling, Inc., as a Delaware corporation, for the purpose of owning a drilling rig, related equipment and spare parts, and on January 31, 2020, Zion incorporated another wholly owned subsidiary, Zion Drilling Services, Inc., a Delaware corporation, to act as the contractor providing such drilling services. When Zion is not using the rig for its own exploration activities, Zion Drilling Services may contract with other operators in Israel to provide drilling services at market rates then in effect. On May 14, 2025, Zion Drilling, Inc. and Zion Drilling Services, Inc. were re-domesticated and converted from Delaware corporations to Texas corporations pursuant to plans of conversion approved unanimously by the directors and shareholders of each corporation. On October 19, 2022, Zion incorporated a wholly owned subsidiary in Israel, Zion Drilling Israel Ltd, for the purpose of owning a drilling rig and related equipment and spare parts. On this date, the entity was created as a placeholder only. A bank account was created in November 2024 and a tax file was created in January 2025. Zion Drilling Israel Ltd did not have any activities during the year ended December 31, 2025.

The New Megiddo License 428 (“NML 428”) was initially awarded on December 3, 2020 for a six-month term and was extended several times before expiring on February 1, 2023. Zion Oil & Gas, Inc. filed an amended application with the Israel Ministry of Energy for a new exploratory license on January 24, 2023 covering the same area as its License No. 428, which expired on February 1, 2023. However, its original application to replace License No. 428 was filed on May 11, 2022, and a revised application was filed on August 29, 2022.

On September 14, 2023, the Israel Ministry of Energy approved a new Megiddo Valleys License 434 (“NMVL 434”or “Exploration License 434”), allowing for oil and gas exploration on approximately 75,000 acres or 302 square kilometers. This Exploration License 434 is valid for three years until September 13, 2026 with four potential 1-year extensions for a total of seven years until September 13, 2030. This NMVL 434 effectively supersedes our previous NML 428.

We continue our exploration focus on the MJ-02 well, as it appears to possess the key geologic ingredients of an active petroleum system with significant exploration potential. As previously announced, Zion is deploying new technologies and stimulation methods for its current re-entry into the MJ-02 well with the objective of potentially unlocking hydrocarbon flows in several identified key zones.

Zion’s rig crew arrived in Israel in February 2025 and completed critical maintenance and preparatory work. The rig, which was safely “warm stacked” in September 2024, underwent necessary checks for maintenance, including fluid changes, lubrication and greasing, and mechanical, electrical, and safety audits to ensure peak functionality. The rig crew drilled out the temporary plug at approximately 1,100 meters and set a permanent plug at the deeper part of the well, allowing for isolation of targeted zones for testing. Perforation and stimulation operations were successfully completed, with gas observed at surface during early flowback.

On June 10, 2025, we completed flowback operations at our Megiddo-Jezreel #1 well (MJ-01), shut the well in and demobilized our crew. The last of our crew left the country just hours before the 12-day war with Iran. We analyzed the initial gas composition data which confirmed that our targeted perforation and stimulation procedures were successful. Gas reached the surface and shows characteristics consistent with a productive reservoir.

An even further delay was created by many of our rig crew members reaching the limit of their work visas. This requires us to reset visas, which is not a simple process, and it adds another layer of delay and complexity. Moreover, the recent changes to visa eligibility have further complicated the process, as Israel has changed their 90-day visa renewals from resetting at the end of the year to resetting six months after expiration. We are working with the Ministry of Interior on this issue. As a side note, the crew had to enter Israel under 90-day visas and not six months visas in order to comply with the labor law requirements in place at the time the operations commenced.

In light of the combination of downhole, logistical, and crew challenges, as well as holidays, and the one-year remembrance of October 7, we temporarily paused active operations during Q4 2024. This was a necessary step to ensure the safety of our personnel and to ensure proper engineering and tools are brought to location to avoid lengthy delays waiting for additional tools should any be required once the job resumes.

On June 10, 2025, we completed flowback operations at our Megiddo-Jezreel #1 well and have since temporarily shut it in and demobilized our crew. The last of our crew left the country just hours before the 12-day war with Iran. We analyzed the initial gas composition data which confirmed that our targeted perforation and stimulation procedures were successful. Gas reached the surface and shows characteristics consistent with a productive reservoir.

During the last six months of 2025, we engaged in planning and logistics activities for the next phase of operations in Israel. Our technical objective remains unchanged, which is to sidetrack the well and drill a lateral section into the identified target interval to enable multi-stage stimulation across multiple zones. The principal operational refinement is to begin this campaign from the MJ-02 well, located on the same pad as the MJ-01 well, just 7.5 meters away on surface and approximately 300 meters offset at depth. Both wellbores access the same target zone. Starting from MJ-02 allows us to begin in larger casing, use larger-diameter tools, and execute a two-stage drilling plan—providing greater flexibility to manage downhole contingencies and improving our chance of operational success.

Logistics remain challenging in Israel’s onshore market, where most services and equipment must be imported with added time and cost. Despite providers being heavily contracted, we have secured key services such as drilling, mud, and cementing. Recent visa reforms and progress with ministry approvals are also positive steps forward.

Our rig crew arrived in Israel in January 2026 to begin a new phase of operations at both MJ-01 and MJ-02 in Israel. Currently, the team is focusing on routine rig repair and maintenance, including a much-needed upgrade to the generator system, ensuring reliable power for the drilling ahead. Once the rig is serviced and tested, our crew will re-enter MJ-01, complete cleanup of the wellbore, install a seal below the water aquifer zone, and re-establish the mandated water monitoring well as required by the Ministry of Energy and Ministry of Water. Following this work, we will rig down and conduct the mandatory five-year recertification and inspection process to ensure full compliance with International Association of Drilling Contractors ("IADC") and national standards before transitioning to the next stage. After inspection, we will rig up over MJ-02, plug and abandon the lower sections of that wellbore, set the direction, and begin the planned horizontal drilling operation into the target reservoir zone.

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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 12222 Merit Drive, Suite 1450, Dallas, Texas 75251, 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.

Company Background

In 1983, during a visit to Israel, John M. Brown (our Founder and Executive Chairman of the Board of Directors) became inspired and dedicated to finding oil and gas in Israel. During the next 17 years he made several trips each year to Israel, hired oil and gas consultants in Israel and Texas, met with Israeli government officials, made direct investments with local exploration companies, and assisted Israeli exploration companies in raising money for oil and gas exploration in Israel. This activity led Mr. Brown to form Zion Oil & Gas, Inc. in April 2000, in order to receive the award of a small onshore petroleum license from the Israeli government.

Zion’s vision, as guided by John Brown, of finding oil and/or natural gas in Israel, is Biblically inspired. The vision is based, in part, on biblical references alluding to the presence of oil and/or natural gas in territories within the State of Israel that were formerly within certain ancient biblical tribal areas. While John Brown provides the broad vision and goals for our company, the actions taken by the Zion Board of Directors and management team as it actively explores for oil and gas in Israel, are based on modern science and good business practice. Zion’s oil and gas exploration activities are supported by appropriate geological, geophysical and other science-based studies and surveys typically carried out by companies engaged in oil and gas exploration activities.

Upon the award of our first petroleum right in May 2000, the Israeli government provided us access to most of its data with respect to previous exploration in the area, including geologic reports, seismic records and profiles, drilling reports, well files, gravity surveys, geochemical surveys and regional maps. We also gathered information concerning prior and ongoing geological, geophysical and drilling activity relevant to our planned activities from a variety of publicly accessible sources. Subsequently, we have acquired additional studies on our own such as seismic and other geophysical and geological surveys.

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ZION’S NEW MEGIDDO VALLEYS 434 LICENSE AREA

The NML 428 was initially awarded on December 3, 2020 for a six-month term and was extended several times before expiring on February 1, 2023. Zion Oil & Gas, Inc. filed an amended application with the Israel Ministry of Energy for a new exploratory license on January 24, 2023 covering the same area as its NML 428, which expired on February 1, 2023. However, its original application to replace License NML 428 was filed on May 11, 2022, and a revised application was filed on August 29, 2022.

On September 14, 2023, the Israel Ministry of Energy approved a new Megiddo Valleys License 434 (“NMVL 434”), allowing for oil and gas exploration on approximately 75,000 acres or 302 square kilometers. NMVL 434 is valid for three years until September 13, 2026 with four potential 1-year extensions for a total of seven years until September 13, 2030. This NMVL 434 effectively supersedes our previous NML 428.

We continue our exploration focus here based on our studies as it appears to possess the key geologic ingredients of an active petroleum system with significant exploration potential. As previously announced, Zion is deploying new technologies and stimulation methods for its current re-entry into the MJ-02 well with the objective of potentially unlocking hydrocarbon flows in several identified key zones.

On June 10, 2025, we completed flowback operations at our MJ-01 well, shut the well in and demobilized our crew. The last of our crew left the country just hours before the 12-day war with Iran. We analyzed the initial gas composition data which confirmed that our targeted perforation and stimulation procedures were successful. Gas reached the surface and shows characteristics consistent with a productive reservoir.

Our rig crew arrived in Israel in January 2026 to begin a new phase of operations at both MJ-01 and MJ-02 in Israel. Currently, the team is focusing on routine rig repair and maintenance, including a much-needed upgrade to the generator system, ensuring reliable power for the drilling ahead. Once the rig is serviced and tested, our crew will re-enter MJ-01, complete cleanup of the wellbore, install a seal below the water aquifer zone, and re-establish the mandated water monitoring well as required by the Ministry of Energy and Ministry of Water. Following this work, we will rig down and conduct the mandatory five-year recertification and inspection process to ensure full compliance with IADC and national standards before transitioning to the next stage. After inspection, we will rig up over MJ-02, plug and abandon the lower sections of that wellbore, set the direction, and begin the planned horizontal drilling operation into the target reservoir zone.

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.

ISRAEL-HAMAS WAR

The nation of Israel declared war on Hamas following the October 7, 2023 invasion by Hamas into many southern Israeli communities, killing and injuring thousands and taking of over 200 Israeli hostages into Gaza. Israel formed a war time emergency government with its primary focus on defending its homeland. As part of the war effort, Israel activated a large number of reservists. Our geologist in Israel was called into service for a month or two in late 2023. In 2024, he was called up again to serve for a period of months. He has since returned back to work. As a result of his absence, the workload was handled by our US based geologist. We have been able to keep up with the geological workload without any issues.

Our operations in Israel take place at the wellsite in north central Israel, away from the primary location of the war in southern Israel. Our drilling rig, pad site, employees and service providers were safe throughout 2025 and through the date of this filing in March 2026.

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

On or around October 13, 2025, following more than two years after the initial invasion by Hamas, another ceasefire was negotiated between Israel and Hamas. The ceasefire deal contains three phases and the first phase involves the release of all living and dead Israeli hostages held by Hamas, along with the release of approximately 1,950 Palestinian prisoners being held in Israel prisons. All of the 20 living hostages were released and the remains of the dead hostages have been released to Israeli families. The next phase (phase 2) of the ceasefire deal is underway and involves the disarmament of Hamas.

There is uncertainty as to the degree of stability that will be seen in the Gaza strip and the wider impact on hostilities in the region.

ISRAEL-HEZBOLLAH WAR

On November 27, 2024, Israel and Hezbollah signed a ceasefire agreement.

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

ISRAEL-UNITED STATES-IRAN WAR

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

On February 28, 2026, Israel and the United States jointly attacked Iran. The attacks took the form of missile strikes throughout Iran targeting regime leadership, nuclear sites, ballistic missile sites and other military infrastructure. Iran’s former supreme leader. Ali Khomenei was killed on this day. The daily attacks are continuing as of the date of this filing. Furthermore, Iran has been firing missiles and drones on approximately fifteen other countries, including, but not limited to, Azerbaijan, Bahrain, Cypress, Iraq, Jordan, Kuwait, Saudi Arabia, Turkey, United Arab Emirates and Turkey.

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Map 1. Zion’s New Megiddo Valleys 434 License as of December 31, 2025.

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Zion’s Former Joseph License

Zion has plugged all of its exploratory wells on its former Joseph License area, 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 (See note 9B and 9C).

I-35 Drilling Rig & Associated Equipment

	I-35	Rig		Other			****
	Drilling	Spare		Drilling			****
	Rig	Parts		Assets		Total
	US	US		US		US
Gross Assets:
December 31, 2024
Asset Additions
Asset Disposals for Self-Consumption			)				)
December 31, 2025
Accumulated Depreciation:
December 31, 2024
Asset Depreciation
December 31, 2025
Net Assets
As of December 31, 2024
	I-35	Rig		Other
	Drilling	Spare		Drilling
	Rig	Parts		Assets		Total
	US	US		US		US
Gross Assets:
December 31, 2023
Asset Additions
Asset Disposals					)		)
Asset Disposals for Self-Consumption			)				)
December 31, 2024
Accumulated Depreciation:
December 31, 2023
Asset Depreciation					****		****
December 31, 2024
Net Assets

All values are in US Dollars.

Exploration Expenditures

The following table summarizes the amounts we expended on our exploration efforts between 2024 and 2025:

	2025	2024
	US	US
	(000)	(000)
I-35 Drilling Rig & Associated Equipment
New Megiddo Valleys License 434:
Exploratory drilling operations
Equipment and inventory purchases
Environmental, geological & geophysical operations
Location construction and maintenance
Total

All values are in US Dollars.

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Employees & Contractors

As of December 31, 2025, we had 20 employees and contractors of whom all but one are on a full-time basis. Of the 20 total headcount, 14 work out of our Dallas office and 6 work out of the Caesarea, Israel office. None of our current employees or contractors are subject to any collective bargaining agreements, and there have been no strikes.

We regularly utilize independent consultants and contractors to perform various professional services, particularly for services connected to drilling operations, such as specialized drilling, health and safety, engineering, logging, cementing and well-testing.

Competition and Markets

The oil and gas exploration industry in Israel currently consists of a number of exploration companies. These include relatively small local or foreign companies (such as Zion Oil & Gas, Givot Olam, and Globe Exploration), as well as larger consortia of local Israeli and foreign participants (Chevron Corporation/Delek Group Ltd.). Most groups are engaged primarily in offshore activities, which is not an area in which we are currently active. Israeli law conveys an exclusive exploration right to license holders that prevents any additional companies from competing in that license area.

Historically, Israel (particularly onshore) has not been an area of interest for international integrated or large or mid-size independent oil and gas exploration companies for various reasons, one of which is likely geopolitical. Since the announcement of the Tamar and Leviathan discoveries during 2009 and 2010, this situation has changed somewhat. Limited availability in Israel of oil field service companies, equipment and personnel continues to present obstacles, especially during periods of decreased activity and risk aversion in the current market. We attempt to enhance our position by developing and maintaining good professional relations with oil field service providers and by demonstrating a high level of credibility in making and meeting commercial commitments.

The oil and gas industry is cyclical, and from time to time there is a shortage of drilling rigs, equipment, supplies and qualified personnel. During these periods, the costs and delivery times of rigs, equipment and supplies can vary greatly. If the unavailability or high cost of drilling and completion rigs, equipment, supplies or qualified personnel was particularly severe in the areas where we operate, we could be materially and adversely affected. We will continue to monitor the market and build service provider relationships in order to help mitigate concentration risk.

If any exploratory well that we drill is commercially productive, we would install the appropriate production equipment which includes, among other items, oil and gas separation facilities and storage tanks. Under the terms of the Petroleum Law, we may be required by the Minister of Energy and Water Resources to offer first refusal for any oil and gas discovered to Israeli domestic purchasers at market prices.

Since Israel imports almost all of its crude oil needs and the market for crude oil in Israel is limited to two local oil refineries, no special marketing strategy needs to be adopted initially with regard to any oil that we may ultimately discover. We believe that we would have a ready local market for our oil at market prices in addition to having the option of exporting to the international market, if any of our future exploratory wells are commercially productive.

Israel’s Petroleum Law

Our business in Israel is subject to regulation by the State of Israel under the Petroleum Law. The administration and implementation of the Petroleum Law are vested in the Minister of Energy (“Energy Minister”), the Petroleum Commissioner and an advisory council. The following discussion includes a brief summary of certain provisions of the Petroleum Law currently in effect. This review is not complete, and it should not be relied on as a definitive restatement of the law related to petroleum exploration and production activities in Israel.

Petroleum resources are owned by the State of Israel, regardless of whether they are located on state lands or the offshore continental shelf. No person is allowed to explore for or produce petroleum without being granted a specific right under the Petroleum Law. Israeli law provides for three types of rights, two relevant to the exploration stage and the third for the production stage.

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Preliminary permit. The “preliminary permit” allows a prospector to conduct preliminary investigations, such as field geology, airborne magnetometer surveys and seismic data acquisition, but does not allow test drilling. It may be granted for a period not to exceed 18 months. The holder of a preliminary permit is entitled to request a priority right on the permit area, which, if granted, prevents an award of petroleum rights on the permit area to any other party. There are no restrictions as to size of the permit area or to the number of permits that may be held by one prospector. However, Israeli policy is to award an area no larger than that for which the applicant has a reasonable plan of operation and has shown evidence of the necessary financial resources to execute the plan.

License. The next level of petroleum right is the “license,” bestowing an exclusive right for further exploration work and requiring the drilling of one or more test wells. The initial term of a license is up to three years, and it may be extended for up to an additional four years (in one-year increments). In the event of a Commercial Discovery approved by the Petroleum Commissioner, the license may be extended for an additional two years. A license area may not exceed 400,000 dunams (approximately 98,842 acres). One dunam is equal to 1,000 square meters (approximately 0.24711 of an acre). No one entity may hold more than 12 licenses or hold more than a total of four million dunam in aggregate license area.

Production lease. Upon approval by the Petroleum Commissioner, a licensee has a statutory “right” to receive a production “lease.” The initial lease term is 30 years, extendable for an additional 20 years (up to a maximum period of 50 years). A lease confers upon the lessee the exclusive right to explore for and produce petroleum in the lease area and requires the lessee to produce petroleum in commercial quantities (and pursue test and development drilling). The lessee is entitled to transport and market the petroleum produced, subject, however, to the right of the government to require the lessee to supply local needs first, at market price.

Petroleum rights fees. The holders of licenses and leases are required to pay fees to the government of Israel to maintain the rights. The fees vary according to the nature of the right, the size and location (onshore or offshore) of the right, acreage subject to the right and, in the case of a license, the period during which the license has been maintained.

Requirements and entitlements of holders of petroleum rights. The holder of a petroleum right (license or lease) is required to conduct its operations in accordance with a work program set as part of the petroleum right, with due diligence and in accordance with the accepted practice in the petroleum industry. The holder is required to submit progress and final reports; provided, however, the information disclosed in such reports remains confidential for as long as the holder owns a petroleum right on the area concerned.

If the holder of a petroleum right does not comply with the work program provided by the terms of the right, the Petroleum Commissioner may issue a notice requiring the holder to cure the default within 60 days of the giving of the notice, together with a warning that failure to comply within the 60-day cure period may entail cancellation of the right. If the petroleum right is cancelled following such notice, the holder of the right may, within 30 days of the date of notice of the Petroleum Commissioner’s decision, appeal such cancellation to the Energy Minister. No petroleum right shall be cancelled until the Energy Minister has ruled on the appeal.

We are obligated, according to the Petroleum Law, to pay royalties to the Government of Israel on the gross production of oil and gas from the oil and gas properties of Zion located in Israel (excluding those reserves serving to operate the wells and related equipment and facilities). The royalty rate stated in the Petroleum Law is 12.5% of the produced reserves. At December 31, 2025 and 2024, the Company did not have any outstanding obligation with respect to royalty payments, since it is in the development stage and, to this date, no proved reserves have been found.

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In March 2011, the Israeli parliament enacted the Petroleum Profits Taxation Law, 2011, which imposes a new levy on oil and gas production. Under the new tax regime, the Israeli Government repealed the percentage depletion deduction and imposed a levy at an initial rate of 20% on profits from oil and gas which will gradually rise to 45.52% for 2016 onwards, depending on the levy coefficient (the R-Factor). The R-Factor refers to the percentage of the amount invested in the exploration, the development and the establishment of the project, so that the 20% rate will be imposed only after a recovery of 150% of the amount invested (R-Factor of 1.5) and will range linearly up to 45.52% after a recovery of 230% of the amount invested (R-Factor of 2.3). For purposes of the levy rate calculation, the minimal gas sale price that will be accepted by the State is the bi-annual average local price. The present 12.5% royalty imposed on oil revenues remains unchanged.

The grant of a petroleum right does not automatically entitle its holder to enter upon the land to which the right applies or to carry out exploration and production work thereon. Entry requires the consent of the private or public holders of the surface rights and of other public regulatory bodies (e.g. planning and building authorities, Nature Reserves Authority, municipal and security authorities, etc.). The holder of a petroleum right may request the government to acquire, on its behalf, land needed for petroleum purposes. The petroleum right holder is required to obtain all other necessary approvals.

Petroleum Taxation. Our activities in Israel will be subject to taxation both in Israel and in the United States. Under the U.S. Internal Revenue Code, we will be entitled to claim either a deduction or a foreign tax credit with respect to Israeli income taxes paid or incurred on our Israeli source oil and gas income. As a general rule, we anticipate that it will be more advantageous for us to claim a credit rather than a deduction for applicable Israeli income taxes on our U.S tax return. A tax treaty exists between the U.S. and Israel that would provide opportunity to use the tax credit.

Exploration and development expenses. Under current US and Israeli tax laws, exploration and development expenses incurred by a holder of a petroleum right can, at the option of such holder, either be expensed in the year incurred or capitalized and expensed (or amortized) over a period of years. Most of our expenses to date have been expensed for both U.S. and Israeli income tax purposes.

Corporate tax. Under current Israeli tax laws, whether a company is registered in Israel or is a foreign company operating in Israel through a branch, it is subject to Israeli Companies Tax on its taxable income (including capital gains) from Israeli sources at a flat rate of 23%, effective January 1, 2019.

Import duties. Insofar as similar items are not available in Israel, the Petroleum Law provides that the owner of a petroleum right may import into Israel, free of most customs, purchase taxes and other import duties, all machinery, equipment, installations, fuel, structures, transport facilities, etc. (apart from consumer goods and private cars and similar vehicles) that are required for the petroleum exploration and production purposes, subject to the requirement that security be provided to ensure that the equipment is exported out of Israel within the agreed upon time frame.

Israeli Energy Related Regulations

Our operations are subject to legal and regulatory oversight by energy-related ministries or other agencies of Israel, each having jurisdiction over certain relevant energy or hydrocarbons laws.

The Onshore Petroleum Exploration Permitting Process in Israel

The permitting process in Israel with respect to petroleum exploration continues to undergo significant modification, the result of which is to considerably increase the complexity, time period, and expenditures needed to obtain the necessary permits to undertake exploratory drilling once a drilling prospect has been identified. Applications for new exploration licenses need to comply with more demanding requirements relating to a license applicant’s financial capability, experience and access to experienced personnel. Various guidelines have been published in Israel by the State of Israel’s Petroleum Commissioner and Energy and Environmental Ministries since 2012 as it pertains to oil and gas activities. Mention of these guidelines was included in previous Zion Oil & Gas filings.

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On June 2, 2020, the Energy Ministry issued a guidance document titled “Commissioner for Petroleum Affairs Guidelines: Extraordinary Incidences Report.” These guidelines describe the reporting procedure regarding incidences that are out of the ordinary during pre-drilling, drilling and production activities including incidences that cause bodily injury or damage to property or environment or incidences that are a cause of delay or cessation of drilling activities.

The Company believes that these new regulations are likely to result in an increase in the expenditures associated with obtaining new exploration rights and drilling new wells. The Company expects that an additional financial burden could occur as a result of requiring cash reserves that could otherwise be used for operational purposes. In addition, these new regulations are likely to continue to increase the time needed to obtain all of the necessary authorizations and approvals to drill and production test exploration wells.

Environmental & Safety / Planning & Building

Oil and gas drilling operations could potentially harm the environment if there are polluting spills caused by the loss of well control. The Petroleum Law and regulations provide that the conduct of petroleum exploration and drilling operations be pursued in compliance with “good oil field practices” and that measures of due care be taken to avoid seepage of oil, gas and well fluids into the ground and from one geologic formation to another. The Petroleum Law and regulations also require that, upon the abandonment of a well, it be adequately plugged and marked. Recently, as a condition for issuing the required permit for the construction of a drilling site, the planning commissions have required the submission of a site remediation plan, subject to approval of the environmental authorities. Our operations are also subject to claims for personal injury and property damage caused by the release of chemicals or petroleum substances by us or others in connection with the conduct of petroleum operations on our behalf. Various guidelines have been published in Israel by the State of Israel’s Petroleum Commissioner and Energy and Environmental Ministries since 2012 as it pertains to oil and gas activities. Mention of these guidelines was included in previous Zion Oil & Gas filings.

We do not know and cannot predict whether any new legislation in this area will be enacted and, if so, in what form and which of its provisions, if any, will relate to and affect our activities, how and to what extent or what impact, if any, it might have on our financial statements. There are no known proceedings instituted by governmental authorities, pending or known to be contemplated against us under any environmental laws. We are not aware of any events of noncompliance in our operations in connection with any environmental laws or regulations. However, we cannot predict whether any new or amended environmental laws or regulations introduced in the future will have a material adverse effect on our future business.

The Company believes that these new and/or revised regulations will significantly increase the complexity, time, and expenditures associated with obtaining new exploration rights, drilling, and plugging/abandoning new wells, coupled with the heavy financial burden of “locking away” significant amounts of cash that could otherwise be used for operational purposes.

Political Climate

We are directly influenced by the political, economic and military conditions affecting Israel. Specifically, we could be adversely affected by:

●	Wars and/or ongoing conflicts between Israel and Hamas, Hezbollah, Iran the Houthis (in Yemen), and/or other terrorist organizations;
●	the interruption or curtailment of trade between Israel and its present trading partners;
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●	a full or partial mobilization of the reserve forces of the Israeli army; and
●	a significant downturn in the economic or financial condition of Israel.
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Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors, and a state of hostility, varying from time to time in intensity and degree, has led to security and economic problems for Israel. Any ongoing or future violence between Israel and the Palestinians, armed conflicts, terrorist activities, tension along Israel’s borders, or political instability in the region could possibly disrupt international trading activities in Israel and may materially and negatively affect our business conditions and could harm our prospects and business.

Civil unrest could spread throughout the region or grow in intensity, leading to more regime changes resulting in governments that are hostile to the United States and Israel, civil wars, or regional conflict. With ongoing operations by Iran, Syria, Russia, the U.S. and other countries in areas in close proximity to Israel, there is an increased risk of deliberate and/or inadvertent mishaps that could give rise to grave military and political consequences.

The nation of Israel declared war on Hamas following the October 7, 2023 invasion by Hamas into many southern Israeli communities, killing and injuring thousands and taking of over 200 Israeli hostages into Gaza. Israel formed a war time emergency government with its primary focus on defending its homeland. As part of the war effort, Israel enlisted a large number of reservists. One geologist in our Israel office was called into service for a month or two in late 2023. In 2024 and 2025, he was called up again to serve for a period of months.

On or around October 13, 2025, following more than two years after the initial invasion by Hamas, a ceasefire was negotiated between Israel and Hamas. The ceasefire deal contains three phases and the first phase involves the release of all living and dead Israeli hostages held by Hamas, along with the release of approximately 1,950 Palestinian prisoners being held in Israel prisons. All of the 20 living hostages were released and all of the remains of the dead hostages have been released to Israeli families. The next phase (phase 2) of the ceasefire deal is underway and involves the disarmament of Hamas.

On November 27, 2024, Israel and Hezbollah signed a ceasefire agreement.

As of the date of this report, both sides are holding to its terms, but the re-occurrence of subsequent hostilities is possible.

We cannot predict the effect, if any, on our business caused by renewed hostilities between Israel and its neighbors or any other changes in the political climate in the area.

Foundations

If we are successful in finding and producing commercial quantities of hydrocarbons in Israel, 6% of our gross revenues from production will go to fund two charitable foundations that we established with the purpose of donating to charities in Israel, the U.S. and elsewhere in the world.

For charitable activities concerning Israel, the Bnei Joseph Foundation (R.A.) was established. On November 11, 2008, both the Articles of Association and Incorporation Certificate were certified by the Registrar of Amutot (i.e. Charitable Foundations) in Israel.

For the U.S. and worldwide charitable activities, the Abraham Foundation in Geneva, Switzerland was established. On June 20, 2008, the Articles of Incorporation were executed and filed by the Swiss Notary in the Commercial Registrar in Geneva. On June 23, 2008, the initial organizational meeting of the founding members was convened in Israel. Regulations for the Organization of the Abraham Foundation, signed by the founding members, were then filed with the Registrar. On November 19, 2008, the Swiss Confederation approved the Foundation as an international foundation under the supervision of the federal government. On December 8, 2008, the Republic of Geneva and the Federal government of Switzerland issued a tax ruling providing complete tax exemption for the Foundation.

On February 5, 2014, the Company submitted applications to the Petroleum Commissioner, requesting royalty interest transfers from the Megiddo-Jezreel License 401 of 3% overriding royalties to the Bnei Joseph Amutot and the Abraham Foundation, respectively. On April 8, 2014, the transfers were approved by the Petroleum Commissioner and duly registered.

On January 14, 2021, the Company submitted applications to the Energy Ministry, Natural Resources Administration, requesting royalty interest transfers from the New Megiddo License 428 of 3% overriding royalties to each of the Bnei Joseph Amutot and the Abraham Foundation, respectively. On March 1, 2021, the Energy Ministry approved both transfers.

The Company has been submitting to the Commissioner all royalty requests for both foundations and registering the overriding royalties with every new license.

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Subsidiaries

On January 24, 2020, Zion incorporated a wholly owned subsidiary, Zion Drilling, Inc., a Delaware corporation, for the purpose of owning a drilling rig and related equipment and spare parts, and on January 31, 2020, Zion incorporated another wholly owned subsidiary, Zion Drilling Services, Inc., a Delaware corporation, to act as the contractor providing such drilling services. When Zion is not using the rig for its own exploration activities, Zion Drilling Services may contract with other operators in Israel to provide drilling services at market rates then in effect. On May 14, 2025, Zion Drilling, Inc. and Zion Drilling Services, Inc. were re-domesticated and converted from Delaware corporations to Texas corporations pursuant to plans of conversion approved unanimously by the directors and shareholders of each corporation.

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

Zion has the trademark “ZION DRILLING” filed with the United States Patent and Trademark Office. Zion has the trademark filed with the World Intellectual Property Organization in Geneva, Switzerland, pursuant to the Madrid Agreement and Protocol. In addition, Zion has the trademark filed with the Israeli Trademark Office in Israel. Zion Drilling Israel Ltd did not have any activities during the year ended December 31, 2025.

Available Information

Zion’s internet website address is “www.zionoil.com.” We make available, free of charge, on our website under “SEC Reports,” our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4 and 5 filed on behalf of directors and executive officers and amendments to those reports, as soon as reasonably practicable after providing the SEC such reports.

Our Corporate Governance Policy, the charters of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee, and the Code of Ethics for directors, officers, employees and financial officers are also available on our website under “Corporate Governance” and in print to any stockholder who provides a written request to the Corporate Secretary at Zion Oil & Gas, Inc., 12222 Merit Drive, Suite 1450, Dallas, Texas 75251, Attn: Corporate Secretary.

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934, as amended. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an internet website that contains reports, proxy and information statements, and other information regarding issuers, including Zion Oil & Gas, Inc., that file electronically with the SEC. The public can obtain any document we file with the SEC at www.sec.gov. Information contained on or connected to our website is not incorporated by reference into this Form 10-K and should not be considered part of this report or any other filing that we make with the SEC.

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ITEM 1A. RISK FACTORS

In evaluating our company, the risk factors described below should be considered carefully. The occurrence of one or more of these events could significantly and adversely affect our business, prospects, financial condition and results of operations.

Risks Associated with our Company

We are a 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 ultimate success of our petroleum exploration efforts in onshore Israel, none of which can be assured.

We were incorporated in April 2000, and we have incurred negative cash flows from our operations, and presently all exploration activities and overhead expenses are financed solely by way of the issue and sale of equity securities or debt instruments. The recoverability of the costs we have incurred to date is uncertain and is dependent upon achieving commercial production or sale, none of which can be assured. Our operations are subject to all of the risks inherent in exploration companies with no revenues or operating income. Our potential for success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with a new business, especially the oil and gas exploration business, and in particular the deep, wildcat exploratory wells in which we are engaged in Israel. We cannot warrant or provide any assurance that our business objectives will be accomplished.

Our ability to continue in business depends upon our continued ability to obtain the necessary financing from external sources to undertake further exploration and development activities and generate profitable operations from oil and natural gas interests in the future. We incurred net losses of $7,627,000 for the year ended December 31, 2025, and $7,343,000 for the year ended December 31, 2024. The audited consolidated financial statements have contained a statement by the auditors that raises substantial doubt about us being able to continue as a “going concern.”

We expect to incur substantial expenditures in our exploration and development programs. Our existing cash balances will not be sufficient to satisfy our exploration and development plans going forward. We are considering various alternatives to remedy any future shortfall in capital. We may deem it necessary to raise capital through equity markets, debt markets or other financing arrangements, including participation arrangements that may be available. Because of the current absence of any oil and natural gas reserves and revenues in our license areas, there can be no assurance that our capital will be available on commercially acceptable terms (or at all) and if it is not, we may be forced to substantially curtail or cease exploration expenditures which could lead to our inability to meet all of our commitments.

On March 13, 2014, Zion filed a registration statement on Form S-3 that was part of a replacement registration statement that was filed with the SEC using a “shelf” registration process. The registration statement was declared effective by the SEC on March 31, 2014. On February 23, 2017, the Company filed a Form S-3 with the SEC (Registration No. 333-216191) as a replacement for the Form S-3 (Registration No. 333-193336), for which the three-year period ended March 31, 2017, along with the base Prospectus and Supplemental Prospectus. The Form S-3, as amended, and the new base Prospectus became effective on March 10, 2017, along with the Prospectus Supplement that was filed and became effective on March 10, 2017. The Prospectus Supplement under Registration No. 333-216191 describes the terms of the Dividend Reinvestment and Stock Purchase Plan (“DSPP” or the "Plan") and replaces the prior Prospectus Supplement, as amended, under the prior Registration No. 333-193336.

Currently, we are substantially reliant on the proceeds of sales of our common stock under the Dividend Reinvestment and Stock Purchase Plan. During the past two completed fiscal years, we have financed our operations primarily from the proceeds of sales of our stock under the Dividend Reinvestment and Stock Purchase Plan. For the years ended December 31, 2025 and 2024, we raised approximately $21,479,000 and $16,257,000, respectively, under the Plan. Of the amounts raised, approximately 60% of the amounts raised in 2025 were attributable to two participants and 57% of the amounts raised in 2024 were attributable to one participant. The cessation of funding from these participants may result in adverse consequences to our business, such as a delay in our exploration and testing efforts, until we locate alternate sources for this funding.

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Our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited consolidated financial statements. Our audited consolidated financial statements at December 31, 2025 and 2024 and for the years then ended were prepared assuming that we will continue as a going concern .

Such an opinion could materially limit our ability to raise additional funds through the issuance of new debt or equity securities or otherwise. Our ability to continue as a going concern is contingent upon, among other factors, the sale of the shares of our common stock or obtaining alternate financing. We cannot provide any assurance that we will be able to raise additional capital.

We may not be able to maintain the listing of our common stock on the OTCQX Market, which could adversely affect our liquidity and the trading volume and market price of our common stock, and decrease your investment.

Effective January 1, 2024, our common stock began trading on the OTCQB Market. The maintenance requirements for listing are to maintain a minimum bid price of $0.01 per share as of the close of business for at least one of every 30 consecutive calendar days and market capitalization of at least $2 million for at least one of every 30 consecutive calendar days. In the event that the Company’s bid price or the market capitalization falls below the minimum criteria, a cure period of 90 calendar days to regain compliance shall begin, during which time the applicable criteria must be met for 10 consecutive trading days. During January 2026, the Company applied for trading on the OTCQX Market (the highest market withing the OTC) due to the rising of its ZNOG stock price during December and January. On February 5, the Company’s application was granted and its ZNOG began trading on the OTCQX Market.

We were involved in an extensive government investigation by the United States Securities and Exchange Commission, the results of which could have had a material adverse effect on our consolidated financial condition and business.

On June 21, 2018, the Fort Worth Regional Office of the SEC informed Zion that it was conducting a formal, non-public investigation and asked that we provide certain information and documents in connection with its investigation. Since that date, we fully cooperated with the SEC and provided all requested information and documents. On April 5, 2023, the Company received from the Fort Worth Regional Office of the SEC written notice concluding its investigation as to the Company and advising that the SEC does “not intend to recommend an enforcement action by the Commission against Zion.” Although not expected, if the SEC reopens its investigation and/or brings an enforcement action(s) against Zion, that could result in reputational harm to Zion and may have a material adverse effect on Zion’s current and future business and exploratory activities and its ability to raise capital to continue our oil and gas exploratory activities.

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Our ongoing exploration and development efforts are subject to many contingencies outside of our control, and any considerable delay in obtaining all of the needed licenses, approvals and authorizations may severely impair our business.

After months of delay, we received our New Megiddo Valleys License 434 on September 14, 2023 (see above) and our proposed Work Plan on December 6, 2023. On February 21, 2024 the Israeli Supervisory Committee approved the detailed work plan for our re-entry operations on the MJ-01 well. The Supervisory Committee is a group of representatives from various interest groups in Israel tasked with oversight of our license area, including from the Spring Valley Regional Council, along with members of local kibbutzim (self-sustaining economic and social communities). While we have secured these approvals on prior wells we’ve drilled, we have no assurance we can obtain them for any future wells in a timely enough manner to prevent disruption in the provision of necessary services, personnel and equipment from our vendors.

We require significant capital to realize our business plan.

Our ongoing work program is expensive. We believe that our current cash resources are sufficient to allow us to undertake exploratory activities through March 31, 2027. The company raised approximately $6,530,000 from the period January 1, 2026 through March 17, 2026 under the DSPP program, which includes collection of the $29,000 stock subscription receivable at December 31, 2025. We estimate that, when we are not actively drilling a well, our monthly expenditure is approximately $600,000 per month. However, when we are drilling, or testing, we estimate that there is an additional cost of approximately $2,000,000 - $3,000,000 per month. Additionally, the newly enacted onshore licensing and environmental and safety related regulations promulgated by the various energy related ministries in Israel during 2021-2023 are likely to render extending our existing license or obtaining new explorations licenses increasingly expensive. For example, at the time of the award of any new exploration license, we will be required to submit performance bank guarantees in the form of a restricted Israel cash deposits for 10% of the cost of the planned drilling program as well as other amounts to cover potential environmental damages. See “Israel Energy Related Governmental Regulations.”

No assurance can be provided that we will be able to raise funds when needed. Further, we cannot assure you that our actual cash requirements will not exceed our estimates. Even if we were to discover hydrocarbons in commercial quantities, we will require additional financing to bring our interests into commercial operation and pay for operating expenses until we achieve a positive cash flow. Additional capital also may be required in the event we incur any significant unanticipated expenses.

Under the current capital and credit market conditions, we may not be able to obtain additional equity or debt financing on acceptable terms. Even if financing is available, it may not be available on terms that are favorable to us or in sufficient amounts to satisfy our requirements.

If we are unable to obtain additional financing, we may be unable to implement our business plan and our growth strategies, respond to changing business or economic conditions and withstand adverse operating results. If we are unable to raise further financing when required, our planned exploration activities may have to be scaled down or even ceased, and our ability to generate revenues in the future would be negatively affected.

Additional financing could cause your relative interest in our assets and potential earnings to be significantly diluted. Even if we have exploration success, we may not be able to generate sufficient revenues to offset the cost of dry holes and general and administrative expenses.

If we cannot obtain the planned extensions of our Megiddo Valleys 434 License or any additional petroleum exploration licenses we deem necessary to the success of our exploration program, then our business may be severely impaired.

Our ability to obtain desired exploration licenses on acceptable terms is subject to change in regulations and policies and to the discretion of the applicable government agencies in Israel. Additionally, the onshore licensing and environmental and safety related regulations promulgated by the various energy related ministries in Israel during 2021-2023 are likely to render obtaining any license extensions or additional exploration licenses increasingly expensive and more time consuming. Accordingly, there can be no assurance that we will be able to extend our existing license or obtain new or additional exploration rights. If we are unable for whatever reason to obtain the exploration rights that we deem necessary or desirable, our business may be severely impaired.

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We rely on independent experts and technical or operational service providers over whom we may have limited control.

The success of our oil and gas exploration efforts is dependent upon the efforts of various third parties that we do not control. These third parties provide critical drilling, engineering, logging, pressure pumping, geological, geophysical and other scientific analytical services, including 2-D and 3-D seismic imaging technology to explore for and develop oil and gas prospects. Given our small size and limited resources, we do not have all the required expertise on staff. As a result, we rely upon various companies and other third parties like engineers, geologists, geophysics, labs and other scientific analytical services to assist us in identifying desirable hydrocarbon prospects to acquire and to provide us with technical assistance and services. In addition, we rely upon the owners and operators of oilfield service equipment.

If any of these relationships with third-party service providers are terminated or are unavailable on commercially acceptable terms, we may not be able to execute our business plan. Our limited control over the activities and business practices of these third parties, any inability on our part to maintain satisfactory commercial relationships with them, their limited availability or their failure to provide quality services could materially and adversely affect our business, results of operations and financial condition.

Exploratory well drilling locations that we decide to drill may not yield oil or natural gas in commercially viable quantities.

There is no way to predict in advance of drilling and testing whether any particular location will yield oil or natural gas in sufficient quantities to recover drilling or completion costs or to be economically viable. The use of technologies and the study of producing fields in the same area, if any, will not enable us to know conclusively prior to drilling and testing whether oil, natural gas liquids (NGLs) or natural gas will be present or, if present, whether oil or natural gas will be present in sufficient quantities to be economically viable. Even if sufficient amounts of oil, NGLs or natural gas exist, we may inadvertently damage the potentially productive hydrocarbon bearing formation or experience mechanical difficulties while drilling or completing a well, resulting in a reduction in production from the well or abandonment of the well. If we drill exploratory wells that we identify as dry holes in our future drilling locations, our business may be materially harmed. We cannot assure you that the analogies we draw from available data from other wells, more fully explored locations or producing fields will be applicable to our drilling locations. Ultimately, the cost of drilling, completing and operating any well is often uncertain, and new wells may not be productive.

Our global operations subject us to various risks, and our failure to manage these risks could adversely affect our results of operations and cash flows.

Our business is subject to certain risks associated with doing business globally, more particularly in Israel. Accordingly, we face significant operational risks as a result of doing business internationally, such as:

●	Difficulties in bringing operational personnel and equipment into Israel stemming from the Israel-United states-Iran war, Israel-Hezbollah war, Israel-Hamas war and/or other military conflicts with Lebanon, Syria, Iran or other hostile country;
●	fluctuations in foreign currency exchange rates;
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●	potentially adverse tax consequences and changes in tax laws;
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●	challenges in providing solutions across a significant distance, in different languages, different time zones and among different cultures;
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●	difficulties in staffing and managing foreign operations, particularly in new geographic locations, and related compliance with employment, immigration and labor laws for employees or other staff living abroad;
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●	restrictions imposed by local labor practices and laws on our business and operations;
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●	economic weakness, including inflation, or rapid or numerous changes in government, economic and political policies and conditions, political or civil unrest or instability, economic or trade sanctions, closure of markets to imports, terrorism or epidemics and other similar outbreaks or events;
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●	compliance with a wide variety of complex foreign laws, treaties and regulations;
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●	compliance with the U.S. Foreign Corrupt Practices Act, or the FCPA, and other anti-corruption and anti-bribery laws;
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●	in effect of unexpected changes in tariffs, trade barriers and other regulatory or contractual limitations on our ability to develop or sell our products in certain foreign markets; and
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●	becoming subject to the laws, regulations and court systems of multiple jurisdictions.
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Our failure to manage the market and operational risks associated with our international operations could limit the future growth of our business and adversely affect our results of operations.

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Our business and operations would suffer in the event of system failures, and our operations are vulnerable to interruption by natural disasters, terrorist activity, power loss, adverse public health events and other events beyond our control, the occurrence of which could materially harm our business.

Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from computer viruses, hacking, ransomware, cyber-attacks, unauthorized access as well as telecommunication and electrical failures. Our information technology and other internal infrastructure systems, including corporate firewalls, servers, leased lines and connection to the Internet, face the risk of systemic failure that could disrupt our operations. Although we have invested significant resources to enhance the security of our computer systems, there can be no assurances we will not experience unauthorized intrusions into our computer systems, or those of our vendors, contractors and consultants, that we will successfully detect future unauthorized intrusions in a timely manner or that future unauthorized intrusions will not result in material adverse effects on our financial condition, reputation or business prospects.

While we have not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our operations.

We are also vulnerable to accidents, electrical blackouts, labor strikes, terrorist activities, war, natural disasters, adverse public health events and other events beyond our control, and we have not undertaken a systematic analysis of the potential consequences to our business as a result of all of such events and do not have an applicable recovery plan in place. Any disruption to our operations or the operations of our collaborators or suppliers from these kinds of events would likely impact our operating results, cash flows and our financial condition.

Although we carry insurance to protect us against some losses or damages resulting from certain types of disasters, the extent of that insurance is limited in scope and amount, and we cannot assure you that our insurance coverage will be sufficient to satisfy any damages and losses. Any business interruption may have a material adverse effect on our business, financial position, results of operations, cash flows and prospects.

Deterioration of political, economic and security conditions in Israel may adversely affect our operations.

Any major hostilities involving Israel, a substantial decline in the prevailing regional security situation or the interruption or curtailment of trade between Israel and its present trading partners could have a material adverse effect on our operations and cash flows. See the prior discussion on Political Climate.

Prolonged and/or widespread regional conflict in the Middle East could have the following results, among others:

●	capital market reassessment of risk and subsequent redeployment of capital to more stable areas making it more difficult for us to obtain financing for potential development projects;
●	security concerns in Israel, making it more difficult for our personnel or supplies to enter or work in or exit the country;
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●	security concerns leading to evacuation of our personnel;
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●	damage to or destruction of our wells, production facilities, receiving terminals or other operating assets;
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●	inability of our service and equipment providers to deliver items necessary for us to conduct our operations in Israel, resulting in delays; and
---	---
●	the lack of availability of experienced crew, oilfield equipment or services if third party providers decide not to enter or to exit the region.
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Loss of property and/or interruption of our business plans resulting from hostile acts could have a significant negative impact on our earnings and cash flow. In addition, we may not have enough insurance to cover any loss of property or other claims resulting from these risks.

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We have a history of losses and we cannot assure you that we will ever be profitable.

We incurred net losses of $7,627,000 for the year ended December 31, 2025, and $7,343,000 for the year ended December 31, 2024. We cannot provide any assurance that we will ever be profitable.

Earnings, if any, will be diluted due to governmental royalty and charitable contributions.

We are legally bound to pay a government royalty of 12.5% of gross sales revenues. Additionally, we are legally required to pay 6% of gross sales revenue to two separate foundations (3% each to two separate foundations – see the separate section on Foundations). As our expenses increase with respect to the amount of sales, these donations and allocation could significantly dilute future earnings and, thus, depress the price of the common stock.

Risks Associated with our Business

We are subject to increasing Israeli governmental regulations and environmental requirements that may cause us to incur substantial incremental costs and/or delays in our drilling program.

Our business is subject to laws and regulations promulgated by the State of Israel relating to the exploration for, and the development, production and marketing of, crude oil and natural gas, as well as safety matters. Legal requirements are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations. We may be required to make substantial expenditures to comply with governmental laws and regulations.

Environmental laws and regulations change frequently, and the implementation of new, or the modification of existing, laws or regulations could adversely impact our operations. The discharge of natural gas, crude oil, or other pollutants into the air, soil or water may give rise to substantial liabilities on our part to government agencies and third parties and may require us to incur substantial costs of remediation. In addition, we may incur costs and penalties in addressing regulatory agency procedures regarding possible non-compliance.

Our lack of diversification increases the risk of an investment in us, and our financial condition and results of operations may deteriorate if we fail to diversify.

Our business focus is on oil and gas exploration on a limited number of properties in Israel and exploitation of any significant reserves that are found within our license areas. As a result, we lack diversification, in terms of both the nature and geographic scope of our business. We will likely be impacted more acutely by factors affecting our industry or the regions in which we operate than we would if our business were more diversified. If we are unable to diversify our operations and cash flows, our financial condition and results of operations and cash flows could deteriorate.

We currently have no proved reserves or current production and we may never have any.

We do not have any proved reserves or current production of oil or gas. We cannot assure you that any wells will be completed or produce oil or gas in commercially profitable quantities.

Oil and gas exploration is an inherently risky business.

Exploratory drilling involves enormous risks, including the risk that no commercially productive oil or natural gas reservoirs will be discovered. Even when properly used and interpreted, seismic data analysis and other computer simulation techniques are only tools used to assist geoscientists in trying to identify subsurface structures and the presence of an active petroleum system. They do not allow the interpreter to know conclusively if hydrocarbons are present or economically available. The risk analysis techniques we use in evaluating potential drilling sites rely on subjective judgments of our personnel and consultants. Additionally, we are typically engaged in drilling deep onshore wildcat exploratory wells in Israel where only approximately 500 total wells have ever been drilled, the vast majority of which are relatively shallow. As such, exploration risks are inherently very substantial.

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A substantial and extended decline in oil or natural gas prices could adversely impact our future rate of growth and the carrying value of our unproved oil and gas assets.

Prices for oil and natural gas fluctuate widely. Fluctuations in the prices of oil and natural gas will affect many aspects of our business, including our ability to attract capital to finance our operations, our cost of capital, and the value of any unproved oil and natural gas properties. Prices for oil and natural gas may fluctuate widely in response to relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty and a wide variety of additional factors that are beyond our control, such as the domestic and foreign supply of oil and natural gas, technological advances affecting energy consumption, and domestic and foreign governmental regulations. Significant and extended reductions in oil and natural gas prices could require us to reduce our capital expenditures and impair the carrying value of our assets.

While there is much analysis and speculation as to the cause of this fluctuation in the price and its predicted future course, there are many factors that contribute to the price of oil, none of which the Company controls. The oil price is also impacted by actual supply and demand, as well as by expectation. Demand for energy is closely related to economic activity which is compounded by key advances and innovation in exploration techniques in recent years. Significant geopolitical events such as heightened conflict in the Middle East, the current Israel-Hamas war, and large-scale terrorist activities can also impact the price of oil tremendously.

If we are successful in finding commercial quantities of oil and/or gas, our revenues, operating results, financial condition and ability to borrow funds or obtain additional capital will depend substantially on prevailing prices for oil and natural gas. Declines in oil and gas prices may materially adversely affect our financial condition, liquidity, ability to obtain financing and operating results. Lower oil and gas prices also may reduce the amount of oil and gas that we could produce economically.

Historically, oil and gas prices and markets have been volatile, with prices fluctuating widely, and they are likely to continue to be volatile, making it impossible to predict with any certainty the future prices of oil and gas. The bottom line is that there are many and varied causes for the fluctuation in the price of oil and natural gas, and we have no control over these factors.

Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations and cash flows may be adversely impacted by currency fluctuations and inflation.

Although our reporting and functional currency is the U.S. dollar, we pay a substantial portion of our expenses in New Israeli Shekel (NIS). As a result, we are exposed to the currency fluctuation risks. For example, if the U.S. dollar weakens against the NIS, our reported financial results in U.S. dollars may be lower than anticipated. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of the currencies mentioned above in relation to the U.S. dollar. These measures, however, may not adequately protect us from material adverse effects.

The insurance we carry may be insufficient to cover all of the risks we face, which could result in significant financial exposure.

Exploration for and production of crude oil and natural gas can be hazardous, involving natural disasters and other unplanned events such as blowouts, well cratering, fire and explosion and loss of well control which can result in damage to or destruction of wells, injury to persons, loss of life, or damage to property and the environment. Exploration and production activities are also subject to risk from political developments such as terrorist acts, piracy, civil disturbances, war, expropriation or nationalization of assets, which can cause loss of or damage to our property.

As is customary within our industry, we maintain insurance against many, but not all, potential perils confronting our operations and in coverage amounts and deductible levels that we believe to be appropriate but economic. Consistent with that profile, our insurance program is structured to provide us financial protection from unfavorable loss resulting from damages to or the loss of physical assets or loss of human life, liability claims of third parties, and exploratory drilling interruption attributed to certain assets and including such occurrences as well blowouts and resulting oil spills, at a level that balances cost of insurance with our assessment of risk and our ability to achieve a reasonable rate of return on our investments. Although we believe the coverage and amounts of insurance carried are adequate and consistent with industry practice, we do not have insurance protection against all the risks we face. Because we chose not to insure certain risks, insurance may not be available at a level that balances the cost of insurance and our desired rates of return, or actual losses exceed coverage limits. We regularly review our risks of loss and the cost and availability of insurance and revise our insurance program accordingly.

If an event occurs that is not covered by insurance or not fully protected by insured limits, it could have a significant adverse impact on our financial condition, results of operations and cash flows.

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We face various risks associated with the trend toward increased activism against oil and gas exploration and development activities.

Opposition toward oil and gas drilling and development activity has been growing globally and is particularly pronounced in Organization for Economic Co-operation and Development (“OECD”) countries which include the U.S., the U.K and Israel. Companies in the oil and gas industry, such as us, are often the target of activist efforts from both individuals and non-governmental organizations regarding environmental compliance and business practices, potential damage to fresh water sources, and safety, among other topics. Future activist efforts could result in the following:

●	delay or denial of drilling or other exploration permits or licenses;
●	shortening of lease terms or reduction in lease size;
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●	restrictions on installation or operation of gathering or processing facilities;
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●	restrictions on the use of certain operating practices, such as hydraulic fracturing;
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●	legal challenges or lawsuits;
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●	damaging publicity about us;
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●	increased costs of doing business;
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●	reduction in demand for our products; and
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●	other adverse effects on our ability to develop our properties and expand production.
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Our need to incur costs associated with responding to these initiatives or complying with any resulting new legal or regulatory requirements resulting from these activities that are substantial and not adequately provided for, could have a material adverse effect on our business, financial condition and results of operations and cash flows.

Economic risks may adversely affect our operations and/or inhibit our ability to raise additional capital.

Economically, our operations in Israel may be subject to:

●	exchange rate fluctuations;
●	royalty and tax increases and other risks arising out of Israeli State sovereignty over the mineral rights in Israel and its taxing authority;
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●	changes in Israel’s economy that could lead to oil and gas price controls; and
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●	unavailability of key personnel, services or equipment as a result of the Israel-United States-Iran war, the Israel-Hezbollah war, the Israel-Hamas war, or other regional hostilities.

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Consequently, our operations may be substantially affected by local economic factors beyond our control, any of which could negatively affect our financial performance and prospects.

Legal risks could negatively affect our market value.

Legally, our operations in Israel may be subject to:

●	changes in the Petroleum Law resulting in modification of license and permit rights;
●	adoption of new legislation relating to the terms and conditions pursuant to which operations in the energy sector may be conducted;
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●	changes in laws and policies affecting operations of foreign-based companies in Israel; and
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●	changes in governmental energy and environmental policies or the personnel administering them.
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The Israeli Energy Ministry has now enacted regulations relating to licensing requirements for entities engaged in the fuel sector that would result in our having to obtain additional licenses to market and sell hydrocarbons that we may discover.

Further, in the event of a legal dispute in Israel, we may be subject to the exclusive jurisdiction of Israeli courts or we may not be successful in subjecting persons who are not United States residents to the jurisdiction of courts in the United States, either of which could adversely affect the outcome of a dispute.

There are limitations on the transfer of interests in our petroleum rights, which could impair our ability to raise additional funds to execute our business plan.

The Israeli government has the right to approve any transfer of rights and interests in any license or other petroleum right we hold or may be granted and any mortgage of any license or other petroleum rights to borrow money. If we attempt to raise additional funds through borrowings or joint ventures with other companies and are unable to obtain required approvals from the government, the value of your investment could be significantly diluted or even lost.

Our dependence on the limited contractors, equipment and professional services available in Israel may result in increased costs and possibly material delays in our work schedule.

Due to the lack of competitive resources in Israel, costs for our operations may be more expensive than costs for similar operations in other parts of the world. We are also more likely to incur delays in our exploration schedules and be subject to a greater risk of failure in meeting our required work schedule. Similarly, some of the oil field personnel we need to undertake our planned operations are not necessarily available in Israel or available on short notice for work in Israel. Any or all of the factors specified above may result in increased costs and delays in the work schedule.

Our dependence on Israeli local licenses and permits as well as new regulations calling for enhanced bank guarantees and insurance coverage may require more funds than we have budgeted and may cause delays in our work schedule.

In connection with drilling operations, we are subject to a number of Israeli local licenses and permits. Some of these are issued by the Israeli Defense Forces, the Civil Aviation Authority, the Israeli Water Commission, the Israel Lands Authority, the holders of the surface rights in the lands on which we intend to conduct drilling operations, local and regional planning commissions and environmental authorities.

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In the event of a Commercial Discovery approved by the Petroleum Commissioner and depending on the nature of the discovery and the production and related distribution equipment necessary to produce and sell the discovered hydrocarbons, we will be subject to additional licenses and permits, including from various departments in the Energy Ministry, regional and local planning commissions, the environmental authorities and the Israel Lands Authority. If we are unable to obtain some or all of these permits or the time required to obtain them is longer than anticipated, we may have to alter or delay our planned work schedule, which would increase our costs.

If we are successful in finding commercial quantities of oil and/or gas, our operations will be subject to laws and regulations relating to the generation, storage, handling, emission, transportation and discharge of substances into the environment, which can adversely affect the cost, manner or feasibility of our doing business. Many Israeli laws and regulations require permits for the operation of various facilities, and these permits are subject to revocation, modification and renewal. Governmental authorities have the power to enforce compliance with their regulations, and violations could subject us to fines, injunctions or both.

If compliance with environmental regulations is more expensive than anticipated, it could adversely impact the profitability and cash flows of our business.

Risks of substantial costs and liabilities related to environmental compliance issues are inherent in oil and gas operations. It is possible that other developments, such as stricter environmental laws and regulations, and claims for damages to property or persons resulting from oil and gas exploration and production, would result in substantial costs and liabilities. This could also cause our insurance premiums to be significantly greater than anticipated.

The unavailability or high cost of equipment, supplies, other oil field services and personnel could adversely affect our ability to execute our exploration and development plans on a timely basis and within our budget.

Our industry is cyclical and, from time to time, there is a shortage of equipment, supplies and oilfield services. There may also be a shortage of trained and experienced personnel. During these periods, the costs of such items are substantially greater and their availability may be limited, particularly in locations that typically have limited availability of equipment and personnel, such as the Eastern Mediterranean, where our operations are located. As a result, equipment, supplies and oilfield services may not be available at rates that provide a satisfactory return on our investment.

Significant disruptions of information technology systems or security breaches could adversely affect our business.

We are increasingly dependent upon information technology systems, infrastructure and data to operate our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including, among other things, trade secrets or other intellectual property, proprietary business information and personal information). It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. Additionally, we have outsourced elements of our operations to third parties, and as a result we manage a number of third-party vendors who may or could have access to our confidential information. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information. The size and complexity of our information technology systems and those of the third-party vendors and service providers with whom we contract make these environments inherently vulnerable. Because we store large volumes of confidential information across our infrastructure, we face risks of service interruptions and security breaches. These vulnerabilities may be exploited through inadvertent or intentional actions by employees, vendors, and business partners, or through cyber attacks by malicious third parties. Likewise, our reliance on third-party systems creates supply chain vulnerabilities outside our direct oversight. A compromise of a vendor’s environment could facilitate unauthorized access to our environments or data.

Significant disruptions or security breaches affecting our information technology systems or those of our third-party vendors and business partners could adversely impact our operations. Such incidents may result in the loss, misappropriation, or unauthorized disclosure of confidential data, including trade secrets, intellectual property, and personal information. Consequently, these failures could lead to substantial financial, legal, and reputational harm. Security breaches and other unauthorized inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above. While we have implemented security measures to protect our information technology systems and infrastructure, there can be no assurance that such measures will prevent service interruptions or security breaches that could adversely affect our business. In addition, our liability insurance may not be sufficient in type or amount to cover us against costs of or claims related to security breaches, cyber-attacks and other related breaches. A cybersecurity breach could adversely affect our reputation and could result in other negative consequences, including disruption of our internal operations, increased cybersecurity protection costs, lost revenue, or litigation.

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Risks Related to our Common Stock

We will issue additional common stock in the future, which would dilute the ownership interests of our existing stockholders.

In the future, we anticipate issuing additional securities in connection with capital raising efforts, including shares of our common stock or securities convertible into or exchangeable for our common stock, resulting in the dilution of the ownership interests of our stockholders. We are authorized under our amended and restated certificate of incorporation to issue 1,600,000,000 shares of common stock. As of March 13, 2026 there were approximately 1,179,449,952 shares of our common stock issued and outstanding.

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.

Because the likelihood of paying cash dividends on our common stock is remote at this time, stockholders must look solely to appreciation of our common stock to realize a gain on their investments.

We do not know when or if we will pay dividends. We currently intend to retain future earnings, if any, to finance the expansion of our business. Our future dividend policy is within the discretion of our board of directors and will depend upon various factors, including our business, financial condition, results of operations, capital requirements and investment opportunities. Accordingly, stockholders must look solely to appreciation of our common stock to realize a gain on their investment. This appreciation may not occur.

Our stock price and trading volume may be volatile, which could result in losses for our stockholders.

The public market for our common stock has been characterized by significant price and volume fluctuations. There can be no assurance that the market price of our common stock will not decline below its current or historic price ranges. The market price may bear no relationship to the prospects, stage of development, existence of oil and gas reserves, revenues, earnings, assets or potential of our company and may not be indicative of our future business performance. The trading price of our common stock could be subject to wide fluctuations. Fluctuations in the price of oil and gas and related international political events can be expected to affect the price of our common stock. In addition, the stock market in general has experienced extreme price and volume fluctuations that have affected the market price for many companies, sometimes unrelated to the operating performance of these companies. These market fluctuations, as well as general economic, political and market conditions, may have a material adverse effect on the market price of our common stock.

Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include:

●	actual or anticipated quarterly variations in our operating results,
●	the lack or the delay in obtaining necessary regulatory approvals,
●	changes in expectations as to our future financial performance or changes in financial estimates, if any,
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●	announcements relating to our business or the business of our competitors,
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●	conditions generally affecting the oil and natural gas industry, particularly in Israel,
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●	the success of our operating strategy,
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●	the operating and stock performance of other comparable companies, and
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●	The continued listing of our stock on a recognized stock exchange

Many of these factors are beyond our control, and we cannot predict their potential effect on the price of our common stock.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 1C. CYBER SECURITY

Risk management and strategy

We assess material risks from cyber security threats on an ongoing basis, including any potential unauthorized occurrence on or conducted through our Information Technology (IT) systems that may result in adverse effects on the confidentiality, integrity, or availability of our systems, infrastructure or information residing therein. We have developed and implemented various processes to oversee and manage cybersecurity risks and have integrated this cybersecurity risk management framework into our Company’s broader risk management framework.

Governance

Our management and the Board recognize the critical importance of managing cyber security risks as part of our larger risk management program. While all of our personnel play a part in managing cyber security risks, one of the key functions of our Board is to provide informed oversight of our risk management process, including risks from cyber security threats. Our Chief Financial Officer briefs the executive leadership team, the Board, and the Audit Committee regarding cybersecurity risks, strategy, and management at least annually.

Our cybersecurity team is comprised of members of senior leadership, including in-house legal counsel and independent third-party SOC 2 certified IT and cybersecurity consultants that serve as our Managed Security Service Provider (MSSP). Our MSSP has substantial experience involving cybersecurity risk management and IT, including security, compliance, systems and programming. These individuals are informed about, and monitor the prevention, mitigation, detection and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy process described above, and report to our internal executive team on a regular basis.

Engaging Third Parties on Risk Management

We collaborate with vendors, service providers, assessors, auditors, consultants, and other third parties on an as-needed basis to develop secure informational and operational technology systems and protect against cybersecurity threats. For example, we engage third-party security experts to monitor our network and conduct risk assessments and program enhancements.

Managing Third-Party Cybersecurity Risk

We recognize the potential cybersecurity risks associated with the use of third parties that provide services to us, process information on our behalf, or have access to our informational or operational technology systems, and we have processes in place to oversee and manage these risks. These processes include conducting vendor due diligence and risk assessments, participating in industry information sharing groups, subscribing to cybersecurity notification services, and maintaining ongoing collaboration with federal agencies. We also seek to mitigate third-party cybersecurity risk through contractual safeguards, and/or regular review of the internal control reports of such third parties.

Material Impact from Cybersecurity Incidents

The Company has not experienced a material cyber security incident or a cyber security threat that has had, or are likely to have, material impacts to our business, operations, finances, or reputation during 2025 nor in any prior years. The company’s overall risk management systems and processes have followed the recommended guidelines of our cyber security insurance company. The Audit Committee has the board’s oversight of risk from cyber security threats and the responsibility for reviewing the management processes. Management’s role in assessing and managing material risks from cyber security threats is the responsibility of the Chief Financial Officer, who reports and coordinates any potential material risk to the Audit Committee.

ITEM 2. PROPERTIES

At December 31, 2025, the Company held one active petroleum exploration license onshore Israel, the New Megiddo Valleys License 434, comprising approximately 75,000 acres. This License was awarded on September 14, 2023 and had much of the same area and coordinates as the replaced License 428 and expires on September 13, 2026.

Please refer to the discussion above under Part 1, Item 1, Business.

The table below summarizes certain data for our license area for the year ended December 31, 2025:

		Area	Working		Expiration
Type of Right	Name	(Approx. Acres)	Interest		Date
License 434	New Megiddo Valleys	75,000	100	%	September 13, 2026 (1)(2)
(1)	Declaration of a Commercial Discovery during the license term, by the Petroleum Commissioner, which may in certain circumstances be extended for two years to define the boundaries of the field, would entitle Zion to receive a 30-year lease (extendable for up to an additional 20 years (50 years in all) subject to compliance with a field development work program and production.
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(2)	The initial term of three years expires on September 13, 2026. Following the initial three-year period, Zion is allowed four separate one-year extensions, bringing the total license period to seven years, terminating on September 13, 2030.
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Surface Rights

The surface rights to the drill site in the New Megiddo Valleys License 434 area are held under a long-term lease by Kibbutz Sde Eliyahu. The rights are owned by the State of Israel and administered by the Israel Lands Authority. Permission has been granted to Zion by both Kibbutz Sde Eliyahu and the Israel Lands Authority for the use of the surface rights.

The surface rights to former drill sites in the former Joseph License area are held under a long-term lease by Kibbutz Ma’anit. The rights are owned by the State of Israel and administered by the Israel Lands Authority. Permission has been granted to Zion by Kibbutz Ma’anit for the use of the surface rights. The Company has completed the plugging obligations of all wells within the Joseph License area and acknowledges its obligation to complete the abandonment of the wells in accordance with guidance from the Environmental Ministry even though the Joseph License has expired.

Summary of Exploration Activities/Present Activities

Please refer to the discussion above under Item 1, under the caption “Summary of Exploration Activities.”

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Office Properties

(i) The Company’s corporate office in Dallas, Texas is under lease for 8,006 square feet.<br> <br>On November 25, 2025, the Company and LLL Four Forest, LP (“LLL”) signed an Office Lease Agreement (“Agreement”) whereby approximately 8,006 rentable square feet of space, of which approximately 5,577 rentable square feet are located in Suite 1450 located on the fourteenth floor, and approximately 2,429 square feet are located in Suite 1740 located on the seventeenth floor. The lease commencement date is January 1, 2026 and the term is for three years and five months with the lease termination being on or around May 31, 2029. The Agreement provided five (5) months of abated rent at the beginning of the lease term. A security deposit of $16,679 was paid in December 2025 and prepaid rent of $192,144 was also paid in December 2025. With the payment of the prepaid rent in December 2025, the Company’s rent is paid through May 2027. Beginning on June 1, 2027 and extending through May 31, 2028, the Company will pay monthly rent at $24.50 per square foot. Beginning on June 1, 2028 and extending through May 31, 2029, the Company will pay monthly rent at $25.00 per square foot. The Company will also pay its prorata share of electricity, taxes and common area maintenance in the building.
(ii) The Company’s field office in Caesarea, Israel is under lease for 6,566 square feet.
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(i) The Company’s corporate office in Dallas, Texas is under lease for 8,006 square feet.<br> <br>On November 25, 2025, the Company and LLL Four Forest, LP (“LLL”) signed an Office Lease Agreement (“Agreement”) whereby approximately 8,006 rentable square feet of space, of which approximately 5,577 rentable square feet are located in Suite 1450 located on the fourteenth floor, and approximately 2,429 square feet are located in Suite 1740 located on the seventeenth floor. The lease commencement date is January 1, 2026 and the term is for three years and five months with the lease termination being on or around May 31, 2029. The Agreement provided five (5) months of abated rent at the beginning of the lease term. A security deposit of $16,679 was paid in December 2025 and prepaid rent of $192,144 was also paid in December 2025. With the payment of the prepaid rent in December 2025, the Company’s rent is paid through May 2027. Beginning on June 1, 2027 and extending through May 31, 2028, the Company will pay monthly rent at $24.50 per square foot. Beginning on June 1, 2028 and extending through May 31, 2029, the Company will pay monthly rent at $25.00 per square foot. The Company will also pay its prorata share of electricity, taxes and common area maintenance in the building.

(ii) The Company’s field office in Caesarea, Israel is under lease for 6,566 square feet.

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The Company had an option to renew the lease for another five years from February 1, 2024 to January 31, 2029, provided it is not in breach of the agreement, where it is required as well to furnish a notice of intent to exercise the option six months prior to termination of lease, and it furnishes a bank guarantee and insurance confirmation prior to commencement of the option period. The Company exercised the option to renew the lease for another seven years from February 1, 2024 through January 31, 2031, when rent is to be paid on a monthly basis in the base amount of approximately NIS 46,500 per month (approximately $12,800) at the exchange rate in effect on the date of this report and is linked to an increase (but not a decrease) in the CPI.

Geneva Branch

On July 11, 2014, Zion Oil & Gas, Inc., Geneva Branch was registered in the Canton of Geneva, Switzerland. The legal Swiss name for the foreign branch is “Zion Oil & Gas, Inc., Wilmington, Branch of Geneva”. The Zion Swiss Branch has its registered office and its business office at 47 Avenue Blanc, 1202 , Geneva, Switzerland. The purpose of the branch is to operate a foreign treasury center for the Company.

ITEM 3. LEGAL PROCEEDINGS

Litigation

From time to time, the Company may be subject to routine litigation, claims or disputes in the ordinary course of business. The Company defends itself vigorously in all such matters. However, we cannot predict the outcome or effect of any of the potential litigation, claims or disputes.

On June 3, 2025, the Company received a notification via summons that it is being sued in the Superior Court of California, County of Los Angeles under the state’s “Trap and Trace” law. California’s Trap and Trace law, part of the California Invasion of Privacy Act (CIPA) Penal Code Section 638.51 prohibits installing or using devices or processes to capture incoming electronic signaling information (like IP addresses or routing data) without a court order or user consent. The Company has retained counsel in the state of California and this case is ongoing. Approximately $25,000 in legal expenses was recognized in 2025. We are expecting to incur additional expenses in 2026, but they are not expected to be material to the Company. Our retained counsel in California advised us that the California courts are backlogged with similar cases and that a resolution to our case is not expected for months. We believe we have a strong case based on the facts.

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

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

We completed our initial public offering of our common stock in January 2007. From January 3, 2007 through September 1, 2009, shares of our common stock were traded on the NYSE Amex under the symbol “ZN.” From September 2, 2009, through July 10, 2019, our common stock traded on the Nasdaq Global Market, also under the symbol “ZN.” From July 11, 2019 through September 1, 2020, our common stock continued to trade on the Nasdaq Capital Market, also under the symbol “ZN.” Since September 3, 2020, our common stock began trading on OTCQX under the symbol “ZNOG.” On January 1, 2024, our common stock began trading on the OTCQB under the same symbol “ZNOG.” The Zion warrant “ZNWAA” has been trading under the symbol “ZNOGW.” During January 2026, the Company applied for trading on the OTCQX Market, and on February 5, 2026 our ZNOG and ZNOGW began trading on the OTCQX Market.

Holders

As of December 31, 2025, there were approximately 23,146 shareholders of record of our common stock. A significant number of shares of our Common Stock are held in either nominee name or street name brokerage accounts and, consequently, we are unable to determine the number of beneficial owners of our stock.

Dividends

We have never paid dividends on our common stock and do not plan to pay dividends on the common stock in the foreseeable future. Whether dividends will be paid in the future will be in the discretion of our board of directors and will depend on various factors, including our earnings and financial condition and other factors our board of directors considers relevant. We currently intend to retain earnings to develop and expand our business.

Issuer Purchases of Equity Securities

We do not have a stock repurchase program for our common stock.

Insider Trading Policies

The company has adopted insider trading policies and procedures applicable to directors, officers and employees. There are no Rule 10b5-1 trading plans in effect and there are no policies and practices regarding the timing of stock options and stock appreciation right (SAR) awards, other than stock option awards per officer employment agreements. While the company is not subjected to the insider trading policy, the company does not trade in its securities when it is in possession of material nonpublic information other than pursuant to previously adopted Rule 10b5-1 trading plans.

Suppliers may not use or share insider information concerning the Company for the purpose of trading in the Company’s common stock or other securities. Insider information includes material nonpublic information about matters such as significant contracts, claims, liabilities, major litigation, potential sales, mergers or acquisitions, development plans, operational activities, earnings, forecasts and budgets. Material information is any information, either positive or negative information that a reasonable investor would consider important in a decision to buy, hold, or sell securities.

ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements and the notes to those consolidated financial statements included elsewhere in this Annual Report. Some of our discussion is forward-looking and involves risks and uncertainties. For information regarding factors that could have a material adverse effect on our business, refer to Risk Factors under Item 1A of this Report.

Overview

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 OTCQX Market under the symbol “ZNOG” and our Common Stock warrant under the symbol “ZNOGW.”

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On September 14, 2023, the Israel Ministry of Energy approved a new Megiddo Valleys License 434 (“NMVL 434”), allowing oil and gas exploration on approximately 75,000 acres or 302 square kilometers out of the approximately 99,000 acres covered by our previous New Megiddo License 428 (“NML 428”) which expired on February 1, 2023. Zion applied for a replacement license for NML 428 months prior to its expiration. This Exploration License 434 will be valid for three years until September 13, 2026 with four potential 1-year extensions for a total of seven years until September 13, 2030. This NMVL 434 effectively supersedes our previous NML 428.

The NMVL 434 lies onshore, south and west of the Sea of Galilee, and we continue our exploration focus here based on our studies as it appears to possess the key geologic ingredients of an active petroleum system with significant exploration potential.

See Item 1 for a detailed listing of our exploration activities, milestones and/or timelines.

I-35 Drilling Rig & Associated Equipment

On March 12, 2020, Zion entered into a Purchase and Sale Agreement with Central European Drilling kft, a Hungarian corporation, to purchase an onshore oil and gas drilling rig, drilling pipe, related equipment and spare parts for a purchase price of $5.6 million in cash, subject to acceptance testing and potential downward adjustment.

	I-35	Rig		Other			****
	Drilling	Spare		Drilling			****
	Rig	Parts		Assets		Total
	US	US		US		US
Gross Assets:
December 31, 2024
Asset Additions
Asset Disposals for Self-Consumption			)				)
December 31, 2025
Accumulated Depreciation:
December 31, 2024
Asset Depreciation
December 31, 2025
Net Assets
As of December 31, 2024
	I-35	Rig		Other
	Drilling	Spare		Drilling
	Rig	Parts		Assets		Total
	US	US		US		US
Gross Assets:
December 31, 2023
Asset Additions
Asset Disposals					)		)
Asset Disposals for Self-Consumption			)				)
December 31, 2024
Accumulated Depreciation:
December 31, 2023
Asset Depreciation					****		****
December 31, 2024
Net Assets

All values are in US Dollars.

Zion’s ability to fully undertake all of these aforementioned activities was subject to its raising the needed capital through the issuance of our securities, and we anticipate we will continue to need to raise funds through the issuance of equity securities (or securities convertible into or exchangeable for equity securities). No assurance can be provided that we will be successful in raising the needed equity on favorable terms (or at all).

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Our executive offices are located at 12222 Merit Drive, Suite 1000, Dallas, Texas 75251, and our telephone number is (214) 221-4610. Our field office in Israel is located at 9 Halamish Street, North Industrial Park, Caesarea 3088900, and the telephone number is +972-4-623-8500.

Principal Components of our Cost Structure

Our operating and other expenses primarily consist of the following:

●	Impairment of Unproved Oil and Gas Properties: Impairment expense is recognized if a determination is made that a well will not be commercially productive. The amounts include amounts paid in respect of the drilling operations as well as geological and geophysical costs and various amounts that were paid to Israeli regulatory authorities.
●	General and Administrative Expenses: Overhead, including payroll and benefits for our corporate staff, costs of managing our exploratory operations and audit, legal and other professional fees is included in general and administrative expenses. General and administrative expenses also include non-cash stock-based compensation expense, investor relations and marketing, facilities costs, insurance, information technology and other office expenses.
---	---
●	Depreciation, Depletion and Amortization: The systematic expensing of the capital costs incurred to explore for natural gas and oil represents a principal component of our cost structure. As a full cost company, we capitalize all costs associated with our exploration, and apportion these costs to each unit of production, if any, through depreciation, depletion and amortization expense. As we have yet to have production, the costs of abandoned wells are written off immediately versus being included in this amortization pool.
---	---

Going Concern Basis

Although we have limited capital resources, no revenue to date and a loss from operations, our consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and liquidation of liabilities in the ordinary course of business. The appropriateness of using the going concern basis is dependent upon our ability to obtain additional financing or equity capital and, ultimately, to achieve profitable operations. Therefore, there is substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Critical Accounting Policies

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expense during the reporting period.

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We have identified the accounting principles which we believe are most critical to the reported financial status by considering accounting policies that involve the most complex of subjective decisions or assessment.

Impairment of Unproved Oil and Gas Properties

We follow the full-cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized.

All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is included in income from continuing operations before income taxes, and the adjusted carrying amount of the unproved properties is amortized on the unit-of-production method.

Our oil and gas properties represent an investment in unproved properties. These costs are excluded from the amortized cost pool until proved reserves are found or until it is determined that the costs are impaired. All costs excluded are reviewed at least quarterly to determine if impairment has occurred. The amount of any impairment is charged to expense since a reserve base has not yet been established. A further impairment requiring a charge to expense may be indicated through evaluation of drilling results, relinquishing drilling rights or other information.

Abandonment of properties is accounted for as adjustments to capitalized costs. The net capitalized costs are subject to a “ceiling test” which limits such costs to the aggregate of the estimated present value of future net revenues from proved reserves discounted at ten percent based on current economic and operating conditions, plus the lower of cost or fair market value of unproved properties. The recoverability of amounts capitalized for oil and gas properties is dependent upon the identification of economically recoverable reserves, together with obtaining the necessary financing to exploit such reserves and the achievement of profitable operations.

The total net book value of our unproved oil and gas properties under the full cost method was $27,673,000 and $21,682,000 at December 31, 2025 and 2024, respectively.

Currency Utilized

Although our oil & gas properties and our principal operations are in Israel, we report all our transactions in United States dollars. Certain dollar amounts in the consolidated financial statements may represent the dollar equivalent of other currencies.

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Valuation of Deferred Taxes

We record a valuation allowance to reduce our deferred tax asset to the amount that we believe is likely to be realized in the future. In assessing the need for the valuation allowance, we have considered not only future taxable income but also feasible and prudent tax planning strategies. In the event that we were to determine that it would be likely that we would, in the future, realize our deferred tax assets in excess of the net recorded amount, an adjustment to the deferred tax asset would be made. In the period that such a determination was made, the adjustment to the deferred tax asset would produce an increase in our net income.

Asset Retirement Obligation

We record a liability for asset retirement obligation at fair value in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived assets.

RESULTS OF OPERATIONS

The following table sets forth our Statements of Operations data for the years ended December 31 (all data is in thousands of USD) for 2025 and 2024:


Operating costs and expenses:
General and administrative expenses	4,943		4,645
Other	2,788		2,694
Operating costs and expenses	7,731		7,339
Other (income) expense, net	(104	)	4
Net loss	7,627		7,343

FOR THE YEAR ENDED DECEMBER 31, 2025 COMPARED TO DECEMBER 31, 2024

Revenue. We currently have no revenue generating operations.

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Operating costs and expenses. Operating costs and expenses for the year ended December 31, 2025 were $7,731,000 compared to $7,339,000 for the year ended December 31, 2024. Operating costs for the year ended December 31, 2025 were $392,000 5% higher compared to the year ended December 31, 2024.

General and administrative expenses. General and administrative expenses for the year ended December 31, 2025 were $4,943,000 compared to $4,645,000 for the year ended December 31, 2024. This represents a growth of $298,000, or 6%, year over year. In 2025, payroll-related expenses were higher in lieu of a lower number of stock options granted.

Other expenses. Other expenses during the year ended December 31, 2025 were $2,788,000 compared to $2,694,000 for the year ended December 31, 2024. This is a variance of $94,000 or 3%, which is not a material variance. The expenses in this category are comprised of non-compensation and non-professional expenses incurred.

Other (income) expense, net. Other (income) expense, net for the year ended December 31, 2025 was ($104,000) compared to $4,000 for the year ended December 31, 2024. This is a variance of $108,000 or 2,700%. The expenses/income in this category are comprised of foreign currency exchange costs, primarily the New Israeli Shekel (NIS) to the US dollar, and the financial expenses/income. Zion earned higher interest income during 2025, due to higher average cash balances.

Net Loss. Net loss for the year ended December 31, 2025 was $7,627,000 compared to $7,343,000 for the year ended December 31, 2024.

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Liquidity and Capital Resources

Liquidity is a measure of a company’s ability to meet potential cash requirements. As discussed above, we have historically met our capital requirements through the issuance of common stock as well as proceeds from the exercise of warrants and options to purchase common shares.

Our ability to continue as a going concern is dependent upon obtaining the necessary financing to complete further exploration and development activities and generate profitable operations from our oil and natural gas interests in the future. Our current operations are dependent upon the adequacy of our current assets to meet our current expenditure requirements and the accuracy of management’s estimates of those requirements. Should those estimates be materially incorrect, our ability to continue as a going concern will be in doubt. Our consolidated financial statements for the year ended December 31, 2025 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We have a history of operating losses and negative cash flows from operations. Therefore, there is substantial doubt about our ability to continue as a going concern.

During the past two completed fiscal years, we have financed our operations primarily from the proceeds of sales of our stock under the Dividend Reinvestment and Stock Purchase Plan (see Note 6E for details). For the years ended December 31, 2025 and 2024, we raised approximately $21,479,000 and $16,257,000, respectively, under the Plan. Of the amounts raised, approximately 60% of the amounts raised in 2025 were attributable to two participants and 57% of the amounts raised in 2024 were attributable to one participant. The cessation of funding from these participants may result in adverse consequences to our business, such as a delay in our testing efforts, until we locate alternate sources for this funding.

At December 31, 2025, we had approximately $8,313,000 in unrestricted cash and cash equivalents compared to $2,272,000 at December 31, 2024. Our working capital (current assets minus current liabilities) was $9,463,000 at December 31, 2025 and $1,702,000 at December 31, 2024.

As of December 31, 2025, and 2024, the Company provided Israeli-required bank guarantees to various governmental bodies (approximately $1,424,000 and $972,000, respectively) and others (approximately $109,000 and $92,000, respectively) with respect to its drilling operation in an aggregate amount of approximately $1,533,000 and $1,064,000, respectively. The cash funds backing these guarantees are held in restricted interest-bearing accounts and are reported on the Company’s balance sheets as cash and cash equivalents – restricted.

During the years ended December 31, 2025 and 2024, cash used in operating activities totaled $8,013,000 and $6,288,000, respectively. Cash provided by financing activities during the years ended December 31, 2025 and 2024 was $21,175,000 and $13,263,000, respectively, and is primarily attributable to proceeds received from the Dividend Reinvestment and Stock Purchase Plan (the “DSPP” or “Plan”). Net cash used in investing activities such as drilling costs for our MJ-01 exploratory well, and purchases of equipment and spare parts was $6,636,000 and $5,274,000 for the years ended December 31, 2025 and 2024, respectively.

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Accounting standards require management to evaluate our ability to continue as a going concern for a period of one year subsequent to the date of the filing of the consolidated financial statements. We expect to incur additional significant expenditures to further our exploration and development programs. While we raised approximately $6,530,000, during the period January 1, 2026 through March 17 2026, which includes collection of the $29,000 stock subscription receivable at December 31, 2025, we will need to raise additional funds in order to continue our exploration and development activities. Additionally, we estimate that, when we are not actively drilling a well, our expenditures are approximately $600,000 per month excluding exploratory operational activities and capital expenditures. However, when we are actively drilling a well, we estimate an additional minimum expenditure of approximately $2,500,000 per month. The above estimates are subject to change. Subject to the qualifications specified below, management believes that our existing cash balance, coupled with anticipated proceeds under the DSPP, will be sufficient to finance our plan of operations through March 31, 2027.

Uncertainties are posed by the various wars and conflicts affecting Israel including, but not limited to, Iran, Hezbollah, Hamas, the Houthis (in Yemen), as well as armed groups in Syria and Iraq. The duration and impacts of these conflicts and/or wars are not fully known at this point in time.

No assurance can be provided that we will be able to raise the needed operating capital.

Even if we raise the needed funds, there are factors that can nevertheless adversely impact our ability to fund our operating needs, including (without limitation), the potential impact(s) of the aforementioned conflicts and wars affecting Israel, unexpected or unforeseen cost overruns in planned non-drilling exploratory work in existing license areas, the costs associated with extended delays in undertaking the required exploratory work, and plugging and abandonment activities which is typical of what we have experienced in the past.

The financial information contained in the consolidated financial statements has been prepared on a basis that assumes that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. This financial information and these consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

The Dividend Reinvestment and Stock Purchase Plan

On March 13, 2014, Zion filed a registration statement on Form S-3 that was part of a replacement registration statement that was filed with the SEC using a “shelf” registration process. The registration statement was declared effective by the SEC on March 31, 2014. On February 23, 2017, the Company filed a Form S-3 with the SEC (Registration No. 333-216191) as a replacement for the Form S-3 (Registration No. 333-193336), for which the three-year period ended March 31, 2017, along with the base Prospectus and Supplemental Prospectus. The Form S-3, as amended, and the new base Prospectus became effective on March 10, 2017, along with the Prospectus Supplement that was filed and became effective on March 10, 2017. The Prospectus Supplement under 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.

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On December 14, 2022, the Company extended the termination date of the ZNWAG warrant by one (1) year from the expiration date of January 8, 2023 to January 8, 2024. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

As of January 8, 2024, any outstanding ZNWAG warrants expired.

Under our Plan, the Company under a Request For Waiver Program executed Waiver Term Sheets of a unit option program consisting of a Unit (shares of stock and warrants) of its securities and subsequently an option program consisting of shares of stock to a participant. The participant’s Plan account was credited with the number of shares of the Company’s Common Stock and warrants that were acquired. Each warrant provided the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $1.00. The warrant has the company notation of “ZNWAM.” The warrants were not registered for trading on the OTCQB or any other stock market or trading market. The warrants became exercisable on January 15, 2021 and continued to be exercisable through July 15, 2022.

On March 21, 2022, the Company extended the termination date of the ZNWAM warrant by one (1) year from the expiration date of July 15, 2022 to July 15, 2023 and revised the exercise price to $0.05. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On June 16, 2023, the Company extended the termination date of the ZNWAM warrant from July 15, 2023 to September 6, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On August 21, 2023, the Company extended the termination date of the ZNWAM warrant from September 6, 2023 to October 31, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On October 19, 2023, the Company extended the termination date of the ZNWAM warrant from October 31, 2023 to December 31, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On December 18, 2023, the Company extended the termination date of the ZNWAM warrant from December 31, 2023 to March 31, 2024. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On March 28, 2024, the Company extended the termination date of the ZNWAM warrant from March 31, 2024 to December 31, 2024. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On January 21, 2025, the Company extended the termination date of the ZNWAM warrant from December 31, 2024 to March 31, 2025. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On March 18, 2025, the entire number of outstanding warrants of 4,376,000 were exercised at $.05 each for total proceeds to Zion of approximately $219,000. As of this report date, there are no ZNWAM warrants outstanding.

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Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program consisting of units of shares of stock and warrants to a participant. After conclusion of the program on June 18, 2021, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and warrants that were acquired. Each warrant provides the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $.25. The warrant shall have the company notation of “ZNWAQ.” The warrants were not registered for trading on the OTCQB or any other stock market or trading market. The warrants were issued on May 5, 2022 and were exercisable through July 15, 2023 at a revised per share exercise price of $.05.

On June 16, 2023, the Company extended the termination date of the ZNWAQ warrant from July 15, 2023 to September 6, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On August 21, 2023, the Company extended the termination date of the ZNWAQ warrant from September 6, 2023 to October 31, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On October 19, 2023, the Company extended the termination date of the ZNWAQ warrant from October 31, 2023 to December 31, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On December 18, 2023, the Company extended the termination date of the ZNWAQ warrant from December 31, 2023 to March 31, 2024. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On March 28, 2024, the Company extended the termination date of the ZNWAQ warrant from March 31, 2024 to December 31, 2024. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On January 21, 2025, the Company extended the termination date of the ZNWAQ warrant from December 31, 2024 to March 31, 2025. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

During March 2025, the entire number of outstanding warrants of 23,428,348 were exercised at $.05 each for total proceeds to Zion of approximately $1,171,000. As of this report date, there are no ZNWAQ warrants outstanding.

Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program consisting of units of shares of stock and warrants to a participant. After conclusion of the program on November 15, 2021, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and warrants that will be acquired. Each warrant provides the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $1.00. The warrant shall have the company notation of “ZNWAS.” The warrants will not be registered for trading on the OTCQB or any other stock market or trading market. The warrants were issued and became exercisable on January 15, 2026 and continue to be exercisable through June 30, 2026 at a per share exercise price of $.25.

Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program consisting of units of shares of stock and warrants to a participant. After conclusion of the program on September 30, 2022, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants that were acquired. Each warrant provides the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $.25. The warrant shall have the company notation of “ZNWAT.” The warrants will not be registered for trading on the OTCQB or any other stock market or trading market.

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

On November 17, 2025, the Company extended the termination date of the ZNWAT warrant from December 31, 2025 to March 31, 2026. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

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Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program consisting of units of shares of stock and warrants to a participant. After conclusion of the program on December 31, 2022, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants that were acquired. Each warrant provides the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $.25. The warrant shall have the company notation of “ZNWAU.” The warrants will not be registered for trading on the OTCQB or any other stock market or trading market. The warrants were issued and became exercisable on January 15, 2026 and continue to be exercisable through June 30, 2026 at a per share exercise price of $.25.

On January 1, 2024, the Company executed a Waiver Term Sheet with a participant consisting of shares of stock. After conclusion of the program on March 31, 2024, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock that were acquired.

On April 1, 2024, the Company executed a Waiver Term Sheet of a unit program with a participant consisting of shares of stock and warrants.

The program was scheduled to terminate at the earlier of: (a) a maximum purchase of $10,000,000 through the DSPP, (b) October 1, 2024 or (c) the closing price of Zion’s stock is 15 cents per share for five (5) consecutive days. Additional terms of the Waiver Term Sheet included the pro-rata issuance of up to 5,000,000 warrants with an exercise price of $.25 per share and an expiration date of December 31, 2024, in the event the Participant purchases up to $5,000,000 of the Company’s stock by July 1, 2024.

On or around August 13, 2024, a first amendment to the Waiver Term Sheet was signed with the participant. The additional terms of the Waiver Term sheet included the pro-rata issuance of up to 10,000,000 warrants with an exercise price of $.25 per share and an expiration date of December 31, 2024, in the event the Participant purchases up to $10,000,000 of the Company’s stock by October 1, 2024.

On or around September 30, 2024, a second amendment to the Waiver Term Sheet was signed with the participant. The additional terms of the Waiver Term sheet provided for the pro-rata issuance of up to 10,000,000 warrants with an exercise price of $.25 per share and an expiration date of April 1, 2025, in the event the Participant purchases up to $10,000,000 of the Company’s stock by December 31, 2024.

On or around November 12, 2024, a third amendment to the Waiver Term Sheet was signed with the participant. The additional terms of the Waiver Term sheet included changing the provision for the program termination provided that the closing stock price is $.20 cents per share or higher for five (5) consecutive days.

On or around January 21, 2025, a fourth amendment to the Waiver Term Sheet was signed with the participant. The Pricing Plan of the program terminated at the earlier of: (a) a maximum purchase of $15,000,000 through the DSPP, (b) June 30, 2025 or (c) the closing price of Zion’s stock is 20 cents per share for five (5) consecutive days. Additional terms of the Waiver Term Sheet include the pro-rata issuance of up to 15,000,000 warrants with an exercise price of $.25 per share and an expiration date of December 31, 2025, in the event the Participant purchases up to $15,000,000 of the Company’s stock by September 30, 2025.

As of May 2, 2025, the above referenced Waiver Term Sheet was terminated as the participant completed the maximum purchase of $15,000,000 through the DSPP along with 15,000,000 warrants.

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

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

Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program effective November 4, 2025 consisting of shares of stock and warrants to a participant. This program had a maximum investment of $250,000 excluding the exercise of any warrants. After conclusion of the program on or around November 18, 2025, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and warrants that were acquired. Each warrant provided the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $.05. The warrant shall have the company notation of “ZNWBC.” The warrants will not be registered for trading on the OTCQB or any other stock market or trading market. On November 19, 2025, a total of 1,519,136 warrants were issued to the participant with the internal designation of the “ZNWBC” warrants. The participant had until March 15, 2026 in which to exercise the warrants.

On November 26, 2025, all of the ZNWBC warrants were exercised, resulting in approximately $76,000 to the Company. As of that date, there were no ZNWBC warrants outstanding.

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

On December 22, 2025, a first amendment to the Waiver Term Sheet was executed whereby the date was extended from December 31, 2025 to January 31, 2026 in which to reach the maximum investment. As part of this first amendment, the termination date of the ZNWAT warrants was extended from December 31, 2025 to March 31, 2026.

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

During the year ended December 31, 2025, Zion incurred $11,000 in equity issuance costs.

During the year ended December 31, 2024, Zion incurred $2,921,000 in equity issuance costs.

During 2025, two participants who participated in the “Request for Waiver” aspect of the DSPP contributed approximately 60% of the cash raised through the DSPP.

During 2024, one participant who participated in the “Request for Waiver” aspect of the DSPP contributed approximately 57% of the cash raised through the DSPP.

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Amendment No. 4 – New Unit Option under the Plan

Under our Plan, we provided a Unit Option with this Amendment No. 4. This Unit Option period began on November 6, 2023 and was scheduled to terminate on December 31, 2023. See Amendment No 5 below for data on an extension.

Our Unit Option consists of the combination of Common Stock and warrants with basic Unit Option features, conditions and terms outlined in the Original Prospectus Supplement. Amendments No.1, 2 and 3 have expired. Amendment No. 4 provided the option period, unit price and the determination of the number of shares of Common Stock and warrants per unit. This Unit Option began on November 6, 2023 and was scheduled to terminate on December 31, 2023, unless extended at the sole discretion of Zion Oil & Gas, Inc. The Unit Option consisted of Units of our securities where each Unit (priced at $250.00 each) was comprised of (i) a certain number of shares of Common Stock determined by dividing $250.00 (the price of one Unit) by the average of the high and low sale prices of the Company’s publicly traded common stock as reported on the OTCQB on the Unit Purchase Date and (ii) Common Stock purchase warrants to purchase an additional fifty (50) shares of Common Stock at a per share exercise price of $0.25. The participant’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants that was acquired under the Units purchased. Each warrant afforded the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $0.25. The warrants has the Company notation of “ZNWBA” and will not be registered for trading on the OTCQB or any other stock market or trading market.

Plan participants, who enrolled into the Unit Option program with the purchase of at least one Unit and enroll in the separate Automatic Monthly Investments (“AMI”) program at a minimum of $50.00 per month, received an additional fifty (50) warrants at an exercise price of $0.25 during this Unit Option program. The fifty (50) additional warrants were for enrolling in the AMI program and received the above warrant with the Company notation of “ZNWBA.” Existing subscribers to the AMI were entitled to the additional fifty (50) warrants, if they purchased at least one (1) Unit during the Unit program.

The ZNWBA warrants became exercisable on January 15, 2024, and continued to be exercisable through January 15, 2025, unless extended, at a per share exercise price of $0.25. See Amendment No. 5 below for new dates.

The date of this Amendment No. 4 to the Prospectus Supplement was November 6, 2023.

Amendment No. 5 – Extension of Termination Date to January 31, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on January 31, 2024.

The ZNWBA warrants now would be first exercisable on February 15, 2024, instead of January 15, 2024 and continue to be exercisable through February 15, 2025, instead of January 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

Accordingly, all references in the Original Prospectus Supplement and Amendment No. 1 and Amendment No. 4, concerning the Unit Option, continue, except for the substitution of the revised Unit Option dates and features above. All other Plan features, conditions and terms remain unchanged.

The date of this Amendment No. 5 to Prospectus Supplement was December 20, 2023.

Amendment No. 6 – Extension of Termination Date to February 29, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on February 29, 2024.

The ZNWBA warrants now will be exercisable on March 15, 2024, instead of February 15, 2024 and continue to be exercisable through March 15, 2025, instead of February 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 6 to Prospectus Supplement was January 29, 2024.

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Amendment No. 7 – Extension of Termination Date to March 31, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on March 31, 2024.

The ZNWBA warrants now will be first exercisable on April 15, 2024, instead of March 15, 2024 and continue to be exercisable through April 15, 2025, instead of March 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 7 to Prospectus Supplement was February 26, 2024.

Amendment No. 8 – Extension of Termination Date to April 30, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on April 30, 2024.

The ZNWBA warrants now will be first exercisable on May 15, 2024, instead of April 15, 2024, and continue to be exercisable through May 15, 2025, instead of April 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 8 to Prospectus Supplement was March 23, 2024.

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Amendment No. 9 – Extension of Termination Date to May 31, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on May 31, 2024.

The ZNWBA warrants now will be first exercisable on June 15, 2024, instead of May 15, 2024, and continue to be exercisable through June 15, 2025, instead of May 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 9 to Prospectus Supplement was April 24, 2024.

Amendment No. 10 – Extension of Termination Date to August 31, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on August 31, 2024.

The ZNWBA warrants now will be first exercisable on September 15, 2024, instead of June 15, 2024, and continue to be exercisable through September 14, 2025, instead of June 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 10 to Prospectus Supplement was May 29, 2024.

Amendment No. 11 – Extension of Termination Date to October 15, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on October 15, 2024.

The ZNWBA warrants now will be first exercisable on November 15, 2024, instead of September 15, 2024, and continue to be exercisable through November 14, 2025, instead of September 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 11 to Prospectus Supplement was August 22, 2024.

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Amendment No. 12 – Extension of Termination Date to December 31, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023. Our Unit Program consists of the combination of Common Stock and warrants with an extended time period, but otherwise the same Unit Program features, conditions and terms in the Prospectus Supplement and Amendment No. 4 apply. We extended under our Unit Program that was to terminate October 15, 2024, but now will terminate December 31, 2024, and we extended the exercise and termination dates of the related ZNWBA warrants.

The ZNWBA warrants became exercisable on January 31, 2025, instead of November 15, 2024, and continue to be exercisable through January 31, 2026, instead of November 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 12 to Prospectus Supplement was October 9, 2024.

Amendment No. 13 – Extension of Termination Date to February 28, 2025

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on February 28, 2025.

The ZNWBA warrants now became exercisable on March 31, 2025, instead of January 31, 2025, and continue to be exercisable through March 31, 2026, instead of January 31, 2026, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 13 to Prospectus Supplement was December 10, 2024.

The current Unit Option terminated on February 28, 2025 as described in Amendment No. 13. The ZWNBA warrants, exercisable at $0.25, were issued on March 31, 2025 and will be exercisable through March 31, 2026.

For the years ended December 31, 2025, and 2024, approximately $29,000 and $nil, respectively, were recorded under the Company’s Statement of Changes in Stockholders’ Equity as Subscriptions Receivables. The funds corresponding to the December 31, 2025 balance were received in January 2026.

For the years ended December 31, 2025, and 2024, approximately $21,479,000, and $16,257,000 were raised under the DSPP program, respectively. The $21,479,000 and $16,257,000 figures were reduced by $11,000 and $2,921,000, respectively, in equity issuance costs to an outside party resulting in net cash provided of $21,468,000 and $13,336,000, respectively.

The Company raised approximately $6,530,000 from the period January 1, 2026 through March 17, 2026 under the DSPP program, which includes collection of the $29,000 stock subscription receivable at December 31, 2025.

The warrants represented by the company notation ZNWAA are tradeable on the OTCQX market under the symbol ZNOGW. However, all of the other warrants characterized above, in the table below, and throughout this Form 10-K, are not tradeable and are used internally for classification and accounting purposes only.

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Warrants Table

The warrant activity and balances for the year 2024 are shown in the table below:

			Warrant	Outstanding								****	Outstanding
	Exercise		Termination	Balance,		Warrants		Warrants		Warrants			Balance,
Warrants	Price		Date	12/31/2023		Issued		Exercised		Expired			12/31/2024
ZNWAA	$	2.00	01/31/2026		1,498,804		-		-		-			1,498,804
ZNWAG	$	1.00	01/08/2024		240,068		-		-		(240,068	)		-
ZNWAM	$	0.05	03/31/2025		4,376,000		-		-		-			4,376,000
ZNWAQ	$	0.05	03/31/2025		23,428,348		-		-		-			23,428,348
ZNWAZ	$	0.25	07/17/2024		153,800		-		-		(153,800	)		-
Outstanding warrants					29,697,020		-		-		(393,868	)		29,303,152

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Changes during 2025 to:

			Warrant	Outstanding						****			Outstanding
	Exercise		Termination	Balance,		Warrants		Warrants			Warrants		Balance,
Warrants	Price		Date	12/31/2024		Issued		Exercised			Expired		12/31/2025
ZNWAA	$	2.00	01/31/2031		1,498,804		-		-			-		1,498,804
ZNWAM	$	0.05	03/31/2025		4,376,000		-		(4,376,000	)		-		-
ZNWAQ	$	0.05	03/31/2025		23,428,348		-		(23,428,348	)		-		-
ZNWBA	$	0.25	03/31/2026		-		1,177,950		-			-		1,177,950
ZNWAT	$	0.18	03/31/2026		-		9,019,652		-			-		9,019,652
ZNWBB	$	0.25	06/30/2026		-		15,000,000		-			-		15,000,000
ZNWBC	$	0.05	03/15/2026		-		1,519,136		(1,519,136	)		-		-
Outstanding warrants					29,303,152		26,716,738		(29,323,484	)		-		26,696,406

Tabular Disclosure of Contractual Obligations

The following summarizes our contractual consolidated financial obligations for continuing operations at December 31, 2025, and the effect such obligations are expected to have on our liquidity and cash flow in future periods.

	Payment due by period (in Thousands of )
	2026	2027		2028		2029		Thereafter		Total
Exploration Related Commitments			-		-		-		-		1,632
Operating Leases			288		372		256		187		1,282
Employment Agreements			-		-		-		-		1,873
Total			288		372		256		187		4,787

All values are in US Dollars.

Off-Balance Sheet Arrangements

We do not currently use any off-balance sheet arrangements to enhance our liquidity or capital resource position, or for any other purpose.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses among other disclosure requirements. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments will be applied retrospectively to all prior periods presented in the financial statements. Zion adopted this ASU effective January 1, 2024. The adoption of this ASU did not have any impact on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures.” This ASU enhances income tax disclosures under topic 740 to increase transparency for investors. Key changes include more detailed rate reconciliations, disaggregation of taxes paid by jurisdiction, and increased disclosure of income before taxes. The effect of this ASU became effective for fiscal years beginning after December 15, 2024. Zion adopted this ASU effective January 1, 2025. The adoption of this ASU did not have any impact on its consolidated financial statements.

Other Recent Accounting Pronouncements

The Company does not believe that the adoption of any recently issued accounting pronouncements had a significant impact on our consolidated financial position, results of operations, or cash flow.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices and/or equity prices. In the normal course of doing business, we are exposed to the risks associated with foreign currency exchange rates and changes in interest rates.

Foreign Currency Exchange Rate Risks. A portion of our expenses, primarily labor expenses and certain supplier contracts, are denominated in New Israeli Shekels (“NIS”). As a result, we have significant exposure to the risk of fluctuating exchange rates with the U.S. Dollar (“USD”), our primary reporting currency. During the period January 1, 2025 through December 31, 2025, the USD has fluctuated by approximately 12.5% against the NIS (the USD weakened relative to the NIS). In contrast, during the period January 1, 2024 through December 31, 2024, the USD has fluctuated by approximately 0.6% against the NIS (the USD strengthened relative to the NIS). Continued weakening of the US dollar against the NIS will result in higher operating costs from NIS denominated expenses. To date, we have not hedged any of our currency exchange rate risks, but we may do so in the future.

At December 31, 2025, we had cash, cash equivalents and short-term and long-term bank deposits of approximately $9,862,000. The weighted average annual interest rate related to our cash and cash equivalents for the year ended December 31, 2025, exclusive of funds at US banks that earn no interest, was approximately 2.8%.

At December 31, 2024, we had cash, cash equivalents and short-term and long-term bank deposits of approximately $3,336,000. The weighted average annual interest rate related to our cash and cash equivalents for the year ended December 31, 2024, exclusive of funds at US banks that earn no interest, was approximately 2.9%.

The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we invest our excess cash in short-term bank deposits and money market funds that may invest in high quality debt instruments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

None.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. Our chief executive officer and our chief financial officer conducted an evaluation of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2025. A significant deficiency in our controls and procedures was identified related solely to the prohibited advance by the Company in March 2025, of a $30,000 hardship loan to an executive vice president referred to in Note 2P of the financial statements accompanying this report.

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the control system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events and the application of judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their goals under all future conditions.

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MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management, under the supervision of the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our company’s assets that could have a material effect on the financial statements.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2025. In making this evaluation, our management used the criteria set forth in the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2025, based on those criteria.

Changes in Internal Control Over Financial Reporting

There were no changes in internal controls over financial reporting that occurred during the fourth quarter of 2025 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item will incorporate by reference such information as set forth in our definitive Proxy Statement (the “2026 Proxy Statement”) for our 2026 annual meeting of stockholders. The 2026 Proxy Statement will be filed with the SEC not later than 120 days subsequent to December 31, 2025.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item will incorporate by reference to the 2026 Proxy Statement for the 2026 annual meeting of stockholders, which will be filed with the SEC not later than 120 days subsequent to December 31, 2025.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item will incorporate by reference to the 2026 Proxy Statement for the 2026 annual meeting of stockholders, which will be filed with the SEC not later than 120 days subsequent to December 31, 2025.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) (1) Consolidated Financial Statements:

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at December 31, 2025 and 2024	F-3
Consolidated Statements of Operations for the years ended December 31, 2025 and 2024	F-4
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2025 and 2024	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024	F-6
Notes to Consolidated Financial Statements	F-8

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Number	Description
3.1	Certificate of Amendment to Amended and Restated Certificate of Incorporation of Zion Oil & Gas, Inc. (incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2011, filed with the SEC on August 9, 2011, Exhibit 3.1, and to the Company’s Form 8-K, filed with the SEC on June 11, 2015, Exhibit 3(i).1.)
3.2	Amended and Restated Bylaws of Zion Oil & Gas, Inc. (incorporated by reference to the Company’s Form 8-K filed with the SEC on February 16, 2022)
4.1	Registration Statement on Form S-3 (File No. 333-283500) as amended, (incorporated by reference as filed with the SEC on November 27, 2024)
4.2	Prospectus Supplement dated December 15, 2021, (incorporated by reference as filed with the SEC on December 16, 2021)
4.3	Original Indenture (incorporated by reference to the Company’s Form S-3 filed with the SEC on December 1, 2021 and amended on December 15, 2021 to the Registrant’s Prospectus, Registration No. 333-261452, Exhibit 4.2 filed with the SEC on December 1, 2021)
4.4	Description of Registered Securities (incorporated by reference to the Company’s Form 10-K filed with the SEC on March 17, 2022)
10.1	Executive Employment and Retention Agreements (Management Agreements)
	(i) Employment Agreement dated November 13, 2013 and made effective January 1, 2014 between Zion Oil & Gas, Inc. and John Brown (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-K as filed with the SEC on March 14, 2017)
	(ii) Employment Agreement dated as of August 15, 2016 between Zion Oil & Gas, Inc. and Michael Croswell Jr (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K as filed with the SEC on September 16, 2016)
	(iii) Employment Agreement dated as of May 1, 2019 and made effective May 1, 2019 between Zion Oil & Gas, Inc. and Robert Dunn (incorporated by reference to Exhibit 10.4 (i) to the Company’s Form 10-Q filed on August 10, 2020)
	(iv) First Amendment to Employment Agreement dated June 11, 2020 and made effective June 11, 2020 between Zion Oil & Gas, Inc. and Robert Dunn (incorporated by reference to Exhibit 10.4 (ii) to the Company’s Form 10-Q filed on August 10, 2020)
	(v) Employment Agreement dated July 1, 2019 and made effective July 1, 2019 between Zion Oil & Gas, Inc. and William H. Avery (incorporated by reference to Exhibit 10.1) to the Company’s Form 8-K filed on July 1, 2019)
10.2	New Megiddo Valleys License 434 (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on November 7, 2023)

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Number	Description
10.3	Office Lease Agreement between Zion Oil & Gas, Inc., as tenant, and Four Forest, LP, as landlord, lease commencement date January 1, 2026 and lease expiration date May 31, 2029
10.4	New Megiddo License 428, dated December 3, 2020 (incorporated by reference to the Company’s Form 10-K filed with the SEC on March 17, 2022)
10.5	Extension of New Megiddo License 428 to February 1, 2023 (incorporated by reference to our Form 10-Q filed with the SEC on August 10, 2022)
14.1	Code of Ethics (incorporated by reference to Exhibit 14.1 to the Company’s Current Report on Form 8-K as filed with the SEC on December 10, 2007)
20.1	Insider Trading Policy (incorporated by reference to Exhibit 20.1 to the Company’s Annual Report on Form 10-K as filed with the SEC on March 27, 2025)
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	Inline XBRL Instance Document.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

ITEM 16. FORM 10-K SUMMARY

We may voluntarily include a summary of information required by Form 10-K under this Item 16. We have elected not to include such summary information.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ZION OIL & GAS, INC. (Registrant)

By:	/s/ Robert W.A. Dunn	By:	/s/ Michael B. Croswell Jr.
	Robert W.A. Dunn<br> Chief Executive Officer<br> (Principal Executive Officer)		Michael B. Croswell Jr.<br> President and Chief Financial Officer<br> (Principal Financial and Accounting Officer)
Date: March 19, 2026		Date: March 19, 2026

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/s/ Robert W.A. Dunn	Chief Executive Officer and Director,	March 19, 2026
Robert W.A. Dunn	(Principal Executive Officer)
/s/ Michael B. Croswell Jr.	President and Chief Financial Officer	March 19, 2026
Michael B. Croswell Jr.	(Principal Financial and Principal Accounting Officer)
/s/ William H. Avery	General Counsel	March 19, 2026
William H. Avery
/s/ Martin M. van Brauman	EVP, Corporate Secretary, Treasurer and Director	March 19, 2026
Martin M. van Brauman
/s/ John M. Brown	Chairman of the Board of Directors	March 19, 2026
John M. Brown
/s/ Paul Oroian	Director	March 19, 2026
Paul Oroian
/s/ Kent Siegel	Director	March 19, 2026
Kent Siegel
/s/ Virginia Prodan	Director	March 19, 2026
Virginia Prodan
/s/ Pandji Putra	Director	March 19, 2026
Pandji Putra
/s/ Sarah Caygill	Director	March 19, 2026
Sarah Caygill
/s/ Jeffrey Moskowitz	Director	March 19, 2026
Jeffrey Moskowitz
/s/ Lee Russell	Director	March 19, 2026
Lee Russell
/s/ Brad Dacus	Director	March 19, 2026
Brad Dacus
/s/ Javier Mazon	Director	March 19, 2026
Javier Mazon

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Zion Oil & Gas, Inc.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at December 31, 2025 and 2024	F-3
Consolidated Statements of Operations for the years ended December 31, 2025 and 2024	F-4
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2025 and 2024	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024	F-6
Notes to Consolidated Financial Statements	F-8

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Zion Oil & Gas, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Zion Oil & Gas, Inc. and subsidiaries (the Company) as of December 31, 2025 and 2024, and the related statements of operations, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Matter

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and had an accumulated deficit that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements, and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.

/s/ RBSM LLP
We have served as the Company’s auditor since 2018.<br> <br>PCAOB ID 587
Las Vegas, NV
March 19, 2026

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Zion Oil & Gas, Inc.

Consolidated Balance Sheets as of

		December 31,
		2024
		US
		thousands
Current assets	****		****
Cash and cash equivalents (see Note 2B)
Cash and cash equivalents – restricted (see Note 2C)
Prepaid expenses and other (see Note 2G)
Governmental receivables
Loan due from related party (see Note 2P)
Other receivables
Total current assets
Unproved oil and gas properties, full cost method (see Note 4)
Property and equipment at cost	****		****
Drilling rig and related equipment, net of accumulated depreciation of 3,521 and 2,807 (see Note 2P)
Property and equipment, net of accumulated depreciation of 743 and 714

Right of Use Lease Assets (see Note 8)
Other assets	****		****
Assets held for severance benefits (see Note 3)
Total other assets
Total assets
Liabilities and Stockholders’ Equity	****		****
Current liabilities	****		****
Accounts payable
Insurance financing (see Note 9F)
Lease obligation – current (see Note 8)
Asset retirement obligation
Accrued liabilities
Total current liabilities
Long-term liabilities	****		****
Lease obligation – non-current (see Note 8)
Provision for severance pay
Total long-term liabilities
Total liabilities
Commitments and contingencies (see Note 9)	****		****
Stockholders’ equity	****		****
Common stock, par value .01; Authorized: 1,600,000,000 shares at December 31, 2025: Issued and outstanding: 1,156,476,572 and 965,362,131 shares at December 31, 2025 and 2024, respectively
Additional paid-in capital
Stock subscription receivable	)
Accumulated deficit	)		)
Total stockholders’ equity
Total liabilities and stockholders’ equity

All values are in US Dollars.

The accompanying notes are an integral part of the consolidated financial statements.

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Zion Oil & Gas, Inc.

Consolidated Statements of Operations

		For the
		year ended
		December
		2024
		US
		thousands
General and administrative
Other
Loss from operations	)		)
Other income (expense), net	****		****
Foreign exchange (loss)	)		)
Financial gain (expenses), net
Loss before income taxes	)		)
Income taxes
Net loss	)		)
Net loss per share of common stock - basic and diluted (in US)	)		)
Weighted-average shares outstanding–basic and diluted (in thousands)

All values are in US Dollars.

The accompanying notes are an integral part of the consolidated financial statements.

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Zion Oil & Gas, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

For the years ended December 31, 2025 and 2024

				Additional			****		****		****
	Common Stock			paid-in		Subscription		Accumulated			****
	Shares		Amounts	Capital		Receivables		deficit		Total
			US	US		US		US		US
	thousands		thousands	thousands		thousands		thousands		thousands
Balances as of December 31, 2023		640,002							)
Funds received from sale of DSPP units and shares and exercise of warrants		324,821
Funds received from option exercises		539
Costs associated with the issuance of shares		-			)						)
Value of options granted to employees, directors and others as non-cash compensation		-
Net loss		-							)		)
Balances as of December 31, 2024		965,362							)
Funds received from sale of DSPP units and shares and exercise of warrants		189,687					)
Funds received from option exercises		1,428					****
Costs associated with the issuance of shares		-			)		****				)
Value of options granted to employees, directors and others as non-cash compensation		-					****
Net loss		-					****		)		)
Balances as of December 31, 2025		1,156,477					)		)

All values are in US Dollars.

The accompanying notes are an integral part of the consolidated financial statements.

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Zion Oil & Gas, Inc.

Consolidated Statements of Cash Flows

	For the year ended
	December 31,
	2025		2024
	US		US
	thousands		thousands
Cash flows from operating activities		****		****
Net loss		)		)
Adjustments required to reconcile net loss to net cash used in operating activities:
Depreciation
Amortization of Right of Use Lease Asset		)
Cost of options issued to employees, directors and others as non-cash compensation
Loss on sale of property and equipment		****
Change in assets and liabilities, net:
Prepaid expenses and other		)		)
Governmental receivables		)		)
Other receivables		)
Lease obligation - current and non current		)		)
Severance pay, net		)		)
Accounts payable				)
Accrued liabilities		****		)
Net cash used in operating activities		)		)
Cash flows from investing activities		****		****
Acquisition of property and equipment		)		)
Proceeds from sale of property and equipment
Acquisition of drilling rig and related equipment		)		)
Investment in unproved oil and gas properties		)		)
Net cash used in investing activities		)		)
Cash flows from financing activities		****		****
Proceeds from exercise of stock options
Changes in insurance premium financing		)
Costs paid related to the issuance of new shares		****		)
Proceeds from issuance of stock and exercise of warrants
Net cash provided by financing activities
Net decrease in cash, cash equivalents and restricted cash		****
Cash, cash equivalents and restricted cash – beginning of year
Cash, cash equivalents and restricted cash – end of year
Non-cash investing and financing activities:		****		****
Unpaid investments in oil and gas properties
Unpaid investments in drilling rig and related equipment
Depreciation of oil and gas equipment
Stock subscription receivable
Unpaid Costs associated with the issuance of shares
Addition of right of use lease assets and lease obligations

All values are in US Dollars.

The accompanying notes are an integral part of the consolidated financial statements.

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Cash, cash equivalents and restricted cash, are comprised as follows:

	December 31,	December 31,
	2025	2024
	US	US
	thousands	thousands
Cash and cash equivalents
Cash and cash equivalents -restricted

All values are in US Dollars.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 1 - Nature of Operations and Going Concern

A. Nature of Operations

Zion Oil & Gas, Inc., a Texas corporation (“we,” “our,” “Zion” or the “Company”) is an oil and gas exploration company with a history of 25 years of oil & gas exploration in Israel. The shareholders of Zion Oil & Gas, Inc. approved the re-domestication of its incorporation to Texas on June 4, 2025.

As of December 31, 2025, the Company has no revenues from its oil and gas operations.

Zion maintains its corporate headquarters in Dallas, Texas. The Company also has branch offices in Caesarea, Israel and Geneva, Switzerland. The purpose of the Israel branch is to support the Company’s operations in Israel, and the purpose of the Switzerland branch is to operate a foreign treasury center for the Company.

On January 24, 2020, Zion incorporated a wholly owned subsidiary, Zion Drilling, Inc., a Delaware corporation, for the purpose of owning a drilling rig, related equipment and spare parts, and on January 31, 2020, Zion incorporated another wholly owned subsidiary, Zion Drilling Services, Inc., a Delaware corporation, to act as the contractor providing such drilling services. When Zion is not using the rig for its own exploration activities, Zion Drilling Services may contract with other operators in Israel to provide drilling services at market rates then in effect. On May 14, 2025, Zion Drilling, Inc. and Zion Drilling Services, Inc. were re-domesticated and converted from Delaware corporations to Texas corporations pursuant to plans of conversion approved unanimously by the directors and shareholders of each corporation.

On October 19, 2022, Zion incorporated a wholly owned subsidiary in Israel, Zion Drilling Israel Ltd, for the purpose of owning a drilling rig and related equipment and spare parts. On this date, the entity was created as a placeholder only. A bank account was created in November 2024 and a tax file was created in *January 2025.*The bank account is denominated in Israeli Shekels. When there are bank transactions in the future, there will be a translation adjustment to United States Dollars. Zion Drilling Israel Ltd did not have any activities during the year ended December 31, 2025.

Exploration Rights/Exploration Activities

New Megiddo Valleys License 434 (“NMVL 434”) – Megiddo-Jezreel #1 Re-Entry (“MJ-01”)

On September 14, 2023, the Israel Ministry of Energy approved NMVL 434, allowing for oil and gas exploration on approximately 75,000 acres or 302 square kilometers. NMVL 434 is valid for three years until September 13, 2026 with four potential 1-year extensions for a total of seven years until September 13, 2030. This NMVL 434 effectively supersedes our previous NML 428.

We continue our exploration focus here based on our studies as it appears to possess the key geologic ingredients of an active petroleum system with significant exploration potential. As previously announced, Zion deployed new technologies and stimulation methods for its re-entry into the MJ-01 well with the objective of potentially unlocking hydrocarbon flows in several identified key zones.

Zion’s rig crew arrived in Israel in February 2025and completed critical maintenance and preparatory work. The rig, which was safely “warm stacked” in September 2024, underwent necessary checks for maintenance, including fluid changes, lubrication and greasing, and mechanical, electrical, and safety audits to ensure peak functionality. The rig crew drilled out the temporary plug at approximately 1,100 meters and set a permanent plug at the deeper part of the well, allowing for isolation of targeted zones for testing. Perforation and stimulation operations were successfully completed, with gas observed at surface during early flowback.

On June 10, 2025, we completed flowback operations at our Megiddo-Jezreel #1 well shut the well in and demobilized our crew. The last of our crew left the country just hours before the 12-day war with Iran. We analyzed the initial gas composition data which confirmed that our targeted perforation and stimulation procedures were successful. Gas reached the surface and showed characteristics consistent with a productive reservoir.

During the last six months of 2025, we engaged in planning and logistics activities for the next phase of operations in Israel. Our technical objective remains unchanged, which is to sidetrack the well and drill a lateral section into the identified target interval to enable multi-stage stimulation across multiple zones. The principal operational refinement is to begin this campaign from the MJ-02 well, located on the same pad as the MJ-01 well, just 7.5 meters away on surface and approximately 300 meters offset at depth. Both wellbores access the same target zone. Starting from MJ-02 allows us to begin in larger casing, use larger-diameter tools, and execute a two-stage drilling plan—providing greater flexibility to manage downhole contingencies and improving our chance of operational success.

Our rig crew arrived in Israel in January 2026 to begin a new phase of operations at both MJ-01 and MJ-02 in Israel. Currently, the team is focusing on routine rig repair and maintenance, including a much-needed upgrade to the generator system, ensuring reliable power for the drilling ahead. Once the rig is serviced and tested, our crew will re-enter MJ-01, complete cleanup of the wellbore, install a seal below the water aquifer zone, and re-establish the mandated water monitoring well as required by the Ministry of Energy and Ministry of Water. Following this work, we will rig down and conduct the mandatory five-year recertification and inspection process to ensure full compliance with International Association of Drilling Contractors (“IADC”) and national standards before transitioning to the next stage. After inspection, we will rig up over MJ-02, plug and abandon the lower sections of that wellbore, set the direction, and begin the planned horizontal drilling operation into the target reservoir zone.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 1 - Nature of Operations and Going Concern (cont’d)

Zion’s Former Joseph License

Uncertainty Due to the Russia- Ukraine War

Due to Russia’s invasion of Ukraine, which began in February 2022, and the resulting sanctions and other actions against Russia and Belarus, there has been uncertainty and disruption in the global economy. Although the Russian war against Ukraine did not have a material adverse impact on the Company’s financial results for the year ended December 31, 2025, at this time the Company is unable to fully assess the aggregate impact the Russian war against Ukraine may have on its business due to various uncertainties, which include, but are not limited to, the duration of the war, the war’s effect on the global economy, future energy pricing, its impact to the businesses of the Company and actions that may be taken by governmental authorities related to the war.

Israel-Hamas War

On October 7, 2023, Hamas, a militant terrorist organization in Gaza, infiltrated southern Israel, killing and injuring at least one thousand Israeli citizens. Roughly 250 Israeli hostages were then taken back to Gaza. This unprovoked attack led the nation of Israel to declare war on Hamas approximately one week later. Israel and Gaza subsequently entered into a multi-phase ceasefire involving the cessation of battles in exchange for release of Israeli hostages and Palestinian prisoners, but hostilities resumed pending release of the remaining Israeli hostages.

On or around October 13, 2025, following more than two years after the initial invasion by Hamas, a ceasefire was negotiated between Israel and Hamas. The ceasefire deal contains three phases and the first phase involves the release of all living and dead Israeli hostages held by Hamas, along with the release of approximately 1,950 Palestinian prisoners being held in Israel prisons. All of the 20 living hostages were released and all of the remains of the dead hostages have been released to Israeli families. The next phase (phase 2) of the ceasefire deal is underway and involves the disarmament of Hamas.

There is uncertainty as to the degree of stability that will be seen in the Gaza strip and the wider impact on hostilities in the region.

While we acknowledge that uncertainty, the Company is moving forward with its MJ-02 recompletion activities (see note 1 for details).

Israel-United States-Iran War

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

On February 28, 2026, Israel and the United States jointly attacked Iran. The attacks took the form of missile strikes throughout Iran targeting regime leadership, nuclear sites, ballistic missile sites and other military infrastructure. Iran’s former supreme leader. Ali Khomenei was killed on this day. The daily attacks are continuing as of the date of this filing. Furthermore, Iran has been firing missiles and drones on approximately fifteen other countries, including, but not limited to, Azerbaijan, Bahrain, Cypress, Iraq, Jordan, Kuwait, Saudi Arabia, Turkey, United Arab Emirates and Turkey.

Israel-Hezbollah War and Wider Hostilities

Immediately after the October 7, 2023 Hamas attack on Israel, the terrorist organization Hezbollah (in Lebanon) began launching daily rockets into Israel. Over the course of the next several months, both Hezbollah and Israel traded rocket fire into the other country, but without engaging in a full war. During Q3 2024, both sides increased the frequency and number of missiles fired. In September 2024, Israel began a ground invasion into Lebanon. On or around November 27, 2024, Israel and Hezbollah signed a ceasefire agreement.

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

B. Going Concern

The Company incurs cash outflows from operations, and all exploration activities and overhead expenses to date have been financed by way of equity or debt financing. The recoverability of the costs incurred to date is uncertain and dependent upon achieving significant commercial production of hydrocarbons.

The Company’s ability to continue as a going concern is dependent upon obtaining the necessary financing to undertake further exploration and development activities and ultimately generating profitable operations from its oil and natural gas interests in the future. The Company’s current operations are dependent upon the adequacy of its current assets to meet its current expenditure requirements and the accuracy of management’s estimates of those requirements. Should those estimates be materially incorrect, the Company’s ability to continue as a going concern may be in doubt. The consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and liquidation of liabilities in the ordinary course of business. During the year ended December 31, 2025, the Company incurred a net loss of approximately $7.6 million and had an accumulated deficit of approximately $301.5 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date the consolidated financial statements were issued.

To carry out planned operations, the Company must raise additional funds through additional equity and/or debt issuances or through profitable operations. There can be no assurance that this capital or positive operational income will be available to the Company, and if it is not, the Company may be forced to curtail or cease exploration and development activities. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty (see also Note 12).

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies

A summary of the significant accounting policies applied in the presentation of the accompanying consolidated financial statements follows:

A. Basis of Presentation and Foreign Currency Matters

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).

All amounts referred to in the notes to the consolidated financial statements are in United States Dollars ($) unless stated otherwise.

The currency of the primary economic environment in which the operations of the Company are conducted is the United States dollar (“dollar”). Therefore, the dollar has been determined to be the Company’s functional currency. Non-dollar transactions and balances have been translated into dollars in accordance with the principles set forth in Accounting Standards Codification (“ASC”) 830 “Foreign Currency Matters.” Transactions in foreign currency (primarily in New Israeli Shekels – “NIS”) are recorded at the exchange rate as of the transaction date. Monetary assets and liabilities denominated in foreign currency are translated on the basis of the representative rate of exchange at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currency are stated at historical exchange rates. All exchange gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of operations as they arise.

B. Cash and Cash Equivalents

The Company maintains cash balances with seven banks, of which four banks are located in the United States, one in the United Kingdom, and two in Israel. For purposes of the statement of cash flows and balance sheet, the Company considers all highly liquid investments with a maturity of three months or less from the balance sheet date to be cash equivalents. At times, the Company maintains deposits in financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk on cash.

C. Cash and Cash Equivalents - Restricted

Interest bearing deposits for a period which exceeds three months but not more than 12 months and are restricted are classified as cash and cash equivalents – restricted. Certain cash deposits in Israeli banks are restricted by various Israeli ministries according to terms of our exploration license.

D. Oil and Gas Properties and Impairment

The Company follows the full-cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized.

All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is included in loss from continuing operations before income taxes, and the adjusted carrying amount of the proved properties is amortized on the unit-of-production method.

The Company’s oil and gas property represents an investment in unproved properties. These costs are excluded from the amortized cost pool until proved reserves are found or until it is determined that the costs are impaired. All costs excluded are reviewed at least quarterly to determine if impairment has occurred. The amount of any impairment is charged to expense since a reserve base has not yet been established. Impairment requiring a charge to expense may be indicated through evaluation of drilling results, relinquishing drilling rights or other information.

Currently, the Company has no economically recoverable reserves and no amortization base. The Company’s unproved oil and gas properties consist of capitalized exploration costs of $27,673,000 and $21,682,000 as of December 31, 2025, and 2024, respectively.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies (cont’d)

E. Property and Equipment

Property and equipment other than oil and gas property and equipment is recorded at cost and depreciated by the straight-line method over its estimated useful life of 3 to 14 years. Depreciation charged to expense amounted to $721,000 and $779,000 for the years ended December 31, 2025, and 2024, respectively. See Footnote 2P for a discussion of the purchase of our drilling rig and related equipment.

F. Assets Held for Severance Benefits

Assets held for employee severance benefits represent contributions to severance pay funds and insurance policies that are recorded at their current redemption value.

G. Prepaid Expenses

The Company makes prepayments for various types of goods and services, including, but not limited to, operational and logistics costs, insurance, professional subscriptions, licenses and other fees.

H. Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("US GAAP") requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of expenses. Such estimates include the valuation of unproved oil and gas properties, deferred tax assets, asset retirement obligations, borrowing rate of interest consideration for leases accounting and legal contingencies. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity, foreign currency, and energy markets have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.

We have made the same estimates as to the potential impact of the Israel-United States-Iran war, Israel-Hezbollah war, the Israel-Hamas war have on our operations. Actual results may differ from these estimates.

I. Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled (see Note 7). The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

Based on Accounting Standards Codification (ASC) 740-10-25-6 “Income Taxes,” the Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company accounts for interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the statements of operations. No liability for unrecognized tax benefits was recognized as of December 31, 2025, and 2024.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies (cont’d)

J. Environmental Costs and Loss Contingencies

Liabilities for loss contingencies, including environmental remediation costs not within the scope of Financial Accounting Standards Board (FASB) ASC Subtopic 410-20, Asset Retirement Obligations and Environmental Obligations – Asset Retirement Obligations, arising from claims, assessments, litigation, fines, and penalties and other sources, are recorded when probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. Recoveries of environmental remediation costs from third parties that are probable of realization are separately recorded as assets, and are not offset against the related environmental liability.

Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of expected future expenditures for environmental remediation obligations are not discounted to their present value.

K. Asset Retirement Obligation

Obligations for dismantlement, restoration and removal of facilities and tangible equipment at the end of oil and gas property’s useful life are recorded based on the estimate of the fair value of the liabilities in the period in which the obligation is incurred. This requires the use of management’s estimates with respect to future abandonment costs, inflation, market risk premiums, useful life and cost of capital. The estimate of asset retirement obligations does not give consideration to the value the related assets could have to other parties. The obligation is recorded if sufficient information about the timing and (or) method of settlement is available to reasonably estimate fair value (see Note 9C).

L. Net Loss per Share Data

Basic and diluted net loss per share of common stock, par value $0.01 per share (“Common Stock”) is presented in conformity with ASC 260-10 “Earnings Per Share.” Diluted net loss per share is the same as basic net loss per share for 2025 as the inclusion of 29,681,325 in stock options and 26,696,406 in warrants would be anti-dilutive.

Diluted net loss per share is the same as basic net loss per share for 2024 as the inclusion of 32,900,882 in stock options and 29,303,152 in warrants would be anti-dilutive.

M. Stock Based Compensation

ASC 718, “Compensation – Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the consolidated financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 718. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.

N. Fair Value Measurements

The Company follows Accounting Standards Codification (ASC) 820, “Fair Value Measurements and Disclosures,” as amended by Financial Accounting Standards Board (FASB) Financial Staff Position (FSP) No. 157 and related guidance. Those provisions relate to the Company’s financial assets and liabilities carried at fair value and the fair value disclosures related to financial assets and liabilities. ASC 820 defines fair value, expands related disclosure requirements, and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, assuming the transaction occurs in the principal or most advantageous market for that asset or liability.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies (cont’d)

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:

●	Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;
●	Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and
---	---
●	Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.
---	---

The Company’s financial instruments, including cash and cash equivalents, other receivables, prepaid expenses and other, Government receivables, accounts payable and accrued liabilities, are carried at historical cost. At December 31, 2025 and 2024, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

O. Warrants

In connection with the Dividend Reinvestment and Stock Purchase Plan (“DSPP”) financing arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are stand-alone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded and accounted as a part of the DSPP investment as additional paid-in capital of the common stock issued. All other warrants are recorded at fair value and expensed over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note 6, Stockholders’ Equity.

P. Related parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. All transactions with related parties are recorded at fair value of the goods or services exchanged.

A hardship loan of $30,000 was given to an executive vice president in March 2025 with the stipulation of monthly repayments of $2,500 beginning in *April 2025.*The balance owed to Zion was $7,500 as of December 31, 2025. Monthly deductions of $2,500 occurred in January and February 2026and the last scheduled repayment of $2,500 will be deducted on or around March 31, 2026. Zion did not have any other related party transactions during the fiscal years ending December 2025 and 2024.

Q. Depreciation and Accounting for Drilling Rig and Related Equipment

Zion purchased an onshore oil and gas drilling rig, drilling pipe, related equipment and spare parts for a purchase price of $5.6 million in cash, inclusive of approximately $540,000 allocated to spare parts and $48,000 allocated to additional separate assets. The value of the spare parts and separate assets are captured in separate ledger accounts, but reported as one line item with the drilling rig on the balance sheet. Zion determined that the life of the I-35 drilling rig (the rig Zion purchased), is 10 years. Zion is depreciating the rig on a straight-line basis.

Zion uses the First In First Out (“FIFO”) method of accounting for the inventory spare parts, meaning that the earliest items purchased will be the first item charged to the well in which the inventory of spare parts gets consumed.

It is also noteworthy that various components and systems on the rig will be subject to certifications by the manufacturer to ensure that the rig is maintained at optimal levels. Per standard practice in upstream oil and gas, each certification performed on our drilling rig increases the useful life of the rig by five years. The costs of each certification will be added to the drilling rig account, and our straight-line amortization will be adjusted accordingly.

Zion purchased rig spare parts totaling approximately $1,143,000 and $178,000 during the years ending December 31, 2025 and 2024, respectively, in preparation for its MJ-01 re-entry project.

Zion sold some excess scrap drilling pipe and accessories for approximately $35,000 to a local Israeli party during the year 2024. This transaction triggered a reduction in Other Drilling Assets, an accumulated depreciation adjustment and a loss on the disposal.

See the table below for a reconciliation of the rig-related activity during the years ending December 31, 2025 and 2024.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies (cont’d)

I-35 Drilling Rig & Associated Equipment

	I-35	Rig		Other			****
	Drilling	Spare		Drilling			****
	Rig	Parts		Assets		Total
	US	US		US		US
Gross Assets:
December 31, 2024
Asset Additions
Asset Disposals for Self-Consumption			)				)
December 31, 2025
Accumulated Depreciation:
December 31, 2024
Asset Depreciation
December 31, 2025
Net Assets
As of December 31, 2024
	I-35	Rig		Other
	Drilling	Spare		Drilling
	Rig	Parts		Assets		Total
	US	US		US		US
Gross Assets:
December 31, 2023
Asset Additions
Asset Disposals					)		)
Asset Disposals for Self-Consumption			)				)
December 31, 2024
Accumulated Depreciation:
December 31, 2023
Asset Depreciation					****		****
December 31, 2024
Net Assets

All values are in US Dollars.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies (cont’d)

R. Other Comprehensive Income

The Company does not have any activity that results in Other Comprehensive Income.

S. Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses among other disclosure requirements. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments will be applied retrospectively to all prior periods presented in the financial statements. Zion adopted this ASU effective January 1, 2024. The adoption of this ASU did not have any impact on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures.” This ASU enhances income tax disclosures under topic 740 to increase transparency for investors. Key changes include more detailed rate reconciliations, disaggregation of taxes paid by jurisdiction, and increased disclosure of income before taxes. The effect of this ASU became effective for fiscal years beginning after December 15, 2024. Zion adopted this ASU effective January 1, 2025. The adoption of this ASU did not have any impact on its consolidated financial statements.

Other Recent Accounting Pronouncements

The Company does not believe that the adoption of any recently issued accounting pronouncements had a significant impact on our consolidated financial position, results of operations, or cash flow.

T. Operating Segments

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

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

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

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 3 - Provision for Severance Pay

Israeli law generally requires payment of severance pay upon dismissal of an Israeli employee or upon termination of employment in certain other circumstances. The following plans relate to the employees in Israel:

A.	The liability in respect of certain of the Company’s employees is discharged in part by participating in a defined contribution pension plan and making regular deposits with recognized pension funds. The deposits are based on certain components of the salaries of the said employees. The custody and management of the amounts so deposited are independent of the Company’s control.
B.	The Company’s liability for severance pay for its Israeli employees is calculated pursuant to Israeli severance pay law based on the most recent salary of the employee multiplied by the number of years of employment, as of the balance sheet date. Employees are entitled to one month’s salary for each year of employment, or a portion thereof. Certain senior executives are entitled to receive additional severance pay. The Company’s liability for all of its Israeli employees is partly provided for by monthly deposits in insurance policies and the remainder by an accrual in the consolidated financial statements. The value of these policies is recorded as an asset in the Company’s balance sheet.
---	---

The liability in respect of certain of the Company’s employees is discharged in part by participating in a defined contribution pension plan and making regular deposits with recognized pension funds. The deposits are based on certain components of the salaries of the said employees. The custody and management of the amounts so deposited are independent of the Company’s control.

The Company’s liability for severance pay for its Israeli employees is calculated pursuant to Israeli severance pay law based on the most recent salary of the employee multiplied by the number of years of employment, as of the balance sheet date. Employees are entitled to one month’s salary for each year of employment, or a portion thereof. Certain senior executives are entitled to receive additional severance pay. The Company’s liability for all of its Israeli employees is partly provided for by monthly deposits in insurance policies and the remainder by an accrual in the consolidated financial statements. The value of these policies is recorded as an asset in the Company’s balance sheet.

---

The deposited funds include profits/loss accumulated up to the balance sheet date. The value of the deposited funds is based on current redemption value of these policies.

C.	Withdrawals from the funds may be made only upon termination of employment.
D.	As of December 31, 2025, and 2024, the Company had a provision for severance pay of $662,000 and $548,000, respectively, of which all was long-term. As of December 31, 2025, and 2024, the Company had $662,000 and $541,000, respectively, deposited in funds managed by major Israeli financial institutions which are earmarked to cover severance pay liability. Such deposits are not considered to be “plan assets” and are therefore included in other assets.
---	---

Withdrawals from the funds may be made only upon termination of employment.

As of December 31, 2025, and 2024, the Company had a provision for severance pay of $662,000 and $548,000, respectively, of which all was long-term. As of December 31, 2025, and 2024, the Company had $662,000 and $541,000, respectively, deposited in funds managed by major Israeli financial institutions which are earmarked to cover severance pay liability. Such deposits are not considered to be “plan assets” and are therefore included in other assets.

---

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 4 - Unproved Oil and Gas Properties, Full Cost Method

Unproved oil and gas properties, under the full cost method, are comprised as follows:

	December 31,	December 31,
	2025	2024
	US	US
	thousands	thousands
Excluded from amortization base:
Drilling costs, and other operational related costs
Capitalized salary costs
Capitalized interest costs
Legal and seismic costs, license fees and other preparation costs
Other costs

All values are in US Dollars.

Changes in Unproved oil and gas properties during the years ended December 31, 2025, and 2024, are as follows:

	December 31,		December 31,
	2025		2024
	US		US
	thousands		thousands
Excluded from amortization base:
Drilling costs, and other operational related costs
Capitalized salary costs
Legal and seismic costs, license fees and other preparation costs
		*		*

All values are in US Dollars.

*	Inclusive of non-cash amounts of approximately $863,000, and $627,000 during the years 2025, and 2024, respectively

Please refer to Footnote 1 – Nature of Operations and Going Concern for more information about Zion’s exploration activities.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 5 - Accrued Liabilities

Accrued liabilities are comprised as follows:

	December 31,	December 31,
	2025	2024
	US	US
	thousands	thousands
Drilling provisions
Employees related
Audit and Legal Costs
Other

All values are in US Dollars.

Note 6 - Stockholders’ Equity

The Company’s shareholders approved the amendment of the Company’s Amended and Restated Certificate of Incorporation to increase the number of shares of common stock, par value $0.01, that the Company is authorized to issue from 1,200,000,000 shares to 1,600,000,000 shares, effective June 4, 2025.

A. 2021 Omnibus Incentive Stock Option Plan

Effective June 9, 2021, the Company’s shareholders authorized the adoption of the Zion Oil & Gas, Inc. 2021 Omnibus Incentive Stock Option Plan (“Omnibus Plan”) for employees, directors and consultants, initially reserving for issuance thereunder 38,000,000 shares of common stock.

The Omnibus Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, bonus stock, awards in lieu of cash obligations, other stock-based awards and performance units. The plan also permits cash payments under certain conditions.

The compensation committee of the Board of Directors (comprised of independent directors) is responsible for determining the type of award, when and to whom awards are granted, the number of shares and the terms of the awards and exercise prices. The options are exercisable for a period not to exceed ten years from the date of grant.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 - Stockholders’ Equity (cont’d)

During the year ended December 31, 2025, the Company granted the following options from the Omnibus Plan for employees, directors and consultants, to purchase shares of common stock as non-cash compensation:

i.	Options to purchase 175,000 shares of Common Stock to five senior officers and two staff members at an exercise price of $0.10 per share. The options vested upon grant and are exercisable through January 4, 2035. The fair value of the options at the date of grant amounted to approximately $15,000.
ii.	Options to purchase 25,000 shares of Common Stock to one senior officer at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through January 4, 2035. These options were granted per the provisions of the Israeli Appendix to the Plan (“Israeli Appendix”). The Israeli Appendix shall apply only to Participants who are residents of the State of Israel or those who are deemed to be residents of the State of Israel for the payment of tax. The provisions specified are an integral part of the Omnibus Plan. The fair value of the options at the date of grant amounted to approximately $3,000.
---	---
ii.	Options to purchase 10,000 shares of Common Stock to one staff member at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through September 1, 2034. These options were granted per the provisions of the Israeli Appendix. The fair value of the options at the date of grant amounted to approximately $500.
---	---

During the year ended December 31, 2024, the Company granted the following options from the Omnibus Plan for employees, directors and consultants, to purchase shares of common stock as non-cash compensation:

i.	Options to purchase 175,000 shares of Common Stock to five senior officers and one staff member at an exercise price of $0.07 per share. The options vested upon grant and are exercisable through January 4, 2034. The fair value of the options at the date of grant amounted to approximately $11,000.
ii.	Options to purchase 25,000 shares of Common Stock to one senior officer at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through January 4, 2034. These options were granted per the provisions of the Israeli Appendix. The fair value of the options at the date of grant amounted to approximately $2,000.
---	---
iii.	Options to purchase 10,000 shares of Common Stock to one staff member at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through September 1, 2034. These options were granted per the provisions of the Israeli Appendix. The fair value of the options at the date of grant amounted to approximately $1,000.
---	---

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 - Stockholders’ Equity (cont’d)

D. Warrants and Options

The Company has reserved 56,377,731 shares of common stock as of December 31, 2025, for the exercise of warrants and options to employees and non-employees, of which 56,377,731 are exercisable. These warrants and options could potentially dilute basic earnings per share in future years. The warrants and options exercise prices and expiration dates are as follows:

					Warrants
	Exercise	Number of		Expiration	or
	Price	Shares		Date	Options
	US
To non-employees
			10,000	October 1, 2027	Options
			7,500	January 1, 2028	Options
			30,000	February 28, 2028	Options
			80,000	November 18, 2029	Options
			20,000	August 12, 2032	Options
			55,000	September 22, 2033	Options
			50,000	April 15, 2032	Options
			75,000	December 10, 2029	Options
To employees and directors
			107,500	January 1, 2027	Options
			40,000	April 17, 2027	Options
			30,000	October 1, 2027	Options
			55,000	January 1, 2028	Options
			25,000	January 4, 2028	Options
			4,000	April 6, 2028	Options
			25,000	January 6, 2029	Options
			35,000	September 18, 2029	Options
			70,000	November 18, 2029	Options
			35,000	January 5, 2030	Options
			75,000	January 4, 2031	Options
			200,000	May 21, 2031	Options
			200,000	July 17, 2031	Options
			10,000	September 1, 2031	Options
			300,000	January 5, 2032	Options
			55,000	January 17, 2032	Options
			560,000	April 15, 2032	Options
			55,000	August 12, 2032	Options
			10,000	September 1, 2032	Options

All values are in US Dollars.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 - Stockholders’ **** Equity (cont’d)

					Warrants
	Exercise	Number of		Expiration	or
	Price	Shares		Date	Options
	US
			495,000	September 23, 2032	Options
			25,000	January 4, 2033	Options
			10,000	September 1, 2033	Options
			895,000	September 22, 2033	Options
			25,000	January 4, 2034	Options
			10,000	September 1, 2034	Options
			25,000	January 4, 2035	Options
			10,000	September 1, 2035	Options
			50,000	January 4, 2033	Options
			6,082,000	September 22, 2033	Options
			125,000	January 4, 2034	Options
			175,000	January 4, 2035	Options
			210,000	January 17, 2032	Options
			3,000,000	January 4, 2032	Options
			5,904,325	April 15, 2032	Options
			4,830,000	September 23, 2032	Options
			25,000	August 1, 2032	Options
			118,000	August 12, 2032	Options
			413,000	September 1, 2031	Options
			25,000	September 3, 2029	Options
			25,000	June 15, 2027	Options
			1,335,000	July 9, 2031	Options
			1,200,000	May 21, 2027	Options
			1,600,000	May 21, 2031	Options
			300,000	January 4, 2027	Options
			550,000	January 4, 2031	Options
To investors
			9,019,652	March 31, 2026	Warrants
			1,177,950	March 31, 2026	Warrants
			15,000,000	June 30, 2026	Warrants
			1,498,804	January 31, 2031	Warrants
Total outstanding			56,377,731

All values are in US Dollars.

*	Weighted Average

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 - Stockholders’ Equity (cont’d)

The stock option transactions since January 1, 2024 are shown in the table below:

			****	Weighted
			****	Average
	Number of			exercise
	shares			price
			****	US
Outstanding, December 31, 2023		34,091,250
Changes during 2024 to:
Granted to employees, officers, directors and others*		210,000
Expired/Cancelled/Forfeited		(862,193	)
Exercised		(538,175	)
Outstanding, December 31, 2024		32,900,882
Changes during 2024 to:
Granted to employees, officers, directors and others*		210,000
Expired/Cancelled/Forfeited		(2,001,557	)
Exercised		(1,428,000	)
Outstanding, December 31, 2025		29,681,325
Exercisable, December 31, 2025		29,681,325

All values are in US Dollars.

The aggregate intrinsic value of options exercised during 2025, and 2024 was approximately $92,000, and $22,000 respectively.

The aggregate intrinsic value of the outstanding options and warrants as of December 31, 2025, totaling 56,377,731 was approximately $2,914,000.

The aggregate intrinsic value of the outstanding options and warrants as of December 31, 2024, totaling 62,204,034 was approximately $2,414,000.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 - Stockholders’ Equity (cont’d)

The following table summarizes information about stock options outstanding as of December 31, 2025:

Shares underlying outstanding options (fully vested)
	****	Weighted
	****	average		Weighted
Range of	****	remaining		Average
exercise		contractual		Exercise
price		life (years)		price
US	****	****	****	US
0.01	107,500		1.00
0.01	40,000		1.30
0.01	40,000		1.75
0.01	62,500		2.00
0.01	25,000		2.01
0.01	30,000		2.16
0.01	4,000		2.27
0.01	25,000		3.02
0.01	35,000		3.72
0.01	150,000		3.89
0.01	35,000		4.02
0.01	75,000		5.02
0.01	200,000		5.39
0.01	200,000		5.55
0.01	10,000		5.67
0.01	300,000		6.02
0.01	55,000		6.05
0.01	560,000		6.30
0.01	75,000		6.62
0.01	10,000		6.68
0.01	495,000		6.74
0.01	25,000		7.02
0.01	10,000		7.68
0.01	895,000		7.73
0.01	25,000		8.02
0.01	10,000		8.68
0.01	25,000		9.02
0.01	10,000		9.68
0.06	50,000		7.02
0.07	125,000		8.02
0.07	6,137,000		7.74
0.10	175,000		9.02
0.14	210,000		6.05
0.15	3,000,000		6.02
0.15	5,954,325		6.30
0.16	75,000		3.95
0.18	4,830,000		6.74
0.24	25,000		6.59
0.24	118,000		6.62
0.25	50,000		5.67
0.25	363,000		5.67
0.28	25,000		3.68
0.29	25,000		1.46
0.39	1,335,000		5.53
0.59	1,200,000		1.39
0.59	1,600,000		5.39
0.92	300,000		1.01
0.92	550,000		5.02
0.01 - 0.92	29,681,325

All values are in US Dollars.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 - Stockholders’ Equity (cont’d)

Granted to employees

The following table sets forth information about the weighted-average fair value of options granted to employees and directors during the year, using the Black Scholes option-pricing model and the weighted-average assumptions used for such grants:

	For the year ended
	December 31,
	2025		2024
Weighted-average fair value of underlying stock at grant date	$	0.11	$	0.07
Dividend yields		—		—
Expected volatility		132% - 135%		133% - 134%
Risk-free interest rates		3.68% - 4.41%		3.71% - 3.97%
Expected life (in years)		5.00		5.00
Weighted-average grant date fair value	$	0.10	$	0.07

Granted to non-employees

The Company did not grant any options to non-employees during the years ended December 31,2025 and 2024.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 - Stockholders’ Equity (cont’d)

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the options.

The expected life represents the weighted average period of time that options granted are expected to be outstanding. The expected life of the options granted to employees and directors is calculated based on the Simplified Method as allowed under Staff Accounting Bulletin No. 110 (“SAB 110”), giving consideration to the contractual term of the options and their vesting schedules, as the Company does not have sufficient historical exercise data at this time. The expected life of the option granted to non-employees equals their contractual term. In the case of an extension of the option life, the calculation was made on the basis of the extended life.

D. Compensation Cost for Warrant and Option Issuances

The following table sets forth information about the compensation cost of warrant and option issuances recognized for employees and directors:

For the year ended December 31,
2025	2024
US$ thousands	US$ thousands
20	331

The following table sets forth information about the compensation cost of warrant and option issuances recognized for non-employees:

For the year ended December 31,
2025	2024
US$ thousands	US$ thousands
-	3

As of December 31, 2025, and 2024, there was $nil and $nil, respectively, of unrecognized compensation cost, related to non-vested stock options granted under the Company’s various stock option plans.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 - Stockholders’ Equity (cont’d)

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

On March 13, 2014, Zion filed a registration statement on Form S-3 that was part of a replacement registration statement that was filed with the SEC using a “shelf” registration process. The registration statement was declared effective by the SEC on March 31, 2014. On February 23, 2017, the Company filed a Form S-3 with the SEC (Registration No. 333-216191) as a replacement for the Form S-3 (Registration No. 333-193336), for which the three-year period ended March 31, 2017, along with the base Prospectus and Supplemental Prospectus. The Form S-3, as amended, and the new base Prospectus became effective on March 10, 2017, along with the Prospectus Supplement that was filed and became effective on March 10, 2017. The Prospectus Supplement under 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.

On December 14, 2022, the Company extended the termination date of the ZNWAG warrant by one (1) year from the expiration date of January 8, 2023 to January 8, 2024. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

As of January 8, 2024, any outstanding ZNWAG warrants expired.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 – Stockholders’ Equity (cont’d)

Under our Plan, the Company under a Request For Waiver Program executed Waiver Term Sheets of a unit option program consisting of a Unit (shares of stock and warrants) of its securities and subsequently an option program consisting of shares of stock to a participant. The participant’s Plan account was credited with the number of shares of the Company’s Common Stock and warrants that were acquired. Each warrant provided the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $1.00. The warrant has the company notation of “ZNWAM.” The warrants were not registered for trading on the OTCQB or any other stock market or trading market. The warrants became exercisable on January 15, 2021 and continued to be exercisable through July 15, 2022.

On March 21, 2022, the Company extended the termination date of the ZNWAM warrant by one (1) year from the expiration date of July 15, 2022 to July 15, 2023 and revised the exercise price to $0.05. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On June 16, 2023, the Company extended the termination date of the ZNWAM warrant from July 15, 2023 to September 6, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On August 21, 2023, the Company extended the termination date of the ZNWAM warrant from September 6, 2023 to October 31, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On October 19, 2023, the Company extended the termination date of the ZNWAM warrant from October 31, 2023 to December 31, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On December 18, 2023, the Company extended the termination date of the ZNWAM warrant from December 31, 2023 to March 31, 2024. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On March 28, 2024, the Company extended the termination date of the ZNWAM warrant from March 31, 2024 to December 31, 2024. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On January 21, 2025, the Company extended the termination date of the ZNWAM warrant from December 31, 2024 to March 31, 2025.Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On March 18, 2025, the entire number of outstanding warrants of 4,376,000 were exercised at $.05 each for total proceeds to Zion of approximately $219,000. As of this report date, there are no ZNWAM warrants outstanding.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 – Stockholders’ Equity (cont’d)

Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program consisting of units of shares of stock and warrants to a participant. After conclusion of the program on June 18, 2021, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and warrants that were acquired. Each warrant provided the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $.25. The warrant shall have the company notation of “ZNWAQ.” The warrants were not registered for trading on the OTCQB or any other stock market or trading market. The warrants were issued on May 5, 2022 and were exercisable through July 15, 2023 at a revised per share exercise price of $.05.

On June 16, 2023, the Company extended the termination date of the ZNWAQ warrant from July 15, 2023 to September 6, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On August 21, 2023, the Company extended the termination date of the ZNWAQ warrant from September 6, 2023 to October 31, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On October 19, 2023, the Company extended the termination date of the ZNWAQ warrant from October 31, 2023 to December 31, 2023. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 – Stockholders’ Equity (cont’d)

On December 18, 2023, the Company extended the termination date of the ZNWAQ warrant from December 31, 2023 to March 31, 2024. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On March 28, 2024, the Company extended the termination date of the ZNWAQ warrant from March 31, 2024 to December 31, 2024. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

On January 21, 2025, the Company extended the termination date of the ZNWAQ warrant from December 31, 2024 to March 31, 2025.Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

During March 2025, the entire number of outstanding warrants of 23,428,348 were exercised at $.05 each for total proceeds to Zion of approximately $1,171,000. As of this report date, there are no ZNWAQ warrants outstanding.

Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program consisting of units of shares of stock and warrants to a participant. After conclusion of the program on November 15, 2021, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and warrants that will be acquired. Each warrant provides the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $1.00. The warrant shall have the company notation of “ZNWAS.” The warrants will not be registered for trading on the OTCQB or any other stock market or trading market. The warrants were issued and became exercisable on January 15, 2026 and continue to be exercisable through June 30, 2026 at a per share exercise price of $.25.

On January 15, 2026, the Company issued 145,180,117 warrants to one participant, with an expiration date of June 30, 2026. The exercise price of the ZNWAS warrant is $.25.

Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program consisting of units of shares of stock and warrants to a participant. After conclusion of the program on September 30, 2022, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants that were acquired. Each warrant provides the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $.25. The warrant shall have the company notation of “ZNWAT.” The warrants will not be registered for trading on the OTCQB or any other stock market or trading market.

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

On November 17, 2025, the Company extended the termination date of the ZNWAT warrant from December 31, 2025 to March 31, 2026.Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 – Stockholders’ Equity (cont’d)

Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program consisting of units of shares of stock and warrants to a participant. After conclusion of the program on December 31, 2022, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants that were acquired. Each warrant provides the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $.25. The warrant shall have the company notation of “ZNWAU.” The warrants will not be registered for trading on the OTCQB or any other stock market or trading market.

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

On January 1, 2024, the Company executed a Waiver Term Sheet with a participant consisting of shares of stock. After conclusion of the program on March 31, 2024, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock that were acquired.

On April 1, 2024, the Company executed a Waiver Term Sheet of a unit program with a participant consisting of shares of stock and warrants.

The program was scheduled to terminate at the earlier of: (a) a maximum purchase of $10,000,000 through the DSPP, (b) October 1, 2024 or (c) the closing price of Zion’s stock is 15 cents per share for five (5) consecutive days. Additional terms of the Waiver Term Sheet included the pro-rata issuance of up to 5,000,000 warrants with an exercise price of $.25 per share and an expiration date of December 31, 2024, in the event the Participant purchases up to $5,000,000 of the Company’s stock by July 1, 2024.

On or around August 13, 2024, a first amendment to its current Waiver Term Sheet was signed with the participant. The additional terms of the Waiver Term sheet included the pro-rata issuance of up to 10,000,000 warrants with an exercise price of $.25 per share and an expiration date of December 31, 2024, in the event the Participant purchases up to $10,000,000 of the Company’s stock by October 1, 2024.

On or around September 30, 2024, a second amendment to its current Waiver Term Sheet was signed with the participant. The additional terms of the Waiver Term sheet included changing the expiration date to December 31, 2024 and the pro-rata issuance of up to 10,000,000 warrants with an exercise price of $.25 per share and an expiration date of April 1, 2025, in the event the Participant purchases up to $10,000,000 of the Company’s stock by December 31, 2024.

On or around November 12, 2024, a third amendment to its current Waiver Term Sheet was signed with the participant. The additional terms of the Waiver Term sheet included changing the provision for the program termination provided that the closing stock price is $.20 cents per share or higher for five (5) consecutive days.

On or around January 21, 2025, a fourth amendment to the Waiver Term Sheet was signed with the participant. The Pricing Plan of the program terminated at the earlier of: (a) a maximum purchase of $15,000,000 through the DSPP, (b) June 30, 2025 or (c) the closing price of Zion’s stock is 20 cents per share for five (5) consecutive days. Additional terms of the Waiver Term Sheet include the pro-rata issuance of up to 15,000,000 warrants with an exercise price of $.25 per share and an expiration date of December 31, 2025, in the event the Participant purchases up to $15,000,000 of the Company’s stock by June 30, 2025.

As of May 2, 2025, the above referenced Waiver Term Sheet was terminated as the participant completed the maximum purchase of $15,000,000 through the DSPP along with 15,000,000 warrants.

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

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

Under our Plan, the Company under a Request For Waiver Program executed a Waiver Term Sheet of a unit program effective November 4, 2025 consisting of shares of stock and warrants to a participant. This program had a maximum investment of $250,000 excluding the exercise of any warrants. After conclusion of the program on or around November 18, 2025, the participant’s Plan account was credited with the number of shares of the Company’s Common Stock and warrants that were acquired. Each warrant provided the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $.05. The warrant shall have the company notation of “ZNWBC.” The warrants will not be registered for trading on the OTCQB or any other stock market or trading market.

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

On November 26, 2025, all of the ZNWBC warrants were exercised, resulting in approximately $76,000 to the Company. As of that date, there were no ZNWBC warrants outstanding.

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

On December 22, 2025, a first amendment to the Waiver Term Sheet was executed whereby the date was extended from December 31, 2025 to January 31, 2026 in which to reach the maximum investment. As part of this first amendment, the termination date of the ZNWAT warrants was extended from December 31, 2025 to March 31, 2026.

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

During the year ended December 31, 2025, Zion incurred $11,000 in equity issuance costs.

During the year ended December 31, 2024, Zion incurred $2,921,000 in equity issuance costs.

During 2025, two participants who participated in the “Request for Waiver” aspect of the DSPP contributed approximately 60% of the cash raised through the DSPP.

During 2024, one participant who participated in the “Request for Waiver” aspect of the DSPP contributed approximately 57% of the cash raised through the DSPP.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 – Stockholders’ Equity (cont’d)

Amendment No. 4 – New Unit Option under the Plan

Under our Plan, we provided a Unit Option under our Unit Program with this Amendment No. 4. This Unit Option period began on November 6, 2023 and was scheduled to terminate on December 31, 2023. See Amendment No 5 below for data on an extension.

Our Unit Option consists of the combination of Common Stock and warrants with basic Unit Option program features, conditions and terms outlined in the Original Prospectus Supplement. Amendments No. 1, 2 and 3 have expired. Amendment No. 4 provided the option period, unit price and the determination of the number of shares of Common Stock and warrants per unit. This Unit Option began on November 6, 2023 and was scheduled to terminated on December 31, 2023, unless extended at the sole option of Zion Oil & Gas, Inc. The Unit Option consisted of Units of our securities where each Unit (priced at $250.00 each) was comprised of (i) a certain number of shares of Common Stock determined by dividing $250.00 (the price of one Unit) by the average of the high and low sale prices of the Company’s publicly traded common stock as reported on the OTCQB on the Unit Purchase Date and (ii) Common Stock purchase warrants to purchase an additional fifty (50) shares of Common Stock at a per share exercise price of $0.25. The participant’s Plan account was credited with the number of shares of the Company’s Common Stock and Warrants that were acquired under the Units purchased. Each warrant provided the participant the opportunity to purchase one share of our Common Stock at a warrant exercise price of $0.25. The warrants have the Company notation of “ZNWBA” and will not be registered for trading on the OTCQB or any other stock market or trading market.

Plan participants, who enrolled into the Unit Option program with the purchase of at least one Unit and enroll in the separate Automatic Monthly Investments (“AMI”) program at a minimum of $50.00 per month, received an additional fifty (50) warrants at an exercise price of $0.25 during this Unit Option Program. The fifty (50) additional warrants were for enrolling in the AMI program and received the above warrant with the Company notation of “ZNWBA.” Existing subscribers to the AMI were entitled to the additional fifty (50) warrants, if they purchased at least one (1) Unit during the Unit program.

The ZNWBA warrants became exercisable on January 15, 2024, and continued to be exercisable through January 15, 2025, unless extended, at a per share exercise price of $0.25. See Amendment No. 5 below for new dates.

Amendment No. 5 – Extension of Termination Date to January 31, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on January 31, 2024.

The ZNWBA warrants now would be first exercisable on February 15, 2024, instead of January 15, 2024 and continue to be exercisable through February 15, 2025, instead of January 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

Accordingly, all references in the Original Prospectus Supplement and Amendment No. 1 and Amendment No. 4, concerning the Unit Option, continue, except for the substitution of the revised Unit Option dates and features above. All other Plan features, conditions and terms remain unchanged.

The date of this Amendment No. 5 to Prospectus Supplement was December 20, 2023.

Amendment No. 6 – Extension of Termination Date to February 29, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on February 29, 2024.

The ZNWBA warrants now will be exercisable on March 15, 2024, instead of February 15, 2024 and continue to be exercisable through March 15, 2025, instead of February 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 6 to Prospectus Supplement was January 29, 2024.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 – Stockholders’ Equity (cont’d)

Amendment No. 7 – Extension of Termination Date to March 31, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on March 31, 2024.

The ZNWBA warrants now will be first exercisable on April 15, 2024, instead of March 15, 2024 and continue to be exercisable through April 15, 2025, instead of March 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 7 to Prospectus Supplement was February 26, 2024.

Amendment No. 8 – Extension of Termination Date to April 30, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on April 30, 2024.

The ZNWBA warrants now will be first exercisable on May 15, 2024, instead of April 15, 2024, and continue to be exercisable through May 15, 2025, instead of April 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 8 to Prospectus Supplement was March 23, 2024.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 – Stockholders’ Equity (cont’d)

Amendment No. 9 – Extension of Termination Date to May 31, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on May 31, 2024.

The ZNWBA warrants now will be first exercisable on June 15, 2024, instead of May 15, 2024, and continue to be exercisable through June 15, 2025, instead of May 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 9 to Prospectus Supplement was April 24, 2024.

Amendment No. 10 – Extension of Termination Date to August 31, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on August 31, 2024.

The ZNWBA warrants now will be first exercisable on September 15, 2024, instead of June 15, 2024, and continue to be exercisable through September 14, 2025, instead of June 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 10 to Prospectus Supplement was May 29, 2024.

Amendment No. 11 – Extension of Termination Date to October 15, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on October 15, 2024.

The ZNWBA warrants now will be first exercisable on November 15, 2024, instead of September 15, 2024, and continue to be exercisable through November 14, 2025, instead of September 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 11 to Prospectus Supplement was August 22, 2024.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 – Stockholders’ Equity (cont’d)

Amendment No. 12 – Extension of Termination Date to December 31, 2024

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023. Our Unit Program consists of the combination of Common Stock and warrants with an extended time period, but otherwise the same Unit Program features, conditions and terms in the Prospectus Supplement and Amendment No. 4 apply. We extended under our Unit Program that was to terminate October 15, 2024, but now will terminate December 31, 2024, and we extended the exercise and termination dates of the related ZNWBA warrants.

The ZNWBA warrants became exercisable on January 31, 2025, instead of November 15, 2024, and continue to be exercisable through January 31, 2026, instead of November 15, 2025, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 12 to Prospectus Supplement was October 9, 2024.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 – Stockholders’ Equity (cont’d)

Amendment No. 13 – Extension of Termination Date to February 28, 2025

Under our Plan, we extended the current Unit Option that was filed under Amendment No. 4, dated November 6, 2023, to terminate on February 28, 2025.

The ZNWBA warrants now became exercisable on March 31, 2025, instead of January 31, 2025, and continue to be exercisable through March 31, 2026, instead of January 31, 2026, unless extended, at a per share exercise price of $0.25. Zion considers this warrant as permanent equity per ASC 815-40-35-2. As such, there is no value assigned to this extension.

The date of this Amendment No. 13 to Prospectus Supplement was December 10, 2024.

The current Unit Option terminated on February 28, 2025 as described in Amendment No. 13. The ZWNBA warrants, exercisable at $0.25, were issued on March 31, 2025 and will be exercisable through March 31, 2026.

For the years ended December 31, 2025, and 2024, approximately $29,000 and $nil, respectively, were recorded under the Company’s Statement of Changes in Stockholders’ Equity as Subscriptions Receivables. The funds corresponding to the December 31, 2025 balance were received in January 2026.

For the years ended December 31, 2025, and 2024, approximately $21,479,000, and $16,257,000 were raised under the DSPP program, respectively. The $21,479,000 and $16,257,000 figures were reduced by $11,000 and $2,921,000, respectively, in equity issuance costs to an outside party resulting in net cash provided of $21,468,000 and $13,336,000, respectively.

The company raised approximately $6,530,000 from the period January 1, 2026 through March 17, 2026 under the DSPP program, which includes collection of the $29,000 stock subscription receivable at December 31, 2025.

The warrants represented by the company notation ZNWAA are tradeable on the OTCQX market under the symbol ZNOGW. However, all of the other warrants characterized above, in the table below, and throughout this Form 10-K, are not tradeable and are used internally for classification and accounting purposes only.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 – Stockholders’ Equity (cont’d)

G. Warrant Tables

The warrant activity and balances for the year 2024 are shown in the table below:

			Warrant	Outstanding								****	Outstanding
	Exercise		Termination	Balance,		Warrants		Warrants		Warrants			Balance,
Warrants	Price		Date	12/31/2023		Issued		Exercised		Expired			12/31/2024
ZNWAA	$	2.00	01/31/2026		1,498,804		-		-		-			1,498,804
ZNWAG	$	1.00	01/08/2024		240,068		-		-		(240,068	)		-
ZNWAM	$	0.05	03/31/2025		4,376,000		-		-		-			4,376,000
ZNWAQ	$	0.05	03/31/2025		23,428,348		-		-		-			23,428,348
ZNWAZ	$	0.25	07/17/2024		153,800		-		-		(153,800	)		-
Outstanding warrants					29,697,020		-		-		(393,868	)		29,303,152

The warrant activity and balances for the year 2025 are shown in the table below:

			Warrant	Outstanding						****			Outstanding
	Exercise		Termination	Balance,		Warrants		Warrants			Warrants		Balance,
Warrants	Price		Date	12/31/2024		Issued		Exercised			Expired		12/31/2025
ZNWAA	$	2.00	01/31/2031		1,498,804		-		-			-		1,498,804
ZNWAM	$	0.05	03/31/2025		4,376,000		-		(4,376,000	)		-		-
ZNWAQ	$	0.05	03/31/2025		23,428,348		-		(23,428,348	)		-		-
ZNWBA	$	0.25	03/31/2026		-		1,177,950		-			-		1,177,950
ZNWAT	$	0.18	03/31/2026		-		9,019,652		-			-		9,019,652
ZNWBB	$	0.25	06/30/2026		-		15,000,000		-			-		15,000,000
ZNWBC	$	0.05	03/15/2026		-		1,519,136		(1,519,136	)		-		-
Outstanding warrants					29,303,152		26,716,738		(29,323,484	)		-		26,696,406

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 6 – Stockholders’ Equity (cont’d)

H. Warrant Descriptions of Current Warrants

The price and the expiration dates for the series of warrants to investors are shown in the table below. The listing contains only those warrants that have a balance and with an expiration date beyond the balance sheet date.

		Period of Grant	Expiration Date
ZNWAA Warrants	A,B,C,D,H,L	March 2013 – December 2014	January 31, 2031
ZNWAS Warrants	E	August 2021 – March 2022	June 30, 2026
ZNWAT Warrants	K,M	August – September 2022	March 31, 2026
ZNWAU Warrants	E	October – November 2022	June 30, 2026
ZNWBA Warrants	F,G	November – December 2024	March 31, 2026
ZNWBB Warrants	J, N	January – June 2025	June 30, 2026

All values are in US Dollars.

A	On May 29, 2019, the Company extended the expiration date of the Warrants by one (1) year.
B	On September 15, 2020, the Company extended the expiration date of the Warrants by two (2) years.
C	On December 14, 2022, the Company extended the expiration date of the Warrants by one (1) year.
D	On January 10, 2024, the Company extended the expiration date of the ZNWAA warrant by one (1) year.
E	These warrants were issued and became exercisable on January 15, 2026 and expire on June 30, 2026.
F	On November 6, 2023 the Company announced a new Unit Offering and the related ZNWBA warrant.
G	On May 29, 2024, the Company filed Amendment No. 10 whereby the current unit option was extended to August 31, 2024 and the exercise date and termination date of the related ZNWBA warrants were also extended. On August 22, 2024, the Company filed Amendment No. 11 whereby the current unit option was extended to October 15, 2024 and the exercise date and termination date of the related ZNWBA warrants were also extended. On October 9, 2024, the Company filed Amendment No. 12 whereby the current unit option was extended to December 31, 2024 and the exercise date and termination date of the related ZNWBA warrants were also extended to January 31, 2026.On December 10, 2024, the Company filed Amendment No. 13 whereby the current unit option was extended to February 28, 2025 and the exercise date and termination date of the related ZNWBA warrants were also extended to March 31, 2026.
H	On November 12, 2024, the Company extended the expiration date of the ZNWAA warrant by one (1) year. The new expiration date is January 31, 2026.
---	---
I	On November 12, 2024, the Company extended the expiration date of the ZNWAA warrant by one (1) year. The new expiration date is January 31, 2026.
---	---
J	On May 19, 2025, the Company issued 15,000,000 warrants to one warrants holder. The expiration date of those ZNWBB warrants was December 31, 2025 and the warrant exercise price is $.25.
K	On August 27, 2025, the Company issued 9,019,652 warrants to one participant, with an expiration date of December 31, 2025.The warrant exercise price was reduced from $.25 to $.18.
---	---
L	On November 17, 2025 the Company extended the expiration date of the ZNWAA warrants to January 31, 2031.
---	---
M	On December 22, 2025 the Company extended the expiration date of the ZNWAT warrants to March 31, 2026.
N	On December 29, 2025 the Company extended the expiration date of the ZNWBB warrants to June 30, 2026.
---	---

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 7 - Income Taxes

The Company had no income tax expense due to the operating loss incurred for the years ended December 31, 2025 and 2024.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are presented below:

	December 31,		December 31,
	2025		2024
	US		US
	thousands		thousands
Deferred tax assets:
Net operating loss carry forwards
Other
Total gross deferred tax assets
Less – valuation allowance		)		)
Net deferred tax assets
Deferred tax liabilities:
Property and equipment
Other		)		)
Unproved oil and gas properties		)		)
Total gross deferred tax liabilities		)		)
Net deferred tax asset

All values are in US Dollars.

In assessing the likelihood of the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets, including net operating losses, is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and tax carry forwards are utilizable.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate future taxable income of approximately $303,761,000 prior to the expiration of some of the net operating loss carry forwards between 2025 and 2046. Based upon the level of historical taxable losses since the Company’s inception, management believes that the Company will not likely realize the benefits of these deductible differences and tax carry forwards and thus, full valuation allowances have been recorded at December 31, 2025 and 2024.

The Company continuously monitors all shareholders that might reach a 5% ownership in the common stock for various purposes, in addition to the I.R.C §382/383 limitation on net operating loss (“NOL”) carry forwards following an ownership change. Sections 382/383 limit the use of corporate NOLs following an ownership change. Section 382(g) defines an ownership change generally as a greater than 50% change in the ownership of stock among certain 5% shareholders over a three-year period. For the tax year 2019, the Company became aware of one individual owning greater than 5%, as evidenced by the filing of a Section 13(G) report with the SEC. However, there have been no changes in stock ownership to trigger sections 382/383.

At December 31, 2025, the Company has available federal net operating loss carry forwards of approximately $303,761,000 to reduce future U.S. taxable income.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 7 - Income Taxes (cont’d)

The Tax Cuts and Jobs Act (TCJA) removed the 2-year carryback provision, extended the 20-year carryforward provision out indefinitely, and limited carryforwards to 80% of net income in any future year. Net operating losses originating in tax years beginning prior to Jan. 1, 2018, are still subject to the former carryover rules of 100% of net income and 20 taxable years following the taxable year of loss. I.R.C. §172.

Income earned from activities in Israel is subject to regular Israeli tax rates. For Israeli tax purposes, exploration costs on unproved properties are expensed. Tax losses can be carried forward indefinitely. At December 31, 2025, the Company has available net operating loss carry forwards of approximately $198,871,672 to reduce future Israeli taxable income. Based upon the level of historical taxable losses since the Company’s inception, management believes that the Company will not likely realize the benefits of these deductible differences and tax carry forwards and thus, full valuation allowances have been recorded at December 31, 2025.

On July 11, 2014, Zion Oil & Gas, Inc. registered the Geneva Branch in the Canton of Geneva, Switzerland. The legal Swiss name for the foreign branch is “Zion Oil & Gas, Inc., Wilmington, Branch of Geneva.” The Geneva Branch has its registered office and its business office at 6 Avenue Jules Crosnier, 1206 Champel, Case Postale 295, 1211 Geneva 12, Switzerland. The purpose of the branch is to operate a foreign treasury center for the Company. As such, the Geneva branch is not expected to have taxable income in any future year.

Reconciliation between the theoretical tax benefit on pre-tax reported (loss) and the actual income tax expense:

	Year ended		Year ended
	December 31,		December 31,
	2025		2024
	US		US
	thousands		thousands
Pre-tax loss as reported		)		)
U.S. statutory tax rate		%		%
Theoretical tax expense		)		)
Increase in income tax expense resulting from:
Permanent differences
Change in valuation allowance
Income tax expense

All values are in US Dollars.

The Company has no material unrecognized tax benefit which would favorably affect the effective income tax rate in future periods and does not believe there will be any significant increases or decreases within the next twelve months. No interest or penalties have been accrued.

The Company has not received final tax assessments since incorporation. In accordance with the US tax regulations, the U.S. federal income tax returns remain subject to examination for the years beginning in 2022.

The Israeli branch has not received final tax assessments since incorporation. In accordance with the Israeli tax regulations, tax returns submitted up to and including the 2020 tax year can be regarded as final.

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Table of Contents

Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 8 - Right of use leases assets and leases obligations

The Company is a lessee in several non-cancellable operating leases, primarily for transportation and office space.

The table below presents the operating lease assets and liabilities recognized on the balance sheets as of December 31, 2025 and 2024:

	December 31,	December 31,
	2025	2024
	US	US
	thousands	thousands
Operating lease assets
Operating lease liabilities:
Current operating lease liabilities
Non-current operating lease liabilities
Total operating lease liabilities

All values are in US Dollars.

The depreciable lives of operating lease assets and leasehold improvements are limited by the expected lease term.

The Company’s leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. The Company used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date.

Dallas office lease

On November 25, 2025, the Company and LLL Four Forest, LP (“LLL”) signed an Office Lease Agreement (“Agreement”) whereby approximately 8,006 rentable square feet of space, of which approximately 5,577 rentable square feet are located in Suite 1450 located on the fourteenth floor, and approximately 2,429 square feet are located in Suite 1740 located on the seventeenth floor. The lease commencement date is January 1, 2026 and the term is for three years and five months with the lease termination being on around May 31, 2029. The Agreement provided five (5) months of abated rent at the beginning of the lease term. A security deposit of $16,679 was paid in December 2025 and prepaid rent of $192,144 was also paid in December 2025. With the payment of the prepaid rent in December 2025, the Company’s rent is paid through May 2027. Beginning on June 1, 2026 and extending through May 31, 2027, the Company will pay monthly rent at $24.00 per square foot. Beginning on June 1, 2027 and extending through May 31, 2028, the Company will pay monthly rent at $24.50 per square foot. Beginning on June 1, 2028 and extending through May 31, 2029, the Company will pay monthly rent at $25.00 per square foot. The Company will also pay its prorata share of electricity, taxes and common area maintenance in the building.

Israel office lease

The Company’s field office in Caesarea, Israel is under lease for 6,566 square feet.

The Company had an option to renew the lease for another five years from February 1, 2024 to January 31, 2029, provided it is not in breach of the agreement, where it is required as well to furnish a notice of intent to exercise the option six months prior to termination of lease, and it furnishes a bank guarantee and insurance confirmation prior to commencement of the option period. The Company exercised the option to renew the lease for another seven years from February 1, 2024 through January 31, 2031, when rent is to be paid on a monthly basis in the base amount of approximately NIS 46,500 per month (approximately $15,000) at the exchange rate in effect on the date of this report and is linked to an increase (but not a decrease) in the CPI.

The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of December 31, 2025 are:

	December 31,			December 31,
	2025			2024
Weighted average remaining lease term (years)		4.5			1.2
Weighted average discount rate		7.8	%		5.6	%

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under non-cancellable operating leases with terms of more than one year to the total operating lease liabilities recognized on the balance sheets as of December 31, 2025:

	US
	thousands
2026
2027
2028
2029
2030
Thereafter
Total undiscounted future minimum lease payments
Less: portion representing imputed interest		)
Total undiscounted future minimum lease payments

All values are in US Dollars.

Operating lease costs were $301,000 and $313,000 for the years ended December 31, 2025, and 2024, respectively. Operating lease costs are included within general and administrative expenses on the statements of income.

Cash paid for amounts included in the measurement of operating lease liabilities was $13,000 and $276,000 for the years ended December 31, 2025, and 2024, respectively, and this amount is included in operating activities in the statements of cash flows.

Right-of-use assets obtained in exchange for new operating lease liabilities were $331,000 and $829,000 for the years ended December 31, 2025, and 2024, respectively.

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Table of Contents

Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 9 - Commitments and Contingencies

A. Litigation

From time to time, the Company may be subject to routine litigation, claims or disputes in the ordinary course of business. The Company defends itself vigorously in all such matters. However, we cannot predict the outcome or effect of any of the potential litigation, claims or disputes.

On June 3, 2025, the Company received a notification via summons that it is being sued in the Superior Court of California, County of Los Angeles under the state’s “Trap and Trace” law. California’s Trap and Trace law, part of the California Invasion of Privacy Act (CIPA) Penal Code Section 638.51 prohibits installing or using devices or processes to capture incoming electronic signaling information (like IP addresses or routing data) without a court order or user consent. The company has retained counsel in the state of California and this case is ongoing. Approximately $25,000 in legal expenses was recognized in 2025. We are expecting to incur some additional expenses in 2026, but they are not expected to be material to the Company.

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

B. Asset Retirement

The Company currently estimates that the costs of plugging and decommissioning of the exploratory wells drilled to date in the former Joseph License area and the present New Megiddo Valleys License 434 to be approximately $571,000 based on current cost rather than Net Present Value. The Company expects to incur such costs during 2026. Liabilities for expenditures are recorded when environmental assessment and/or remediation is probable and the timing and costs can be reasonably estimated.

Changes in Asset Retirement Obligations were as follows:

	December 31,	December 31,
	2025	2024
	US	US
	thousands	thousands
Asset Retirement Obligations, Beginning Balance
Liabilities Settled
Revision of Estimate
Retirement Obligations, Ending Balance

All values are in US Dollars.

C. Environmental and Onshore Licensing Regulatory Matters

The Company is engaged in oil and gas exploration and production and may become subject to certain liabilities as they relate to environmental clean-up of well sites or other environmental restoration procedures and other obligations as they relate to the drilling of oil and gas wells or the operation thereof. Various guidelines have been published in Israel by the State of Israel’s Petroleum Commissioner and Energy and Environmental Ministries as it pertains to oil and gas activities. Mention of these older guidelines was included in previous Zion filings.

The Company believes that these regulations will result in an increase in the expenditures associated with obtaining new exploration rights and drilling new wells. The Company expects that an additional financial burden could occur as a result of requiring cash reserves that could otherwise be used for operational purposes. In addition, these regulations are likely to continue to increase the time needed to obtain all of the necessary authorizations and approvals to drill and production test exploration wells.

As of December 31, 2025 and 2024, the Company accrued nil and nil for license regulatory matters.

D. Charitable Foundations

Two charitable foundations were established, one in Israel and one in Switzerland, for the purpose of supporting charitable projects and other charities in Israel, the United States and internationally. A 3% royalty or equivalent interest in any Israeli oil and gas interests as may now be held or, in the future be acquired, by the Company was assigned to each charitable organization (6% interest in the aggregate). At December 31, 2025 and 2024, the Company did not have any outstanding obligation in respect of the charitable foundations, since to this date, no proved reserves have been found.

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Table of Contents

Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 9 - Commitments and Contingencies (cont’d)

E. Office and Vehicle Leases

(i) The Company’s corporate office in Dallas, Texas is under lease for 8,006 square feet.

On November 25, 2025, the Company and LLL Four Forest, LP (“LLL”) signed an Office Lease Agreement (“Agreement”) whereby approximately 8,006 rentable square feet of space, of which approximately 5,577 rentable square feet are located in Suite 1450 located on the fourteenth floor, and approximately 2,429 square feet are located in Suite 1740 located on the seventeenth floor. The lease commencement date is January 1, 2026 and the term is for three years and five months with the lease termination being on or around May 31, 2029. The Agreement provided five (5) months of abated rent at the beginning of the lease term. A security deposit of $16,679 was paid in December 2025 and prepaid rent of $192,144 was also paid in December 2025. With the payment of the prepaid rent in December 2025, the Company’s rent is paid through May 2027. Beginning on June 1, 2027 and extending through May 31, 2028, the Company will pay monthly rent at $24.50 per square foot. Beginning on June 1, 2028 and extending through May 31, 2029, the Company will pay monthly rent at $25.00 per square foot. The Company will also pay its prorata share of electricity, taxes and common area maintenance in the building.

Prior to the aforementioned lease, the Company’s corporate office in Dallas, Texas was under lease for 8,774 square feet in a separate building. On October 4, 2023, the Company and the Lessor signed a Third Amendment to the Lease Agreement (“Third Amendment”) whereby the Lease extended from June 1, 2023 through December 31, 2024, for a total of 19 months. The monthly payments to be paid were as follows: (1) basic rent of $7,677.25, (2) common area maintenance of $2,917.36, (3) taxes and insurance of $1,593.94 and (4) electricity charges of $1,703.62. That building changed ownership in *April 2024.*For the year 2025, a new lease or lease amendment was not extended to Zion and we continued to pay the same rates in 2025 as we did in 2024. The Company moved out of its former offices in mid- December 2025.

(ii) The Company’s field office in Caesarea, Israel is under lease for 6,566 square feet.

The Company had an option to renew the lease for another five years from February 1, 2024 to January 31, 2029, provided it is not in breach of the agreement, where it is required as well to furnish a notice of intent to exercise the option six months prior to termination of lease, and it furnishes a bank guarantee and insurance confirmation prior to commencement of the option period. The Company exercised its option to renew the lease for another seven years from February 1, 2024 through January 31, 2031, when rent is to be paid on a monthly basis in the base amount of approximately NIS 46,500 per month (approximately $15,000) at the exchange rate in effect on the date of this report and is linked to an increase (but not a decrease) in the CPI.

Under the lease agreement, the Company is authorized to further sublease part of the leased premises to a third party that is pre-approved by the sub-lessor. Rent and its related taxes, utilities, insurance and maintenance expenses for 2025 and 2024 were $414,000 and $397,000 respectively.

(iii) On November 14, 2023, the Company and GM Financial (as Lessor) signed a motor vehicle lease agreement for a 2023 Chevy Equinox. The first payment of $499.32 was due on November 14, 2023 and this was paid on or around that date. The lease calls for 38 additional payments, from December 2023 through January 2027, of $499.32 so that the sum of all 39 payments is $19,473.48. At the inception of the lease, and in addition to the sum of the 39 payments, lease signing bonuses provided an initial $1,500 reduction of the lease cost on November 14, 2023. The value at the end of the lease has a residual value of $14,011.40 per the terms of the lease agreement. Additionally, the Company must pay the Lessor $.25 cents per mile for each mile in excess of 20,000 annual miles. This lease is treated as an operating lease.

At December 31, 2025, and continuing through the date of this Form 10-K report, all payments have been paid.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 9 - Commitments and Contingencies (cont’d)

The future minimum lease payments as of December 31, 2025, are as follows:

	US
	thousands
2026
2027
2028
2029
2030
Thereafter
Total undiscounted future minimum lease payments
Less: portion representing imputed interest		)
Total undiscounted future minimum lease payments

All values are in US Dollars.

F. Insurance Financing

Effective November 16, 2023, the Company renewed its third-party liability (“TPL”) insurance policy in Israel with total premiums, taxes and fees for approximately $76,000. A cash down payment of approximately $23,000 was paid on November 16, 2023. Under the terms of the insurance financing, payments of approximately $5,000, which included interest at the rate of 13.99% per annum, were due each month for 10 months commencing on December 16, 2023. The Company has completed its financing commitment pertaining to the TPL insurance as of September 30, 2024.

Effective December 28, 2023, the Company renewed its D&O insurance policy with total premiums, taxes and fees for approximately $442,000. A cash down payment of approximately $69,000 was paid on December 13, 2023. Under the terms of the insurance financing, payments of approximately $37,000, which included interest at the rate of 13.4% per annum, are due each month for 10 months commencing on *January 28, 2024.*As of December 31, 2024, this was fully paid off.

Effective March 12, 2024, the Company renewed its rig insurance policy with total premiums, taxes and fees for approximately $95,000. A cash down payment of approximately $38,000 was paid on February 23, 2024. Under the terms of the insurance financing, payments of approximately $9,000, which included interest at the rate of 13.99% per annum, were due each month for 10 months commencing on April 12, 2024. As of December 31, 2024, the outstanding balance was approximately $9.000.

Effective November 18, 2024, the Company renewed its third party liability policy in Israel with total premiums, taxes and fees for approximately $76,000. A cash down payment of approximately $20,000 was paid on November 18, 2024. Under the terms of the insurance financing, payments of approximately $5,000, which included interest at the rate of 12.9% per annum, were due each month for 11 months commencing on December 16, 2024. As of December 31, 2024, the outstanding balance was approximately $51.000, and as of December 31, 2025, the policy was fully paid off. The policy was capitalized under Unproved Oil and Gas assets.

Effective December 3, 2024 the Company renewed its Control of well (“COW”) insurance policy in Israel with total premiums, taxes and fees for approximately $84,000. A cash payment of approximately $84,000 was paid on December 3, 2024. The policy was capitalized under Unproved Oil and Gas assets. As of December 31, 2024, the policy was fully paid off.

Effective December 28, 2024, the Company renewed its D&O insurance policy with total premiums, taxes and fees for approximately $430,000. A cash down payment of approximately $41,000 was paid on January 2, 2025. Under the terms of the insurance financing, payments of approximately $39,000, which included interest at the rate of 12.9% per annum, were due each month for 10 months commencing on *January 28, 2025.*As of December 31, 2024, the outstanding balance was approximately $430.000, and as of December 31, 2025, the policy was fully paid off.

Effective March 12, 2025, the Company renewed its rig insurance policy with total premiums, taxes and fees for approximately $119,000. The total premium was paid in full on March 7, 2025. The policy was capitalized under Unproved Oil and Gas assets.

Effective June 1, 2025, the Company renewed its foreign package (“Foreign”) insurance in Israel with total premiums, taxes and fees for approximately $14,000. The total premium was paid in full on June 3, 2025. The policy was capitalized under Unproved Oil and Gas assets.

Effective June 1, 2025, the Company renewed its control of well (“COW”) insurance in Israel with total premiums, taxes and fees for approximately $37,000. The total premium was paid in full on June 11, 2025. The policy was capitalized under Unproved Oil and Gas assets.

Effective November 13, 2025, the Company renewed its third-party liability (“TPL”) policy in Israel with total premiums, taxes and fees for approximately $71,000. The total premium was paid in full on November 13, 2025. The policy was capitalized under Unproved Oil and Gas assets.

Effective December 3, 2025, the Company renewed its Control of well (“COW”) insurance policy in Israel with total premiums, taxes and fees for approximately $84,000. The total premium was paid in full on December 3, 2025.

On December 12, 2025, the Company paid approximately $2,000 to extend its cyber security insurance coverage through March 31, 2026.

Effective December 28, 2025, the Company renewed its D&O insurance policy with total premiums, taxes and fees for approximately $398,000. The total premium was paid in full on December 24, 2025.

The balances for all lines of insurance financing at December 31, 2025 and 2024, were $nil and $490,000, respectively.

G. Bank Guarantees

As of December 31, 2025, and 2024, the Company provided Israeli-required bank guarantees to various governmental bodies (approximately $1,424,000 and $972,000, respectively) and others (approximately $109,000 and $92,000, respectively) with respect to its drilling operation in an aggregate amount of approximately $1,533,000 and $1,064,000, respectively. The cash funds backing these guarantees are held in restricted interest-bearing accounts and are reported on the Company’s balance sheets as cash and cash equivalents – restricted.

H. Vendor concentration

The Company’s financial instruments that are exposed to a concentration of credit risk are accounts payable. There are four suppliers in 2025 and three suppliers in 2024 that represent 10% or more of the Company’s accounts payable outstanding balance, respectively.

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

There is uncertainty as to the degree of stability that will be seen in the Middle East, and Israel in particular, due to these present hostilities. While we acknowledge that uncertainty, the Company is moving forward with its MJ-02 re-entry project.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 10 - Risks and Uncertainties

We are directly influenced by the political, economic and military conditions affecting Israel.

We cannot predict the effect, if any, on our business of renewed hostilities between Israel and its neighbors or any other changes in the political climate in the area. Deterioration of political, economic and security conditions in Israel may adversely affect our operations.

We are subject to increasing Israeli governmental regulations and environmental requirements that may cause us to incur substantial incremental costs and/or delays in our drilling program.

Newly enacted onshore licensing and environmental and safety related regulations promulgated by the various energy related ministries in Israel during 2024-2025 have rendered obtaining and drilling under new exploration licenses more time-consuming and expensive.

The Company believes that these new and/or revised regulations will also significantly increase the time, effort, and expenditures associated with obtaining all of the necessary authorizations and approvals prior to drilling and production testing its current and any subsequent well(s).

Economic risks may adversely affect our operations and/or inhibit our ability to raise additional capital.

Economically, our operations in Israel may be subject to:

●	exchange rate fluctuations between the Israeli shekel versus the US Dollar;
●	any significant changes in oil and gas commodities pricing and hence the cost of oilfield services and drilling equipment;
---	---
●	royalty and tax increases and other risks arising out of Israeli state sovereignty over the mineral rights in Israel and its taxing authority; and
---	---
●	changes in Israel’s economy that could lead to legislation establishing oil and gas price controls.
---	---

Consequently, our operations may be substantially affected by local economic factors beyond our control, any of which could negatively affect our financial performance and prospects.

Legal risks could negatively affect our market value.

Legally, our operations in Israel may be subject to:

●	changes in the Petroleum Law resulting in modification of license and permit rights;
●	adoption of new legislation relating to the terms and conditions pursuant to which operations in the energy sector may be conducted;
---	---
●	changes in laws and policies affecting operations of foreign-based companies in Israel; and
---	---
●	changes in governmental energy and environmental policies or the personnel administering them.
---	---

Our dependence on the limited contractors, equipment and professional services available in Israel may result in increased costs and possibly material delays in our work schedule.

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 10 - Risks and Uncertainties (cont’d)

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices and/or equity prices. In the normal course of doing business, we are exposed to the risks associated with foreign currency exchange rates and changes in interest rates.

Foreign Currency Exchange Rate Risks. A portion of our expenses, primarily labor expenses and certain supplier contracts, are denominated in New Israeli Shekels (“NIS”). As a result, we have significant exposure to the risk of fluctuating exchange rates with the U.S. Dollar (“USD”), our primary reporting currency. During the period January 1, 2025 through December 31, 2025, the USD has fluctuated by approximately 12.5% against the NIS (the USD weakened relative to the NIS). In contrast, during the period January 1, 2024 through December 31, 2024, the USD has fluctuated by approximately 0.6% against the NIS (the USD strengthened relative to the NIS). Continued weakening of the US dollar against the NIS will result in higher operating costs from NIS denominated expenses. To date, we have not hedged any of our currency exchange rate risks, but we may do so in the future.

Interest Rate Risk. Our exposure to market risk relates to our cash and investments. We maintain an investment portfolio of short-term bank deposits and money market funds. The securities in our investment portfolio are not leveraged, and are, due to their very short-term nature, subject to minimal interest rate risk. We currently do not hedge interest rate exposure. Because of the short-term maturities of our investments, we do not believe that a change in market interest rates would have a significant negative impact on the value of our investment portfolio except for reduced income in a low interest rate environment. At December 31, 2025, we had cash, cash equivalents and short-term and long-term bank deposits of approximately $9,862,000. The weighted average annual interest rate related to our cash and cash equivalents for the year ended December 31, 2025, exclusive of funds at US banks that earn no interest, was approximately 2.8%. At December 31, 2024, we had cash, cash equivalents and short-term and long-term bank deposits of approximately $3,336,000. The weighted average annual interest rate related to our cash and cash equivalents for the year ended December 31, 2024, exclusive of funds at US banks that earn no interest, was approximately 2.9%.

F- 45

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Zion Oil & Gas, Inc.

Notes to Consolidated Financial Statements

Note 11 - Selected Quarterly Information (Unaudited)

The following represents selected quarterly consolidated financial information for 2025 and 2024:

	For the three months ended
	March 31		June 30		September 30		December 31
	US		US		US		US
	thousands		thousands		thousands		thousands
2025:		****		****		****		****
Oil and gas sales
Net loss		)		)		)		)
Net loss per share – basic and diluted		)		)		)		)
Weighted-average shares outstanding–basic and diluted (in thousands)
2024:		****		****		****		****
Oil and gas sales
Net loss		)		)		)		)
Net loss per share – basic and diluted		)		)		)		)
Weighted-average shares outstanding–basic and diluted (in thousands)

All values are in US Dollars.

Note 12 - Subsequent Events

(i) On January 5, 2026, the Company granted options under the Omnibus Plan to one senior officer, to purchase 25,000 shares of Common Stock at an exercise price of $0.01 per share. The options vested upon grant and are exercisable through January 4, 2036. These options were granted per the provisions of the Israeli Appendix. The fair value of the options at the date of grant amounted to approximately $6,000.

(ii) On January 5, 2026, the Company granted options under the Omnibus Plan to five senior officers and two staff members to purchase 175,000 shares of Common Stock at an exercise price of $0.24 per share. The options vested upon grant and are exercisable through January 4, 2036. The fair value of the options at the date of grant amounted to approximately $36,000.

(iii) Approximately $6,530,000 was collected through the Company’s DSPP program during the period January 1, 2026 through March 17, 2026 which includes collection of the $29,000 stock subscription receivable at December 31, 2025.

The Company has evaluated subsequent events through March 19, 2026 the date the financial statements were available to be issued. Except as disclosed above, no other events have occurred that would require adjustment to or disclosure in these financial statements.

F-46

ex_924462.htm

Exhibit 10.3

OFFICE LEASE

MERIT TOWER

LLL FOUR FOREST, LP,

a Texas limited partnership,

as Landlord,

and

ZION OIL AND GAS, INC.,

a Texas corporation,

as Tenant.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

TABLE OF CONTENTS

Page

ARTICLE 1 PREMISES, BUILDING, PROJECT, AND COMMON AREAS	1
ARTICLE 2 LEASE TERM	1
ARTICLE 3 BASE RENT	2
ARTICLE 4 ADDITIONAL RENT	2
ARTICLE 5 USE OF PREMISES	7
ARTICLE 6 SERVICES AND UTILITIES	8
ARTICLE 7 REPAIRS	10
ARTICLE 8 ADDITIONS AND ALTERATIONS	11
ARTICLE 9 COVENANT AGAINST LIENS	11
ARTICLE 10 INSURANCE	11
ARTICLE 11 DAMAGE AND DESTRUCTION	13
ARTICLE 12 NONWAIVER	14
ARTICLE 13 CONDEMNATION	14
ARTICLE 14 ASSIGNMENT AND SUBLETTING	14
ARTICLE 15 OWNERSHIP AND REMOVAL OF TRADE FIXTURES	16
ARTICLE 16 HOLDING OVER	16
ARTICLE 17 ESTOPPEL CERTIFICATES	17
ARTICLE 18 SUBORDINATION	17
ARTICLE 19 DEFAULTS; REMEDIES	17
ARTICLE 20 FORCE MAJEURE	19
ARTICLE 21 SECURITY DEPOSIT	19
ARTICLE 22 SUBSTITUTION OF OTHER PREMISES	19
ARTICLE 23 SIGNS	19
ARTICLE 24 COMPLIANCE WITH LAW	19
ARTICLE 25 LATE CHARGES AND INSUFFICIENT FUNDS	20
ARTICLE 26 LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT	20
ARTICLE 27 ENTRY BY LANDLORD	20
ARTICLE 28 TENANT PARKING	21
ARTICLE 29 MISCELLANEOUS PROVISIONS	21

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(i)

TABLE OF CONTENTS

Page

Accountant	7
Additional Notice	10
Additional Rent	2
Applicable Laws	19
Bank Prime Loan	20
Base Building	10
Base Rent	2
Base Year	2
Brokers	23
Building	1
Control,	16
Direct Expenses	2
Eligibility Period	10
Estimate	6
Estimate Statement	6
Estimated Excess	6
Excess	6
Expense Year	3
Force Majeure	19
HVAC	8
Initial Notice	10
Interest Rate	20
Landlord	iii
Landlord Default	10
Landlord Parties	11
Lease	iii
Lease Commencement Date	1
Lease Expiration Date	1
Lease Term	1
Lease Year	1
Lines	24
OFAC	25
Operating Expenses	3
Patriot Act	25
Permitted Transferee.	16
Permitted Use	iv
Premises	1
Prohibited Persons	25
Renovations	24
Rent Abatement	2
Rent Abatement Period	2
Rent.	2
Review Period	7
Rules and Regulations	7
Security Deposit	19
Signage	19
Statement	6
Summary	iii
Tax Expenses	5
TCCs	1
Tenant	iii
Tenant Parties	11
Tenant's Share	6
Third Party Contractor	12
Transfer Premium	15

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(ii)

MERIT TOWER

OFFICE LEASE

This Office Lease (the "Lease"), dated as of the date set forth in Section 1 of the Summary of Basic Lease Information (the "Summary"), below, is made by and between LLL FOUR FOREST, LP, a Texas limited partnership company ("Landlord"), and ZION OIL AND GAS, INC, a Texas corporation ("Tenant").

SUMMARY OF BASIC LEASE INFORMATION ("Summary")

TERMS OF LEASE	DESCRIPTION
1. Date:	November_____, 2025
2. Project and Premises:
2.1 Project:	That certain nineteen (19)-story office building (the "Building") containing approximately 398,767 rentable square feet of space, its Common Areas (as defined in Section 1.1.3 below), that certain six (6)-story parking garage, and the land parcels upon which the Building, Common Areas, parking garage and other improvements are located, at 12222 Merit Drive, Dallas, Texas 75251, commonly known as Merit Tower.
2.2 Premises:	Approximately 8,006 rentable square feet of space, of which approximately 5,577 rentable square feet are located in Suite 1450 located on the 14th floor of the Building and approximately 2,429 rentable square feet are located in Suite 1740, located on the 17th floor of the Building, as further set forth in Exhibit A to the Lease. For purposes of the Lease, its terms and conditions, both Suites shall collectively be referred to as the "Premises". Notwithstanding the foregoing Landlord and Tenant agree that each Suite shall remain physically separated from each other, each with its own individual access, and Tenant shall have individual suite signs for each Suite.
3. Lease Term<br><br> <br>(Article 2):
3.1 Length of Term:	Three (3) years and five (5) months.
3.2 Lease Commencement Date:	January 1, 2026. Notwithstanding the foregoing, Landlord shall allow for up to two (2) weeks prior access for cabling, phone installation, furniture installation, etc., at no cost.
3.3 Lease Expiration Date:	The date immediately preceding the last day of the calendar month which is forty-one (41) months subsequent to the Lease Commencement Date.
4. Base Rent (Article 3):
Lease<br><br> <br>Months			Annual Base<br><br> <br>Rent*	Monthly Installment<br><br> <br>of Base Rent*	Annual Rental Rate per<br><br> <br>Rentable Square Foot*
---	---	---	---	---	---
1	-	5	$0.00**	$0.00**	$0.00**
6	-	17	$192,144.00***	$16,012.00	$24.00
18	-	29	$196,146.96	$16,345.58	$24.50
30	-	41	$200,150.04	$16,679.17	$25.00

* The Annual Base Rent was calculated by multiplying the Annual Rental Rate per Rentable Square Foot by the number of rentable square feet of space in the Premises. The Monthly Installment of Base Rent was calculated by multiplying the Annual Rental Rate per Rentable Square Foot by the number of rentable square feet of space in the Premises and dividing by twelve (12).

** During the free rent period, Tenant will be responsible for Additional Rent charges in accordance with Article 4 (if any are applicable), and for their monthly electricity charges defined in Section 6.2

*** First year’s Base Rent (exclusive of abatement period), **** due upon Lease execution.

5. Base Year<br><br> <br>(Article 4):	Calendar year 2026

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(iii)

6. Tenant's Share<br><br> <br>(Article 4):	2.0077%. The Tenant’s Share was calculated by dividing the rentable square feet of the Premises by the rentable square feet of the Building.
7. Permitted Use<br><br> <br>(Article 5):	Tenant shall use the Premises solely for general office use and uses incidental thereto (the "Permitted Use"); provided, however, that notwithstanding anything to the contrary set forth hereinabove, and as more particularly set forth in the Lease, Tenant shall be responsible for operating and maintaining the Premises pursuant to, and in no event may Tenant's Permitted Use violate, (A) Landlord's "Rules and Regulations," as that term is set forth in Article 5 of this Lease, (B) all "Applicable Laws," as that term is set forth in Article 24 of this Lease, (C) all applicable zoning, building codes and (D) the character of the Building as a first-class office building.
8. Security Deposit<br><br> <br>(Article 21):	$16,679.17 (due upon Lease execution).
9. Parking Passes Ratio<br><br> <br>(Article 28):	Four (4) unreserved parking spaces for every 1,000 rentable square feet of the Premises, of which five (5) spaces shall be for the use of executive parking spaces, at a cost of $75.00 plus tax, per space, per month. Unreserved parking spaces shall be free of charge during the Lease Term.
10. Address of Tenant:	12655 North Central Expressway, Suite 1000<br><br> <br>Dallas, TX 75243<br><br> <br>Attention: Michael B. Croswell Jr.<br> (Prior to Lease Commencement Date)<br><br> <br>and
	12222 Merit Drive, Suite 1450<br><br> <br>Dallas, TX 75251<br><br> <br>Attention: Michael B. Croswell Jr.<br><br> <br>(After Lease Commencement Date)
11. Address of Landlord:	LLL Four Forest, LP<br> 12222 Merit Drive, Suite 280<br> Dallas, TX 75251<br> Attention: Eduardo Gildenson
12. Broker(s) (Section 29.25):<br><br> <br><br><br> <br>Representing Tenant:<br><br> <br>Newmark	Representing Landlord:<br><br> <br>Gildenson Real Estate, LLC
13. Condition of the Premises:	AS-IS, WHERE-IS.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(iv)

ARTICLE 1

PREMISES, BUILDING, PROJECT, AND COMMON AREAS

1.1Premises, Building, Project and Common Areas.

1.1.1The Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 2.2 of the Summary (the "Premises"). The outline of the Premises is set forth in Exhibit A attached hereto and each floor or floors of the Premises has the number of rentable square feet as set forth in Section 2.2 of the Summary. The parties hereto agree that the lease of the Premises is upon and subject to the terms, covenants and conditions (the "TCCs") herein set forth, and Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of such TCCs by it to be kept and performed and that this Lease is made upon the condition of such performance. The parties hereto hereby acknowledge that the purpose of Exhibit A is to show the approximate location of the Premises in the "Building," as that term is defined in Section 1.1.2, below, only, and such exhibit is not meant to constitute an agreement, representation or warranty as to the construction of the Premises, the precise area thereof or the specific location of the "Common Areas," as that term is defined in Section 1.1.3, below, or the elements thereof or of the accessways to the Premises, as that term is defined in Section 1.1.2, below. Except as specifically set forth in this Lease, Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Premises. Tenant also acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty regarding the condition of the Premises, the Building or the Project or with respect to the suitability of any of the foregoing for the conduct of Tenant's business, except as specifically set forth in this Lease. The taking of possession of the Premises by Tenant shall conclusively establish that the Premises and the Building were at such time in good and sanitary order, condition and repair.

1.1.2The Building. The Premises are a part of the building set forth in Section 2.1 of the Summary (the "Building"). The term "Project" as used in this Lease, shall mean (i) the Building and the Common Areas and (ii) the land (which is improved with landscaping, parking facilities and other improvements) upon which the Project is located.

1.1.3Common Areas. Tenant shall have the non-exclusive right to use in common with other tenants in the Building and/or Project, and subject to the rules and regulations referred to in Article 5 of this Lease, those portions of the Building and/or Project which are provided, from time to time, for use in common by Landlord, Tenant and any other tenants of the Building (such areas, together with such other portions of the Building and Project designated by Landlord, in its discretion, including certain areas designated for the exclusive use of certain tenants, or to be shared by Landlord and certain tenants, are collectively referred to herein as the "Common Areas"). The manner in which the Common Areas are maintained and operated shall be at the sole discretion of Landlord and the use thereof shall be subject to such rules, regulations and restrictions as Landlord may make from time to time, provided that such rules, regulations and restrictions do not unreasonably interfere with the rights granted to Tenant under this Lease and the permitted use granted under Article 5, below. Landlord reserves the right to close temporarily, make alterations or additions to, or change the location of elements of the Building and/or Project and its Common Areas; provided that no such changes shall be permitted which materially reduce Tenant's rights or access hereunder. Except when and where Tenant's right of access is specifically excluded in this Lease, Tenant shall have the right of access to the Premises, the Building, and the Building parking facilities twenty-four (24) hours per day, seven (7) days per week during the "Lease Term," as that term is defined in Article 2, below.

1.2Stipulation of Rentable Square Feet of Premises. For purposes of this Lease, the "rentable square feet" of the Building and Premises shall be deemed as set forth in Section 2.1 and Section 2.2 of the Summary, respectively.

ARTICLE 2

LEASE TERM

2.1Initial Lease Term. The TCCs and provisions of this Lease shall be effective as of the date of this Lease. The term of this Lease (the "Lease Term") shall be as set forth in Section 3.1 of the Summary, shall commence on the date set forth in Section 3.2 of the Summary (the "Lease Commencement Date"), and shall terminate on the date set forth in Section 3.3 of the Summary (the "Lease Expiration Date") unless this Lease is sooner terminated as hereinafter provided. For purposes of this Lease, the term "Lease Year" shall mean each consecutive twelve (12) month period during the Lease Term; provided, however, that the first Lease Year shall commence on the Lease Commencement Date and end on the last day of the month in which the first anniversary of the Lease Commencement Date occurs, and the second and each succeeding Lease Year shall commence on the first day of the next calendar month.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(1)

ARTICLE 3

BASE RENT

3.1In General. Tenant shall pay, without prior notice or demand, to Landlord or Landlord's agent at the management office of the Project, or, at Landlord's option, at such other place as Landlord may from time to time designate in writing, by a check for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, base rent ("Base Rent") as set forth in Section 4 of the Summary, payable in equal monthly installments as set forth in Section 4 of the Summary in advance on or before the first day of each and every calendar month during the Lease Term, without any setoff or deduction whatsoever. The Base Rent for the first full year of the Lease Term which occurs after the expiration of any free rent period shall be paid at the time of Tenant's execution of this Lease. If any payment of Rent is for a period which is shorter than one month, the Rent for any such fractional month shall accrue on a daily basis during such fractional month and shall total an amount equal to the product of (i) a fraction, the numerator of which is the number of days in such fractional month and the denominator of which is the actual number of days occurring in such calendar month, and (ii) the then-applicable Monthly Installment of Base Rent. All other payments or adjustments required to be made under the TCCs of this Lease that require proration on a time basis shall be prorated on the same basis.

3.2Rent Abatement. Provided that the Tenant is not then in default of the Lease and is then in occupancy of the entire Premises, then during the period beginning on the first day of Lease Month One (1) and ending on the last day of Lease Month Five (5) (the “Rent Abatement Period”), Tenant shall not be obligated to pay any Base Rent otherwise attributable to the Premises for such Rent Abatement Period (the "Rent Abatement"). Tenant acknowledges and agrees that during such Rent Abatement Period, such abatement of Base Rent shall have no effect on the calculation of any future increases in Base Rent, Operating Costs or Landlord's Taxes payable by Tenant pursuant to the terms of this Lease, which increases shall be calculated without regard to such abatement of Base Rent. The foregoing Rent Abatement has been granted to Tenant as additional consideration for entering into this Lease, and for agreeing to pay the rent and performing the terms and conditions otherwise required under the Lease, as amended. If Tenant shall be in economic default or material non-economic default under the Lease and shall fail to cure such economic default or material non-economic default within notice and cure period, if any, permitted for cure pursuant to the Lease, then Landlord may at its option, by notice to Tenant, elect, in addition to any other remedies Landlord may have under the Lease that Tenant shall immediately become obligated to pay to Landlord all Base Rent abated hereunder during the Rent Abatement Period, with interest as provided pursuant to the Lease from the date such Base Rent would have otherwise been due but for the abatement provided herein.

ARTICLE 4

ADDITIONAL RENT

4.1General Terms. In addition to paying the Base Rent specified in Article 3 of this Lease, Tenant shall pay "Tenant's Share" of the annual "Direct Expenses," as those terms are defined in Sections 4.2.6 and 4.2.2 of this Lease, respectively, which are in excess of the amount of Direct Expenses applicable to the "Base Year," as that term is defined in Section 4.2.1, below; provided, however, that in no event shall any decrease in Direct Expenses for any Expense Year below Direct Expenses for the Base Year entitle Tenant to any decrease in Base Rent or any credit against sums due under this Lease. Such payments by Tenant, together with any and all other amounts payable by Tenant to Landlord pursuant to the TCCs of this Lease, are hereinafter collectively referred to as the "Additional Rent," and the Base Rent and the Additional Rent are herein collectively referred to as "Rent." All amounts due under this Article 4 as Additional Rent shall be payable for the same periods and in the same manner as the Base Rent; provided, however, the parties hereby acknowledge that the first monthly installment of Tenant's Share of any "Estimated Excess," as that term is set forth in, and pursuant to the terms and conditions of, Section 4.3 of this Lease, shall first be due and payable for the calendar month occurring immediately following the expiration of the Base Year. Without limitation on other obligations of Tenant which survive the expiration of the Lease Term, the obligations of Tenant to pay the Additional Rent provided for in this Article 4 shall survive the expiration of the Lease Term.

4.2Definitions of Key Terms Relating to Additional Rent. As used in this Article 4, the following terms shall have the meanings hereinafter set forth:

4.2.1 "Base Year" shall mean the period set forth in Section 5 of the Summary.

4.2.2 "Direct Expenses" shall mean "Operating Expenses" and "Tax Expenses."

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(2)

4.2.3 "Expense Year" shall mean each calendar year in which any portion of the Lease Term falls, through and including the calendar year in which the Lease Term expires, provided that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive month period, and, in the event of any such change, Tenant's Share of Direct Expenses shall be equitably adjusted for any Expense Year involved in any such change.

4.2.4 "Operating Expenses" shall mean all expenses, costs and amounts of every kind and nature which Landlord pays or accrues during any Expense Year because of or in connection with the ownership, management, maintenance, security, repair, replacement, restoration or operation of the Project, or any portion thereof, in accordance with sound real estate management and accounting principles, consistently applied. Without limiting the generality of the foregoing, Operating Expenses shall specifically include any and all of the following: (i) the cost of supplying all utilities (other than the cost of electricity, the payment for which shall be made in accordance with the TCCs of Section 6.1.2 of this Lease), the cost of operating, repairing, maintaining, and renovating the utility, telephone, mechanical, sanitary, storm drainage, and elevator systems, and the cost of maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections and the cost of contesting any governmental enactments which may affect Operating Expenses, and the costs incurred in connection with a governmentally mandated transportation system management program or similar program; (iii) the cost of all insurance carried by Landlord in connection with the Project; (iv) the cost of landscaping, relamping, and all supplies, tools, equipment and materials used in the operation, repair and maintenance of the Project, or any portion thereof; (v) costs incurred in connection with the parking areas servicing the Project; (vi) fees and other costs, including management fees, consulting fees, legal fees and accounting fees, of all contractors and consultants in connection with the management, operation, maintenance and repair of the Project; (vii) payments under any equipment rental agreements; (viii) wages, salaries and other compensation and benefits, including taxes levied thereon, of all persons (other than persons generally considered to be higher in rank than the position of Project manager, except for those working on-site and devoting substantially all of his her employed time to the Project) engaged in the operation, maintenance and security of the Project; (ix) costs under any instrument pertaining to the sharing of costs by the Project; (x) operation, repair, maintenance and replacement of all systems and equipment and components thereof of the Project; (xi) the cost of janitorial services to the Premises and Common Areas and the cost of alarm, security and other services, replacement of wall and floor coverings, ceiling tiles and fixtures in common areas, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (xii) amortization of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Project, or any portion thereof (which amortization calculation shall include interest at the "Interest Rate," as that term is set forth in Article 25 of this Lease); (xiii) the cost of capital improvements or other costs incurred in connection with the Project (A) which are intended to effect economies in the operation or maintenance of the Project, or any portion thereof, (B) that are required to comply with present or anticipated conservation programs, (C) which are replacements or modifications of nonstructural items located in the Common Areas required to keep the Common Areas in good order or condition, or (D) that are required under any governmental law or regulation by a federal, state or local governmental agency, except for capital repairs, replacements or other improvements to remedy a condition existing prior to the Lease Commencement Date which an applicable governmental authority, if it had knowledge of such condition prior to the Lease Commencement Date, would have then required to be remedied pursuant to then-current governmental laws or regulations in their form existing as of the Lease Commencement Date and pursuant to the then-current interpretation of such governmental laws or regulations by the applicable governmental authority as of the Lease Commencement Date; provided, however, that any capital expenditure shall be amortized with interest at the Interest Rate over the shorter of (X) seven (7) years, or (Y) its useful life as Landlord shall reasonably determine in accordance with sound real estate management and accounting principles; (xiv) costs, fees, charges or assessments imposed by, or resulting from any mandate imposed on Landlord by, any federal, state or local government for fire and police protection, trash removal, community services, or other services which do not constitute "Tax Expenses" as that term is defined in Section 4.2.5, below; (xv) payments under any easement, license, operating agreement, declaration, restrictive covenant, or instrument pertaining to the sharing of costs by the Project, and (xvi) costs of any additional services not provided to the Building and/or the Project as of the Lease Commencement Date but which are thereafter provided by Landlord in connection with its prudent management of the Building and/or the Project.

Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses shall not, however, include:

(a) costs, including marketing costs, legal fees, space planners' fees, advertising and promotional expenses, and brokerage fees incurred in connection with the original construction or development, or original or future leasing of the Project, and costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements made for new tenants initially occupying space in the Project after the Lease Commencement Date or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Project (excluding, however, such costs relating to any common areas of the Project or parking facilities);

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(3)

(b) except as set forth in items (xii), (xiii), and (xiv) above, depreciation, interest and principal payments on mortgages and other debt costs, if any, penalties and interest;

(c) costs for which the Landlord is reimbursed by any tenant or occupant of the Project or by insurance by its carrier or any tenant's carrier or by anyone else, and electric power costs for which any tenant directly contracts with the local public service company;

(d) any bad debt loss, rent loss, or reserves for bad debts or rent loss;

(e) costs associated with the operation of the business of the partnership or entity which constitutes the Landlord, as the same are distinguished from the costs of operation of the Project (which shall specifically include, but not be limited to, accounting costs associated with the operation of the Project). Costs associated with the operation of the business of the partnership or entity which constitutes the Landlord include costs of partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions of the Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of the Landlord's interest in the Project, and costs incurred in connection with any disputes between Landlord and its employees, between Landlord and Project management, or between Landlord and other tenants or occupants, and Landlord's general corporate overhead and general and administrative expenses;

(f) the wages and benefits of any employee who does not devote substantially all of his or her employed time to the Project unless such wages and benefits are prorated to reflect time spent on operating and managing the Project vis-à-vis time spent on matters unrelated to operating and managing the Project;

(g) amount paid as ground rental for the Project by the Landlord;

(h) overhead and profit increment paid to the Landlord or to subsidiaries or affiliates of the Landlord for services in the Project to the extent the same exceeds the costs of such services rendered by qualified, first-class unaffiliated third parties on a competitive basis;

(i) any compensation paid to clerks, attendants or other persons in commercial concessions operated by the Landlord, provided that any compensation paid to any concierge at the Project shall be includable as an Operating Expense;

(j) rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment which if purchased the cost of which would be excluded from Operating Expenses as a capital cost, except equipment not affixed to the Project which is used in providing janitorial services to the Common Area (or similar services to the Project) and, further excepting from this exclusion such equipment rented or leased to remedy or ameliorate an emergency condition in the Project;

(k) all items and services for which Tenant or any other tenant in the Project reimburses Landlord or which Landlord provides selectively to one or more tenants (other than Tenant) without reimbursement;

(l) costs, other than those incurred in ordinary maintenance and repair, for sculpture, paintings, fountains or other objects of art;

(m) any costs expressly excluded from Operating Expenses elsewhere in this Lease;

(n) rent for any office space occupied by Project management personnel to the extent the size or rental rate of such office space exceeds the size or fair market rental value of office space occupied by management personnel of the comparable buildings in the vicinity of the Building, with adjustment where appropriate for the size of the applicable project;

(o) costs arising from the gross negligence or willful misconduct of Landlord or its agents, employees, vendors, contractors, or providers of materials or services; and

(p) costs incurred to comply with laws relating to the removal of hazardous material (as defined under applicable law) which was in existence in the Building or on the Project prior to the Lease Commencement Date, and was of such a nature that a federal, State or municipal governmental authority, if it had then had knowledge of the presence of such hazardous material, in the state, and under the conditions that it then existed in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto; and costs incurred to remove, remedy, contain, or treat hazardous material, which hazardous material is brought into the Building or onto the Project after the date hereof by Landlord or any other tenant of the Project and is of such a nature, at that time, that a federal, State or municipal governmental authority, if it had then had knowledge of the presence of such hazardous material, in the state, and under the conditions, that it then exists in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(4)

If Landlord is not furnishing any particular work or service (the cost of which, if performed by Landlord, would be included in Operating Expenses) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Landlord, Operating Expenses shall be deemed to be increased by an amount equal to the additional Operating Expenses which would reasonably have been incurred during such period by Landlord if it had at its own expense furnished such work or service to such tenant. If the Project is not at least ninety-five percent (95%) occupied during all or a portion of the Base Year or any Expense Year, Landlord may elect to make an appropriate adjustment to the components of Operating Expenses for such year to determine the amount of Operating Expenses that would have been incurred had the Project been ninety-five percent (95%) occupied; and the amount so determined shall be deemed to have been the amount of Operating Expenses for such year. Operating Expenses for the Base Year shall not include market-wide cost increases due to extraordinary circumstances, including, but not limited to, Force Majeure, boycotts, strikes, conservation surcharges, embargoes or shortages. In no event shall the components of Direct Expenses for any Expense Year related to Project utility, services, or insurance costs be less than the components of Direct Expenses related to Project utility, services, or insurance costs in the Base Year. Landlord shall not (i) make a profit by charging items to Operating Expenses that are otherwise also charged separately to others and (ii) subject to Landlord's right to adjust the components of Operating Expenses described above in this paragraph, collect Operating Expenses from Tenant and all other tenants in the Building in an amount in excess of what Landlord incurs for the items included in Operating Expenses.

Notwithstanding anything herein to the contrary, for purposes of computing Tenant's Share of Direct Expenses in excess of Direct Expenses applicable to the Base Year, Controllable Expenses shall not increase more than **** six percent (6%) over Controllable Expenses (hereinafter defined) for the prior Expense Year, on a cumulative, compounding basis over the entire Lease Term. For purposes hereof, "Controllable Expenses" shall mean all Direct Expenses except Tax Expenses, all utilities and insurance costs.

4.2.5Taxes

4.2.5.1 "Tax Expenses" shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary, including, without limitation (a) all real property taxes and other assessments on the Project, including, but not limited to, gross receipts taxes, assessments for special improvement districts and building improvement districts, governmental charges, fees and assessments for police, fire, traffic mitigation or other governmental service of purported benefit to the Project, taxes and assessments levied in substitution or supplementation in whole or in part of any such taxes and assessments and the Project's share of any real estate taxes and assessments under any reciprocal easement agreement, common area agreement or similar agreement as to the Project; (b) all personal property taxes for property that is owned by Landlord and used in connection with the operation, maintenance and repair of the Project; (c) all sales, use, franchise or other tax now or hereafter imposed by any governmental authority upon Rent received by Landlord or on the revenue of Landlord from the Project; and (d) all costs and fees incurred in connection with seeking reductions in any tax liabilities described in (a), (b) and (c), including, without limitation, any costs incurred by Landlord for compliance, review and appeal of tax liabilities. Notwithstanding anything to the contrary contained herein, the term "Taxes" shall also mean any taxes and assessments attributable to the Project or its operation including any tax on the rent or other revenue from the Project, or any portion thereof, or as against the business of owning or leasing the Project, or any portion thereof, including any business, gross margins, or similar tax payable by Landlord which is attributable to rent or other revenue derived from the Project (including, but not limited to, the Texas Margin tax that is currently calculated at a rate of 0.7% of gross rent), and any sales, use, franchise or other tax now or hereafter imposed by any governmental authority upon rent received by Landlord or on the revenue of Landlord from the Project.

4.2.5.2 Any costs and expenses (including, without limitation, reasonable attorneys' fees) incurred in attempting to protest, reduce or minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such expenses are paid. Refunds of Tax Expenses shall be credited against Tax Expenses and refunded to Tenant regardless of when received, based on the Expense Year to which the refund is applicable, provided that in no event shall the amount to be refunded to Tenant for any such Expense Year exceed the total amount paid by Tenant as Additional Rent under this Article 4 for such Expense Year. If Tax Expenses for any period during the Lease Term or any extension thereof are increased after payment thereof for any reason, including, without limitation, error or reassessment by applicable governmental or municipal authorities, Tenant shall pay Landlord upon demand Tenant's Share of any such increased Tax Expenses included by Landlord as Project Tax Expenses pursuant to the TCCs of this Lease. Notwithstanding anything to the contrary contained in this Section 4.2.5, there shall be excluded from Tax Expenses (i) all excess profits taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state income taxes, and other taxes to the extent applicable to Landlord's general or net income (as opposed to rents, receipts or income attributable to operations at the Project), (ii) any items included as Operating Expenses, and (iii) any items paid by Tenant under Section 4.4 of this Lease. Notwithstanding anything to the contrary set forth in this Lease, only Landlord may institute proceedings to reduce Tax Expenses and the filing of any such proceeding by Tenant without Landlord's consent shall constitute an event of default by Tenant under this Lease. Notwithstanding the foregoing, Landlord shall not be obligated to file any application or institute any proceeding seeking a reduction in Tax Expenses.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(5)

4.2.6 "Tenant's Share" shall mean the percentage set forth in Section 6 of the Summary.

4.3Calculation and Payment of Additional Rent. If for any Expense Year ending or commencing within the Lease Term, Tenant's Share of Direct Expenses for such Expense Year exceeds Tenant's Share of Direct Expenses applicable to the Base Year, then Tenant shall pay to Landlord, in the manner set forth in Section 4.3.1, below, and as Additional Rent, an amount equal to the excess (the "Excess").

4.3.1Statement of Actual Direct Expenses and Payment by Tenant. **** Landlord shall give to Tenant following the end of each Expense Year, a statement (the "Statement") which shall state in general major categories the Project Direct Expenses incurred or accrued for the Base Year or such preceding Expense Year, as applicable, and which shall indicate the amount of the Excess. Landlord shall use commercially reasonable efforts to deliver such Statement to Tenant on or before May 1 following the end of the Expense Year to which such Statement relates. Upon receipt of the Statement for each Expense Year commencing or ending during the Lease Term, if an Excess is present, Tenant shall pay, within thirty (30) days after receipt of the Statement, the full amount of the Excess for such Expense Year, less the amounts, if any, paid during such Expense Year as "Estimated Excess," as that term is defined in Section 4.3.2, below, and if Tenant paid more as Estimated Excess than the actual Excess, Tenant shall receive a credit in the amount of Tenant's overpayment against Rent next due under this Lease. The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord or Tenant from enforcing its rights under this Article 4. Even though the Lease Term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant's Share of Project Direct Expenses for the Expense Year in which this Lease terminates, if an Excess is present, Tenant shall, within thirty (30) days after receipt of the Statement, pay to Landlord such amount, and if Tenant paid more as Estimated Excess than the actual Excess, Landlord shall, within thirty (30) days, deliver a check payable to Tenant in the amount of the overpayment. The provisions of this Section 4.3.1 shall survive the expiration or earlier termination of the Lease Term. Notwithstanding the immediately preceding sentence, Tenant shall not be responsible for Tenant's Share of any Project Direct Expenses attributable to any Expense Year which are first billed to Tenant more than two (2) calendar years after the Lease Expiration Date, provided, however, that Tenant shall nevertheless remain responsible for Tenant's Share of Direct Expenses levied by any governmental authority or by any public utility companies at any time following the Lease Expiration Date which are attributable to any Expense Year.

4.3.2Statement of Estimated Direct Expenses. **** In addition, Landlord shall give Tenant a yearly expense estimate statement (the "Estimate Statement") which shall set forth in general major categories Landlord's reasonable estimate (the "Estimate") of what the total amount of Project Direct Expenses for the then-current Expense Year shall be and the estimated excess (the "Estimated Excess") as calculated by comparing the Project Direct Expenses for such Expense Year, which shall be based upon the Estimate, to the amount of Project Direct Expenses for the Base Year. Landlord shall use commercially reasonable efforts to deliver such Estimate Statement to Tenant on or before May 1 following the end of the Expense Year to which such Estimate Statement relates. The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Additional Rent under this Article 4, nor shall Landlord be prohibited from revising any Estimate Statement or Estimated Excess theretofore delivered to the extent necessary. Thereafter, Tenant shall pay, within thirty (30) days after receipt of the Estimate Statement, a fraction of the Estimated Excess for the then-current Expense Year (reduced by any amounts paid pursuant to the second to last sentence of this Section 4.3.2). Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year, including the month of such payment, and twelve (12) as its denominator. Until a new Estimate Statement is furnished (which Landlord shall have the right to deliver to Tenant at any time), Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the total Estimated Excess set forth in the previous Estimate Statement delivered by Landlord to Tenant. Throughout the Lease Term Landlord shall maintain books and records with respect to Project Direct Expenses in accordance with generally accepted real estate accounting and management practices, consistently applied.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(6)

4.4Taxes and Other Charges for Which Tenant Is Directly Responsible.

4.4.1 Tenant shall be liable for and shall pay before delinquency, taxes levied against Tenant's equipment, furniture, fixtures and any other personal property located in or about the Premises. If any such taxes on Tenant's equipment, furniture, fixtures and any other personal property are levied against Landlord or Landlord's property or if the assessed value of Landlord's property is increased by the inclusion therein of a value placed upon such equipment, furniture, fixtures or any other personal property and if Landlord pays the taxes based upon such increased assessment, which Landlord shall have the right to do regardless of the validity thereof but only under proper protest if requested by Tenant, Tenant shall upon demand repay to Landlord the taxes so levied against Landlord or the proportion of such taxes resulting from such increase in the assessment, as the case may be.

4.4.2 If the tenant improvements in the Premises, whether installed and/or paid for by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, are assessed for real property tax purposes at a valuation higher than the valuation at which tenant improvements conforming to Landlord's "building standard" in other space in the Building are assessed, then the Tax Expenses levied against Landlord or the property by reason of such excess assessed valuation shall be deemed to be taxes levied against personal property of Tenant and shall be governed by the provisions of Section 4.4.1, above.

4.4.3 Notwithstanding any contrary provision herein, Tenant shall pay prior to delinquency any (i) rent tax or sales tax, service tax, transfer tax or value added tax, or any other applicable tax on the rent or services herein or otherwise respecting this Lease, (ii) taxes assessed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion of the Project, including the Project parking facilities; or (iii) taxes assessed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises.

4.5Landlord's Books and Records. Upon Tenant's written request given not more than ninety (90) days after Tenant's receipt of a Statement for a particular Expense Year, and provided that Tenant is not then in default under this Lease beyond the applicable cure period provided in this Lease, Landlord shall furnish Tenant with such reasonable supporting documentation in connection with said Project Direct Expenses as Tenant may reasonably request. Landlord shall provide said information to Tenant within sixty (60) days after Tenant's written request therefor. Within one hundred eighty (180) days after receipt of a Statement by Tenant (the "Review Period"), if Tenant disputes the amount of Additional Rent set forth in the Statement, an independent certified public accountant (which accountant (A) is a member of a nationally or regionally recognized accounting firm, and (B) is not working on a contingency fee basis), designated and paid for by Tenant, may, after reasonable notice to Landlord and at reasonable times, inspect Landlord's records with respect to the Statement at Landlord's offices, provided that Tenant is not then in default under this Lease (beyond any applicable notice and cure periods) and Tenant has paid all amounts required to be paid under the applicable Estimate Statement and Statement, as the case may be. In connection with such inspection, Tenant and Tenant's agents must agree in advance to follow Landlord's reasonable rules and procedures regarding inspections of Landlord's records, and shall execute a commercially reasonable confidentiality agreement regarding such inspection. Tenant's failure to dispute the amount of Additional Rent set forth in any Statement within the Review Period shall be deemed to be Tenant's approval of such Statement and Tenant, thereafter, waives the right or ability to dispute the amounts set forth in such Statement. If after such inspection, Tenant still disputes such Additional Rent, a determination as to the proper amount shall be made, at Tenant's expense, by an independent certified public accountant (the "Accountant") selected by Landlord and subject to Tenant's reasonable approval; provided that if such determination by the Accountant proves that Direct Expenses were overstated by more than ten percent (10%), then the cost of the Accountant and the cost of such determination shall be paid for by Landlord. Tenant hereby acknowledges that Tenant's sole right to inspect Landlord's books and records and to contest the amount of Direct Expenses payable by Tenant shall be as set forth in this Section 4.5, and Tenant hereby waives any and all other rights pursuant to applicable law to inspect such books and records and/or to contest the amount of Direct Expenses payable by Tenant.

ARTICLE 5

USE OF PREMISES

Tenant shall use the Premises solely for the “Permitted Use,” as that term is defined in Section 7 of the Summary, and Tenant shall not use or permit the Premises to be used for any other purpose or purposes whatsoever without the prior written consent of Landlord, which may be withheld in Landlord’s sole and absolute discretion. Tenant covenants and agrees that it shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose contrary to the rules and regulations promulgated by Landlord from time to time ("Rules and Regulations"), or in violation of the laws of the United States of America, the State of Texas or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Project, or in a manner otherwise inconsistent with the character of the Project as a first-class office building Project. Tenant shall faithfully observe and comply with the Rules and Regulations, the current set of which (as of the date of this Lease) is attached to this Lease as Exhibit C; provided, however, Landlord shall not enforce, change or modify the Rules and Regulations in a discriminatory manner and Landlord agrees that the Rules and Regulations shall not be unreasonably modified or enforced in a manner which will unreasonably interfere with the normal and customary conduct of Tenant's business.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(7)

ARTICLE 6

SERVICES AND UTILITIES

6.1Standard Tenant Services. Landlord shall provide the following services and utilities.

6.1.1 Subject to reasonable change implemented by Landlord and all governmental rules, regulations and guidelines applicable thereto, Landlord shall provide heating and air conditioning when necessary for normal comfort for normal office use in the Premises ("HVAC") from Monday through Friday from 8.00 a.m. to 6.00 p.m., and on Saturday from 9.00 a.m. to 1.00 p.m. (collectively, the "Building Hours"), except for the date of observation of locally and nationally recognized holidays (collectively, the "Holidays"). The daily time periods identified hereinabove are sometimes referred to as the "Business Hours." Landlord shall make available HVAC at other times at Tenant’s expense, provided that such HVAC usage will be separately metered and billed to Tenant at the prevailing hourly rate charged by Landlord for after hours HVAC usage, which is currently $80.00 per hour, with a two (2) hours minimum. Landlord shall have the right to adjust, from time to time and at Landlord’s sole discretion, the hourly rate for after-hours HVAC to account for the increased costs of operating the HVAC system. Tenant shall install, operate and maintain, at its expense, such additions or modifications to HVAC Equipment as may be reasonably determined by Landlord to be necessary in order to maintain building HVAC standards or to correct temperature imbalance resulting from Tenant’s installation and operation of lights, machines, computer or electronic data processing equipment or other special equipment or facilities placing a greater burden on HVAC Equipment than would general office use. If Tenant desires to use heat, ventilation or air conditioning during hours other than those for which Landlord is obligated to supply such utilities pursuant to the terms of Section 6.1 of this Lease, Tenant shall give Landlord such prior notice, as Landlord shall from time to time establish as appropriate (but in no event less than one (1) business day prior notice), of Tenant's desired use in order to supply such utilities, and Landlord shall supply such utilities to Tenant at such hourly cost to Tenant (which shall be treated as Additional Rent) as Landlord shall from time to time establish.

6.1.2 Landlord shall provide adequate electrical wiring and facilities and power for normal general office use as reasonably determined by Landlord. Tenant shall bear the cost of replacement of lamps, starters and ballasts for non-Building standard lighting fixtures within the Premises. Building standard electrical power to the Premises shall be sufficient for operation under normal business conditions of building standard office lighting. Tenant's use of electrical service shall not exceed, either in voltage, rated capacity, use beyond Building Service Hours or overall load, that which Landlord reasonably deems to be standard for the Building. If Tenant requests permission to consume excess electrical service, Landlord may refuse to consent or may condition consent upon conditions that Landlord reasonably elects (including, without limitation, the installation of utility service upgrades, meters, submeters, air handlers or cooling units), and the additional usage (to the extent permitted by Law), installation and maintenance cost shall be paid for by Tenant. Landlord shall have the right to separately submeter electrical usage for the Premises or to measure electrical usage by survey or other methods that Landlord, in its reasonable judgment, deems appropriate.

6.1.3 Landlord shall provide city water from the regular Building outlets for drinking, lavatory and toilet purposes.

6.1.4 Landlord shall provide janitorial services five (5) days per week, except the date of observation of the Holidays, in and about the Premises and window washing services in a manner consistent with other comparable buildings in the vicinity of the Building

6.1.5 Landlord shall provide nonexclusive, non-attended automatic passenger elevator service during the Building Hours.

Tenant shall cooperate fully with Landlord at all times and abide by all regulations and requirements that Landlord may reasonably prescribe for the proper functioning and protection of the HVAC, electrical, mechanical and plumbing systems. Landlord shall not be required to provide any services other than as expressly set forth in Section 6.1.1 to 6.1.5 hereinabove.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(8)

6.2Electricity; Janitorial Service; Above Standard Tenant Services.

6.2.1Electricity. Notwithstanding anything to the contrary set forth in Section 4 or this Article 6, Tenant hereby agrees to pay an amount equal to Tenant’s Proportionate Share of Electrical Costs as defined herein. Within ten (10) business days after receiving the estimate or revised estimate from Landlord setting forth an estimate of Electrical Costs for a particular calendar year, Tenant shall pay Landlord one-twelfth (1/12^th^) of Tenant’s Proportionate Share of the estimated Electrical Costs on the first day of each calendar month of the Lease Term. Tenant shall pay Landlord one twelfth (1/12^th^) of Tenant’s Proportionate Share of this estimate, until a new estimate becomes available. Landlord may revise the estimates whenever it obtains more accurate information for the electrical rate for the Project. Tenant’s Proportionate Share of Electrical Costs is an amount equal to the product of (a) the Electrical Costs for the Project multiplied by (b) Tenant’s Proportionate Share, paid monthly in advance in an estimated amount. Electrical Costs means all electrical costs and charges of any kind, general or special, ordinary or extraordinary, charged to, levied against, or otherwise payable with respect to the Project. Electrical Costs shall not include any electrical costs separately metered to, and payable directly to the utility provider by, any tenant of the Building, but in such event Landlord may adjust Tenant’s Proportionate Share to exclude from the rentable square footage of the Building the rentable square footage of any leased Tenant space for which landlord does not receive Electrical Cost payments. If the Building is not at least 95% occupied during any calendar year or if Landlord is not supplying electrical services to at least 95% of the total Rentable Square Footage of the Building at any time during a calendar year, Electrical Costs shall be determined as if the Building had been 95% occupied and Landlord had been supplying electrical services to 95% of the Rentable Square Footage of the Building during that calendar year. Landlord shall deliver to tenant a report for the previous calendar year by January 15^th^ of each year, or soon thereafter as reasonably possible, setting forth (a) the actual Electrical Costs; (b) the amount of Electrical Cost due from Tenant; and (c) the amount of Electrical Costs paid by Tenant. Within twenty (20) days of such delivery, Tenant shall pay to Landlord the amount due from Tenant minus the amount paid by Tenant. If the total amount paid by Tenant during the calendar year exceeds the amount due, Landlord shall apply the excess as a credit against Tenant’s payment of Tenant’s Proportionate Share of Electrical Costs for the next payment coming due. Given Tenant's direct payment obligations set forth hereinabove, the cost of electricity for the Project shall be excluded from Operating Expenses. Electrical Costs shall be adjusted as follows: (a) amounts received by Landlord as reimbursement for above standard electrical consumption shall be deducted from Electrical Costs, and (b) the cost of electricity incurred to provide overtime HVAC to specific tenants (as reasonably estimated by Landlord) shall be deducted from Electrical Costs. Landlord shall have the exclusive right to select any company providing electrical service to the Premises, to aggregate the electrical service for the Project and Premises with other Buildings and to purchase electricity through a broker and/or buyers group and to change providers and manner of purchasing electricity.

6.2.2Above-Standard Tenant Services. Notwithstanding anything to the contrary set forth in Section 4 or this Article 6, Tenant shall directly pay to Landlord one hundred percent (100%) of the cost of all services required by Tenant to be provided by Landlord which are in excess of the services set forth in Section 6.1, above (collectively, the "Above-Standard Tenant Service"), including, but not limited to, (i) twenty-four (24) hour porter service, (ii) any over-standard use more particularly identified in Section 6.3, below.

6.3Overstandard Tenant Use. Tenant shall not, without Landlord's prior written consent, use heat-generating machines, machines other than normal fractional horsepower office machines, or equipment or lighting other than Building standard lights in the Premises, which may affect the temperature otherwise maintained by the air conditioning system or increase the water normally furnished for the Premises by Landlord pursuant to the terms of Section 6.1 of this Lease. If such consent is given, Landlord shall have the right to install supplementary air conditioning units or other facilities in the Premises, including supplementary or additional metering devices, and the cost thereof, including the cost of installation, operation and maintenance, increased wear and tear on existing equipment and other similar charges, shall be paid by Tenant to Landlord upon billing by Landlord. If Tenant uses water, electricity, heat or air conditioning in excess of that supplied by Landlord pursuant to Section 6.1 of this Lease, Tenant shall pay to Landlord, upon billing, the cost of such excess consumption, the cost of the installation, operation, and maintenance of equipment which is installed in order to supply such excess consumption, and the cost of the increased wear and tear on existing equipment caused by such excess consumption; and Landlord may install devices to separately meter any increased use and in such event Tenant shall pay the increased cost directly to Landlord, on demand, at the rates charged by the public utility company furnishing the same, including the cost of such additional metering devices. Tenant shall be responsible for properly operating and maintaining any such supplemental equipment and shall provide to Landlord, at Tenant’s sole expense, evidence of a maintenance agreement for such equipment through a Landlord approved vendor. Tenant's use of electricity shall never exceed the capacity of the feeders to the Project or the risers or wiring installation. Tenant shall not install or use or permit the installation or use of any computer or electronic data processing equipment in the Premises, without the prior written consent of Landlord.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(9)

6.4Interruption of Use. Except as otherwise expressly provided in this Lease, Tenant agrees that Landlord shall not be liable for damages, by abatement of Rent or otherwise, for Tenant's failure to obtain, or for any failure to furnish or delay in furnishing, any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by repairs, replacements, or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building after reasonable effort to do so, by any accident or casualty whatsoever, by act or default of Tenant or other parties; and such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenant’s use and possession of the Premises or relieve Tenant from paying Rent or performing any of its obligations under this Lease, except as otherwise expressly provided in this Lease.

6.5Rent Abatement. If (i) Landlord fails to perform the obligations required of Landlord under the TCCs of this Lease, (ii) such failure causes all or a portion of the Premises to be untenantable and unusable by Tenant, and (iii) such failure relates to (A) the nonfunctioning of the heat, ventilation, and air conditioning system in the Premises, the electricity in the Premises, the nonfunctioning of the elevator service to the Premises, or (B) a failure to provide access to the Premises, Tenant shall give Landlord notice (the "Initial Notice"), specifying such failure to perform by Landlord (the "Landlord Default"). If Landlord has not cured such Landlord Default within five (5) business days after the receipt of the Initial Notice (the "Eligibility Period"), Tenant may deliver an additional notice to Landlord (the "Additional Notice"), specifying such Landlord Default and Tenant's intention to abate the payment of Rent under this Lease. If Landlord does not cure such Landlord Default within five (5) business days of receipt of the Additional Notice, Tenant may, upon written notice to Landlord, immediately abate Rent payable under this Lease for that portion of the Premises rendered untenantable and not used by Tenant, for the period beginning on the date five (5) business days after the Initial Notice to the earlier of the date Landlord cures such Landlord Default or the date Tenant recommences the use of such portion of the Premises. Except as provided in this Section 6.5, nothing contained herein shall be interpreted to mean that Tenant is excused from paying Rent due hereunder.

ARTICLE 7

REPAIRS

Tenant shall, at Tenant's own expense, keep the Premises, including all improvements, fixtures, equipment, window coverings, and furnishings therein, in good order, repair and condition at all times during the Lease Term. In addition, Tenant shall, at Tenant's own expense but under the supervision and subject to the prior approval of Landlord, and within any reasonable period of time specified by Landlord, promptly and adequately repair all damage to the Premises and replace or repair all damaged or broken fixtures and appurtenances; provided however, that, at Landlord's option, or if Tenant fails to make such repairs, Landlord may, but need not, make such repairs and replacements, and Tenant shall pay Landlord the cost thereof, including a percentage of the cost thereof (to be uniformly established for the Building) sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlord's involvement with such repairs and replacements forthwith upon being billed for same. Notwithstanding the foregoing, Landlord shall be responsible for repairs to the exterior walls, foundation and roof of the Building, the structural portions of the floors of the Building, and the systems and equipment of the Building (collectively, the "Base Building"), except to the extent that such repairs are required due to the negligence or willful misconduct of Tenant; provided, however, that if such repairs are due to the negligence or willful misconduct of Tenant, Landlord shall nevertheless make such repairs at Tenant's expense, or, if covered by Landlord's insurance, Tenant shall only be obligated to pay any deductible in connection therewith. Landlord may, but shall not be required to, enter the Premises at all reasonable times to make such repairs, alterations, improvements and additions to the Premises or to the Project or to any equipment located in the Project as Landlord shall desire or deem necessary or as Landlord may be required to do by governmental or quasi-governmental authority or court order or decree; provided, however, except for (i) emergencies, (ii) repairs, alterations, improvements or additions required by governmental or quasi-governmental authorities or court order or decree, or (iii) repairs which are the obligation of Tenant hereunder, any such entry into the Premises by Landlord shall be performed in a manner so as not to materially interfere with Tenant's use of, or access to, the Premises; provided that, with respect to items (ii) and (iii) above, Landlord shall use commercially reasonable efforts to not materially interfere with Tenant's use of, or access to, the Premises.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(10)

ARTICLE 8

ADDITIONS AND ALTERATIONS

Tenant may not make any improvements, alterations, additions or changes to the Premises during the Lease Term without the consent of Landlord, which consent may be granted, withheld or conditioned in the sole and absolute discretion of Landlord. Landlord and Tenant hereby acknowledge and agree that (i) all alterations, improvements, fixtures, equipment and/or appurtenances which may be installed or placed in or about the Premises, from time to time, shall be at the sole cost of Tenant and shall be and become the property of Landlord, and (ii) the Tenant Improvements to be constructed in the Premises pursuant to the TCCs of the Tenant Work Letter shall, upon completion of the same, be and become a part of the Premises and the property of Landlord; provided, however, that notwithstanding the foregoing, Tenant may remove any alterations, improvements, fixtures and/or equipment which Tenant can substantiate to Landlord have not been paid for with any Tenant improvement allowance funds provided to Tenant by Landlord, provided Tenant repairs any damage to the Premises and Building caused by such removal and returns the affected portion of the Premises to a building standard tenant improved condition as determined by Landlord. Landlord may, at Landlord’s sole and absolute discretion, require any improvements, alterations, additions or changes to be bid by, and supervised through Landlord’s construction manager, inclusive of Landlord’s construction manager standard fee of four percent (4%), at Tenant’s expense.

ARTICLE 9

COVENANT AGAINST LIENS

Tenant has no authority or power to cause or permit any lien or encumbrance of any kind whatsoever, whether created by act of Tenant, operation of law or otherwise, to attach to or be placed upon the Building, Project or Premises, and any and all liens and encumbrances created by Tenant shall attach to Tenant’s interest only. Tenant covenants and agrees not to suffer or permit any lien of mechanics or materialmen or others to be placed against the Building, Project or the Premises with respect to work or services claimed to have been performed for or materials claimed to have been furnished to Tenant or the Premises, and, in case of any such lien attaching or notice of any lien, Tenant covenants and agrees to cause it to be immediately released and removed of record. Notwithstanding anything to the contrary set forth in this Lease, in the event that such lien is not released and removed on or before the date notice of such lien is delivered by Landlord to Tenant, Landlord, at its sole option, may immediately take all action necessary to release and remove such lien, without any duty to investigate the validity thereof, and all sums, costs and expenses, including reasonable attorneys’ fees and costs, incurred by Landlord in connection with such lien shall be deemed Additional Rent under this Lease and shall immediately be due and payable by Tenant.

ARTICLE 10

INSURANCE

10.1Indemnification and Waiver. To the extent not prohibited by law, Landlord, its members, partners and their respective officers, agents, servants, employees, and independent contractors (collectively, "Landlord Parties") shall not be liable for any damage either to person or property or resulting from the loss of use thereof, which damage is sustained by Tenant or by other persons claiming through Tenant. Tenant shall indemnify, defend, protect, and hold harmless Landlord Parties from any and all loss, cost, damage, expense and liability (including without limitation court costs and reasonable attorneys' fees) incurred in connection with or arising from (i) any cause in, on or about the Premises, Common Areas or elsewhere in the Project, and (ii) any acts, omissions or negligence of Tenant or of any person claiming by, through or under Tenant, its partners, and their respective officers, agents, servants, employees, clients, invitees and independent contractors (collectively, the "Tenant Parties"), in, on or about the Project, in either event either prior to, during, or after the expiration of the Lease Term, provided that the terms of the foregoing indemnity shall not apply to the gross negligence or willful misconduct of Landlord. The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease with respect to any claims or liability occurring prior to such expiration or termination. Notwithstanding anything to the contrary contained in this Lease, nothing in this Lease shall impose any obligations on Tenant or Landlord to be responsible or liable for, and each hereby releases the other from all liability for, consequential damages other than those consequential damages incurred by Landlord in connection with a holdover of the Premises by Tenant after the expiration or earlier termination of this Lease.

10.2Tenant's Compliance with Landlord's Fire and Casualty Insurance. Tenant shall, at Tenant's expense, comply as to the Premises with all insurance company requirements pertaining to the use of the Premises. If Tenant's conduct or use of the Premises causes any increase in the premium for such insurance policies, then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant's expense, shall comply with all rules, orders, regulations or requirements of the American Insurance Association (formerly the National Board of Fire Underwriters) and with any similar body.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(11)

10.2.1Tenant's Insurance. Tenant shall maintain Commercial/Comprehensive General Liability Insurance covering the insured against claims of bodily injury, personal injury and property damage (including loss of use thereof) arising out of Tenant's operations, and contractual liabilities (covering the performance by Tenant of its indemnity agreements) including a Broad Form endorsement covering the insuring provisions of this Lease and the performance by Tenant of the indemnity agreements set forth in Section 10.1 of this Lease, for limits of liability not less than $3,000,000.00 for each occurrence and $3,000,000.00 annual aggregate, with 0% Insured's participation. In addition, Tenant shall carry Property Insurance covering all office furniture, trade fixtures, office equipment, merchandise and all other items of Tenant's property on the Premises installed by, for, or at the expense of Tenant. Such insurance shall be written on an "all risks" of physical loss or damage basis, for the full replacement cost value new without deduction for depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance and shall include a vandalism and malicious mischief endorsement, sprinkler leakage coverage and earthquake sprinkler leakage coverage. Furthermore, Tenant shall maintain (A) Worker's Compensation Insurance, and Employer's Liability Insurance, both with a waiver of subrogation endorsement against the Landlord and with minimum limits for Employer's Liability and for Worker's Compensation of One Million and No/100 Dollars ($1,000,000.00) per employee and One Million and No/100 Dollars ($1,000,000.00) per occurrence, and (B) Comprehensive Automobile Liability Insurance covering all owned, hired, or non-owned vehicles with the following limits of liability: One Million Dollars ($1,000,000.00) combined single limit for bodily injury and property damage. Tenant shall also carry Business Income Interruption for at least one (1) year worth of revenues, in such amounts as will reimburse Tenant for actual direct or indirect loss of earnings attributable in the event of a loss.

10.3Form of Policies. The minimum limits of policies of insurance required of Tenant under this Lease shall in no event limit the liability of Tenant under this Lease. Such insurance shall (i) name Landlord, and any other party it so specifies, as an additional insured; (ii) specifically cover the liability assumed by Tenant under this Lease, including, but not limited to, Tenant's obligations under Section 10.1 of this Lease; (iii) be issued by an insurance company having a rating of not less than A-VIII in Best's Insurance Guide or which is otherwise acceptable to Landlord and licensed to do business in the State of Texas; (iv) be primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and is non-contributing with any insurance requirement of Tenant; (v) provide that said insurance shall not be canceled or coverage changed unless thirty (30) days' prior written notice shall have been given to Landlord and any mortgagee of Landlord, the identity of whom has been provided to Tenant in writing. Tenant shall deliver said policy or policies or certificates thereof to Landlord on or before the Lease Commencement Date and at least thirty (30) days before the expiration dates thereof. In the event Tenant shall fail to procure such insurance, or to deliver such policies or certificate, Landlord may, at its option, after written notice to Tenant and Tenant's failure to obtain such insurance within five (5) days thereafter, procure such policies for the account of Tenant, and the cost thereof shall be paid to Landlord as Additional Rent within five (5) days after delivery to Tenant of bills therefore.

10.4Subrogation. Landlord and Tenant agree to have their respective insurance companies issuing property damage insurance waive any rights of subrogation that such companies may have against Landlord or Tenant, as the case may be, so long as the insurance carried by Landlord and Tenant, respectively, is not invalidated thereby. Notwithstanding anything to the contrary contained in this Lease, Landlord and Tenant hereby waive any right that either may have against the other on account of any loss or damage to their respective property to the extent such loss or damage is insurable under policies of insurance for fire and all risk coverage, theft, public liability, or other similar insurance.

10.5Additional Insurance Obligations. Tenant shall carry and maintain during the entire Lease Term, at Tenant's sole cost and expense, increased amounts of the insurance required to be carried by Tenant pursuant to this Article 10, and such other reasonable types of insurance coverage and in such reasonable amounts covering the Premises and Tenant's operations therein, as may be reasonably requested by Landlord. Notwithstanding the foregoing, Landlord's request shall only be considered reasonable if such increased coverage amounts and/or such new types of insurance are consistent with the requirements of a majority of comparable buildings, and Landlord shall not so increase the coverage amounts or require additional types of insurance during the first five (5) years of the Lease Term and thereafter no more often than one time in any five (5) year period.

10.6Third-Party Contractors. Tenant shall obtain and deliver to Landlord, Third Party Contractor's certificates of insurance and applicable endorsements at least seven (7) business days prior to the commencement of work in or about the Premises by any vendor or any other third-party contractor (collectively, a "Third Party Contractor"), which shall be similar in amounts of coverage as Tenant’s Insurance. All such insurance shall (a) name Landlord as an additional insured under such party's liability policies as required by Section 10.3 above and this Section 10.6, (b) provide a waiver of subrogation in favor of Landlord under such Third Party Contractor's commercial general liability insurance, (c) be primary and any insurance carried by Landlord shall be excess and non-contributing, and (d) comply with Landlord's minimum insurance requirements, including Worker's Compensation.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(12)

ARTICLE 11

DAMAGE AND DESTRUCTION

11.1Repair of Damage to Premises by Landlord. If the Premises or any common areas of the Building or Project serving or providing access to the Premises shall be damaged by fire or other casualty, Landlord shall promptly and diligently, subject to reasonable delays for insurance adjustment or other matters beyond Landlord's reasonable control, and subject to all other terms of this Article 11, restore the base, shell and core of the Premises and such common areas. Such restoration shall be to substantially the same condition of the base, shell and core of the Premises and common areas prior to the casualty, except for modifications required by zoning and building codes and other laws or by the holder of a mortgage on the Project, or any other modifications to the common areas deemed desirable by Landlord, which are consistent with the character of the Project, provided access to the Premises and any common restrooms serving the Premises shall not be materially impaired. Notwithstanding any other provision of this Lease, upon the occurrence of any damage to the Premises, Tenant shall assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Tenant's insurance carried under Section 10.3 of this Lease, and Landlord shall repair any injury or damage to the tenant improvements installed in the Premises and shall return such tenant improvements to their original condition. In connection with such repairs and replacements, Tenant shall, prior to the commencement of construction, submit to Landlord, for Landlord's review and approval, all plans, specifications and working drawings relating thereto, and Landlord shall select the contractors to perform such improvement work. Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's business resulting in any way from such damage or the repair thereof; provided however, that if such fire or other casualty shall have damaged the Premises or common areas necessary to Tenant's occupancy, and the Premises are not occupied by Tenant as a result thereof, then during the time and to the extent the Premises are unfit for occupancy, the Rent shall be abated in proportion to the ratio that the amount of rentable square feet of the Premises which is unfit for occupancy for the purposes permitted under this Lease bears to the total rentable square feet of the Premises; provided, however, the foregoing abatement shall not apply to the extent such damage is the result of the willful misconduct of Tenant or Tenant's employees, contractors, licensees, or invitees.

11.2Landlord's Option to Repair. Notwithstanding the terms of Section 11.1 of this Lease, Landlord may elect not to rebuild and/or restore the Premises and/or Project and instead terminate this Lease by notifying Tenant in writing of such termination within sixty (60) days after the date of discovery of such damage, such notice to include a termination date giving Tenant ninety (90) days to vacate the Premises, but Landlord may so elect only if the Building shall be damaged by fire or other casualty or cause, whether or not the Premises are affected, and one or more of the following conditions is present: (i) repairs cannot reasonably be completed within one hundred eighty (180) days of the date of discovery of damage (when such repairs are made without the payment of overtime or other premiums); (ii) the holder of any mortgage on the Building shall require that the insurance proceeds or any portion thereof be used to retire the mortgage debt; or (iii) the damage is not fully covered, except for deductible amounts, by Landlord's insurance policies. In addition, in the event that the Premises or the Building is destroyed or damaged to any substantial extent during the last twelve (12) months of the Lease Term, then notwithstanding anything contained in this Article 11, Landlord shall have the option to terminate this Lease by giving written notice to Tenant of the exercise of such option within thirty (30) days after the date of such damage or destruction, in which event this Lease shall cease and terminate as of the date of such notice. Upon any such termination of this Lease pursuant to this Section 11.2, Tenant shall pay the Base Rent and Additional Rent, properly apportioned up to such date of termination, and both parties hereto shall thereafter be freed and discharged of all further obligations hereunder, except as provided for in provisions of this Lease which by their terms survive the expiration or earlier termination of the Lease Term.

11.3Waiver of Statutory Provisions. The provisions of this Lease, including this Article 11, constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, the Building or any other portion of the Project, and any statute or regulation of the state in which the Building is located, with respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, and any other statute or regulation, now or hereafter in effect, shall have no application to this Lease or any damage or destruction to all or any part of the Premises, the Building or any other portion of the Project.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(13)

ARTICLE 12

NONWAIVER

No waiver of any provision of this Lease shall be implied by any failure of Landlord to enforce any remedy on account of the violation of such provision, even if such violation shall continue or be repeated subsequently, any waiver by Landlord of any provision of this Lease may only be in writing, and no express waiver shall affect any provision other than the one specified in such waiver and that one only for the time and in the manner specifically stated. No receipt of monies by Landlord from Tenant after the termination of this Lease shall in any way alter the length of the Lease Term or of Tenant’s right of possession hereunder or after the giving of any notice shall reinstate, continue or extend the Lease Term or affect any notice given Tenant prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit or after final judgment for possession of the Premises, Landlord may receive and collect any Rent due, and the payment of said Rent shall not waive or affect said notice, suit or judgment.

ARTICLE 13

CONDEMNATION

If the whole or any material part of the Premises, Building or Project shall be taken by power of eminent domain or condemned by any competent authority for any public or quasi-public use or purpose, or if any adjacent property or street shall be so taken or condemned, or reconfigured or vacated by such authority in such manner as to require the use, reconstruction or remodeling of any part of the Premises, Building or Project, or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation, this Lease shall terminate upon notice by either Landlord or Tenant to the other party. Landlord shall be entitled to receive the entire award or payment in connection therewith.

ARTICLE 14

ASSIGNMENT AND SUBLETTING

14.1Transfers. Tenant shall not, without the prior written consent of Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise transfer, this Lease or any interest hereunder, permit any assignment, or other transfer of this Lease or any interest hereunder by operation of law, sublet the Premises or any part thereof, or enter into any license or concession agreements or otherwise permit the occupancy or use of the Premises or any part thereof by any persons other than Tenant and its employees and contractors. In connection with any such transfer contemplated by Tenant, Tenant shall submit a written request for consent notice to Landlord, together with any information reasonably required by Landlord which will enable Landlord to determine (i) the financial responsibility, character, and reputation of the proposed transferee, (ii) the nature of such transferee's business, (iii) the proposed use of the applicable portion of the Premises, and (iv) any other reasonable consent parameters. Any transfer made without Landlord's prior written consent shall, at Landlord's option, be null, void and of no effect, and shall, at Landlord's option, constitute a default by Tenant under this Lease. Whether or not Landlord consents to any proposed transfer, Tenant shall pay Landlord's review and processing fees, as well as any reasonable professional fees (including, without limitation, attorneys', accountants', architects', engineers' and consultants' fees) incurred by Landlord, within thirty (30) days after written request by Landlord. The rights granted to Tenant under this Article 14 are personal to the Original Tenant and its Permitted Transferees (as defined below in Section 14.7), and may not be assigned or transferred to any other person or entity.

14.2Landlord's Consent. Landlord shall not unreasonably withhold its consent to any proposed Transfer of the Subject Space to the transferee on the terms specified in the Transfer Notice. Without limitation as to other reasonable grounds for withholding consent, the parties hereby agree that it shall be reasonable under this Lease and under any applicable law for Landlord to withhold consent to any proposed Transfer where one or more of the following apply: (i) transferee is of a character or reputation or engaged in a business which is not consistent with the quality of the Building or the Project; (ii) transferee is not a party of reasonable financial worth and/or financial stability in light of the responsibilities to be undertaken in connection with the transfer on the date consent is requested; (iii) transferee intends to use the applicable portion(s) of the Premises for purposes which are not permitted under this Lease; (iv) transferee is either a governmental agency or instrumentality thereof; or (v) the proposed transfer would cause a violation of another lease for space in the Project, or would give an occupant of the Project a right to cancel its lease. Notwithstanding anything to the contrary in this Lease, if Tenant or any proposed transferee claims that Landlord has unreasonably withheld or delayed its consent under Section 14.2 or otherwise has breached or acted unreasonably under this Article 14, their sole remedies shall be a declaratory judgment and an injunction for the relief sought without any monetary damages, and Tenant hereby waives all other remedies, including, without limitation, any right at law or equity to terminate this Lease, on its own behalf and, to the extent permitted under all Applicable Laws, on behalf of the proposed Transferee. Tenant shall indemnify, defend and hold harmless Landlord from any and all liability, losses, claims, damages, costs, expenses, causes of action and proceedings involving any third party or parties (including without limitation Tenant's proposed subtenant or assignee) who claim they were damaged by Landlord's wrongful withholding or conditioning of Landlord's consent.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(14)

14.3Transfer Premium. If Landlord consents to a proposed transfer, as a condition thereto which the parties hereby agree is reasonable, Tenant shall pay to Landlord fifty percent (50%) of any "Transfer Premium," as that term is defined in this Section 14.3, received by Tenant from such Transferee. "Transfer Premium" shall mean all rent, additional rent or other consideration payable by such transferee in connection with the transfer in excess of the Rent and Additional Rent payable by Tenant under this Lease during the term of the transfer (on a per rentable square foot basis if less than all of the Premises is transferred); provided, however, such Transfer Premium shall also include, but not be limited to, key money, bonus money or other cash consideration paid by transferee to Tenant in connection with such transfer, and any payment in excess of fair market value for services rendered by Tenant to transferee or for assets, fixtures, inventory, equipment, or furniture transferred by Tenant to transferee in connection with such Transfer.

14.4Landlord's Option as to Subject Space. Notwithstanding anything to the contrary contained in this Article 14, Landlord shall have the option, by giving written notice to Tenant within thirty (30) days after receipt of Tenant's written request for consent to so transfer, to recapture the corresponding portion of the Premises. Such recapture notice shall cancel and terminate this Lease with respect to such portion of the Premises as of the effective date of the proposed transfer. In the event of a recapture by Landlord, if this Lease shall be canceled with respect to less than the entire Premises, the Rent reserved herein shall be prorated on the basis of the number of rentable square feet retained by Tenant in proportion to the number of rentable square feet contained in the Premises, and this Lease as so amended shall continue thereafter in full force and effect, and upon request of either party, the parties shall execute written confirmation of the same. If Landlord declines, or fails to elect in a timely manner to recapture the subject space under this Section 14.4, then, provided Landlord has consented to the proposed transfer, Tenant shall be entitled to proceed to transfer the subject space to the proposed transferee, subject to provisions of this Article 14.

14.5Effect of Transfer. If Landlord consents to a transfer, (i) the TCCs of this Lease shall in no way be deemed to have been waived or modified, (ii) such consent shall not be deemed consent to any further transfer by either Tenant or a transferee, (iii) Tenant shall deliver to Landlord, promptly after execution, an original executed copy of all documentation pertaining to the transfer in form reasonably acceptable to Landlord, (iv) Tenant shall furnish upon Landlord's request a complete statement, certified by an independent certified public accountant, or Tenant's chief financial officer, setting forth in detail the computation of any Transfer Premium Tenant has derived and shall derive from such Transfer, and (v) no Transfer relating to this Lease or agreement entered into with respect thereto, whether with or without Landlord's consent, shall relieve Tenant or any guarantor of the Lease from any liability under this Lease, including, without limitation, in connection with the subject space. Landlord or its authorized representatives shall have the right at all reasonable times to audit the books, records and papers of Tenant relating to any Transfer, and shall have the right to make copies thereof. If the Transfer Premium respecting any Transfer shall be found understated, Tenant shall, within thirty (30) days after demand, pay the deficiency, and if understated by more than two percent (2%), Tenant shall pay Landlord's costs of such audit. The rights contained in this Article 14 shall only be exercisable one time during the Term or any Renewal Term(s), and they can only be exercised by Tenant and not by any Transferee; therefore, Tenant hereby acknowledges that upon Landlord’s consent to a transfer, no further transfers shall be allowed by any transferee during the Term or any Renewal Term(s).

14.6Occurrence of Default. Any transfer hereunder shall be subordinate and subject to the provisions of this Lease, and if this Lease shall be terminated during the term of any transfer, Landlord shall have the right to: (i) treat such transfer as cancelled and repossess the subject space by any lawful means, or (ii) require that such transferee attorn to and recognize Landlord as its landlord under any such transfer. If Tenant shall be in default under this Lease, Landlord is hereby irrevocably authorized, as Tenant's agent and attorney-in-fact, to direct any transferee to make all payments under or in connection with the transfer directly to Landlord (which Landlord shall apply towards Tenant's obligations under this Lease) until such default is cured. Such transferee shall rely on any representation by Landlord that Tenant is in default hereunder, without any need for confirmation thereof by Tenant. Upon any assignment, the assignee shall assume in writing all obligations and covenants of Tenant thereafter to be performed or observed under this Lease. No collection or acceptance of rent by Landlord from any transferee shall be deemed a waiver of any provision of this Article 14 or the approval of any transferee or a release of Tenant from any obligation under this Lease, whether theretofore or thereafter accruing. In no event shall Landlord's enforcement of any provision of this Lease against any transferee be deemed a waiver of Landlord's right to enforce any term of this Lease against Tenant or any other person. If Tenant's obligations hereunder have been guaranteed, Landlord's consent to any Transfer shall not be effective unless the guarantor also consents to such Transfer.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(15)

14.7Non-Transfers. **** Notwithstanding anything to the contrary contained in this Article 14, (i) an assignment or subletting of all or a portion of the Premises to an affiliate of Tenant (an entity which is controlled by, controls, or is under common control with, Tenant), (ii) an assignment of the Premises to an entity which acquires all or substantially all of the assets or interests (partnership, stock or other) of Tenant, or (iii) an assignment of the Premises to an entity which is the resulting entity of a merger or consolidation of Tenant, shall not be deemed a Transfer under this Article 14, provided that Tenant notifies Landlord of any such assignment or sublease and promptly supplies Landlord with any documents or information requested by Landlord regarding such assignment or sublease or such affiliate, and further provided that such assignment or sublease is not a subterfuge by Tenant to avoid its obligations under this Lease or otherwise effectuate any "release" by Tenant of such obligations. The transferee under a transfer specified in items (i), (ii) or (iii) above shall be referred to as a "Permitted Transferee.” "Control," as used in this Section 14.7, shall mean the ownership, directly or indirectly, of at least fifty-one percent (51%) of the voting securities of, or possession of the right to vote, in the ordinary direction of its affairs, of at least fifty-one percent (51%) of the voting interest in, any person or entity.

ARTICLE 15

OWNERSHIP AND REMOVAL OF TRADE FIXTURES

15.1Surrender of Premises. No act or thing done by Landlord or any agent or employee of Landlord during the Lease Term shall be deemed to constitute an acceptance by Landlord of a surrender of the Premises unless such intent is specifically acknowledged in a writing signed by Landlord. The delivery of keys to the Premises to Landlord or any agent or employee of Landlord shall not constitute a surrender of the Premises or effect a termination of this Lease, whether or not the keys are thereafter retained by Landlord, and notwithstanding such delivery Tenant shall be entitled to the return of such keys at any reasonable time upon request until this Lease shall have been properly terminated.

15.2Removal of Tenant Property by Tenant. Upon the expiration of the Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject to the provisions of this Article 15, quit and surrender possession of the Premises to Landlord in as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, reasonable wear and tear and damage from casualty excepted. Upon such expiration or termination, Tenant shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish, and such items of furniture, equipment, free-standing cabinet work, and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense in the Premises, and such similar articles of any other persons claiming under Tenant, as Landlord may, in its sole discretion, require to be removed, and Tenant shall repair at its own expense all damage to the Premises and Building resulting from such removal.

ARTICLE 16

HOLDING OVER

If Tenant holds over after the expiration of the Lease Term hereof, with or without the express or implied consent of Landlord, such tenancy shall be from month-to-month only, and shall not constitute a renewal hereof or an extension for any further term, and in such case Rent shall be payable at a monthly rate equal to the product of (i) the Rent applicable during the last rental period of the Lease Term under this Lease, and (ii) a percentage equal to one hundred fifty percent (150%) during the first two (2) months immediately following the expiration or earlier termination of the Lease Term, and two hundred percent (200%) thereafter. Such month-to-month tenancy shall be subject to every other term, covenant and agreement contained herein. Nothing contained in this Article 16 shall be construed as consent by Landlord to any holding over by Tenant, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or other termination of this Lease. The provisions of this Article 16 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord harmless from all loss, costs (including reasonable attorneys' fees) and liability resulting from such failure, including, without limiting the generality of the foregoing, any claims made by any succeeding tenant founded upon such failure to surrender, and any lost profits to Landlord resulting therefrom.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(16)

ARTICLE 17

ESTOPPEL CERTIFICATES

Within ten (10) days following a request in writing by Landlord, Tenant shall execute and deliver to Landlord an estoppel certificate, which, as submitted by Landlord, shall be substantially in the form of Exhibit B, attached hereto, (or such other form as may be required by any prospective mortgagee or purchaser of the Project, or any portion thereof), indicating therein any exceptions thereto that may exist at that time, and shall also contain any other information reasonably requested by Landlord or Landlord's mortgagee or prospective mortgagee. Tenant shall execute and deliver whatever other instruments may be reasonably required for such purposes. At any time during the Lease Term, Landlord may require Tenant to provide Landlord with a current financial statement and financial statements of the two (2) years prior to the current financial statement year. Such statements shall be prepared in accordance with generally accepted accounting principles and, if such is the normal practice of Tenant, shall be audited by an independent certified public accountant. Failure of Tenant to timely execute and deliver such estoppel certificate or other instruments shall constitute an acceptance of the Premises and an acknowledgment by Tenant that statements included in the estoppel certificate are true and correct, without exception.

ARTICLE 18

SUBORDINATION

This Lease is subject and subordinate to all present and future ground or underlying leases of the Project and to the lien of any mortgages or trust deeds, now or hereafter in force against the Project and the Building, if any, and to all renewals, extensions, modifications, consolidations and replacements thereof, and to all advances made or hereafter to be made upon the security of such mortgages or trust deeds, unless the holders of such mortgages or trust deeds, or the lessors under such ground lease or underlying leases, require in writing that this Lease be superior thereto. Tenant covenants and agrees in the event any proceedings are brought for the foreclosure of any such mortgage, or if any ground or underlying lease is terminated, to attorn, without any deductions or set-offs whatsoever, to the purchaser upon any such foreclosure sale, or to the lessor of such ground or underlying lease, as the case may be, if so requested to do so by such purchaser or lessor, and to recognize such purchaser or lessor as the lessor under this Lease. Tenant shall, within five (5) days of request by Landlord, execute such further instruments or assurances as Landlord may reasonably deem necessary to evidence or confirm the subordination or superiority of this Lease to any such mortgages, trust deeds, ground leases or underlying leases. Tenant hereby irrevocably authorizes Landlord to execute and deliver in the name of Tenant any such instrument or instruments if Tenant fails to do so, provided that such authorization shall in no way relieve Tenant from the obligation of executing such instruments of subordination or superiority. Tenant waives the provisions of any current or future statute, rule or law which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect this Lease and the obligations of the Tenant hereunder in the event of any foreclosure proceeding or sale.

ARTICLE 19

DEFAULTS; REMEDIES

19.1Events of Default. Events of Default. The occurrence of any of the following shall constitute a default of this Lease by Tenant:

19.1.1 Any failure by Tenant to pay any Rent or any other charge required to be paid under this Lease, or any part thereof, when due unless such failure is cured within five (5) calendar days; or,

19.1.2 Except where a specific time period is otherwise set forth for Tenant's performance in this Lease, in which event the failure to perform by Tenant within such time period shall be a default by Tenant under this Section 19.1.2, any failure by Tenant to observe or perform any other provision, covenant or condition of this Lease to be observed or performed by Tenant where such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant; provided that if the nature of such default is such that the same cannot reasonably be cured within a thirty (30) day period, Tenant shall not be deemed to be in default if it diligently commences such cure within such period and thereafter diligently proceeds to rectify and cure such default, but in no event exceeding a period of time in excess of sixty (60) days after written notice thereof from Landlord to Tenant; or

19.1.3 To the extent permitted by law, a general assignment by Tenant or any guarantor of this Lease for the benefit of creditors, or the taking of any corporate action in furtherance of bankruptcy or dissolution whether or not there exists any proceeding under an insolvency or bankruptcy law, or the filing by or against Tenant or any guarantor of any proceeding under an insolvency or bankruptcy law, unless in the case of a proceeding filed against Tenant or any guarantor the same is dismissed within sixty (60) days, or the appointment of a trustee or receiver to take possession of all or substantially all of the assets of Tenant or any guarantor, unless possession is restored to Tenant or such guarantor within thirty (30) days, or any execution or other judicially authorized seizure of all or substantially all of Tenant's assets located upon the Premises or of Tenant's interest in this Lease, unless such seizure is discharged within thirty (30) days; or

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(17)

19.1.4 The failure by Tenant to observe or perform according to the provisions of Articles 5, 14, 17 or 18 of this Lease where such failure continues for more than two (2) business days after notice from Landlord.

The notice periods provided herein are in lieu of, and not in addition to, any notice periods provided by law.

19.2Remedies Upon Default. Upon the occurrence of any event of default by Tenant, Landlord shall have, in addition to any other remedies available to Landlord at law or in equity (all of which remedies shall be distinct, separate and cumulative), the option to pursue any one or more of the following remedies, each and all of which shall be cumulative and nonexclusive, without any notice or demand whatsoever.

19.2.1 Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim or damages therefore; and Landlord may recover from Tenant the following: (i) the worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, specifically including but not limited to, brokerage commissions and advertising expenses incurred, expenses of remodeling the Premises or any portion thereof for a new tenant, whether for the same or a different use, and any special concessions made to obtain a new tenant; and (v) at Landlord’s election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law. The term “rent” as used in this Section 19.2.1 shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord or to others. As used in Sections 19.2.1(i) and (ii), above, the “worth at the time of award” shall be computed by allowing interest at the rate set forth in Article 25 of this Lease, but in no case greater than the maximum amount of such interest permitted by law. As used in Section 19.2.1(iii) above, the “worth at the time of award” shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).

19.2.2 If Landlord does not elect to terminate this Lease on account of any default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due.

19.2.3 If Landlord does not elect to terminate this Lease due to a monetary default by Tenant, Landlord may cease to provide certain services to Tenant, such as but not limited to, janitorial services, non-emergency maintenance requests, conference center and fitness center privileges, until such monetary default is cured.

19.2.4 Landlord shall at all times have the rights and remedies (which shall be cumulative with each other and cumulative and in addition to those rights and remedies available under Sections 19.2.1, 19.2.2 and 19.2.3, above, or any law or other provision of this Lease), without prior demand or notice except as required by applicable law, to seek any declaratory, injunctive or other equitable relief, and specifically enforce this Lease, or restrain or enjoin a violation or breach of any provision hereof.

19.3Waiver of Default. No waiver by Landlord or Tenant of any violation or breach of any of the terms, provisions and covenants herein contained shall be deemed or construed to constitute a waiver of any other or later violation or breach of the same or any other of the terms, provisions, and covenants herein contained. Forbearance by Landlord in enforcement of one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. The acceptance of any Rent hereunder by Landlord following the occurrence of any default, whether or not known to Landlord, shall not be deemed a waiver of any such default, except only a default in the payment of the Rent so accepted.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(18)

ARTICLE 20

FORCE MAJEURE

Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain services, labor, or materials or reasonable substitutes therefore, governmental actions, civil commotions, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, except with respect to the obligations imposed with regard to Rent and other charges to be paid by Tenant pursuant to this Lease (collectively, the "Force Majeure"), notwithstanding anything to the contrary contained in this Lease, shall excuse the performance of such party for a period equal to any such prevention, delay or stoppage and, therefore, if this Lease specifies a time period for performance of an obligation of either party, that time period shall be extended by the period of any delay in such party's performance caused by a Force Majeure.

ARTICLE 21

SECURITY DEPOSIT

Concurrent with Tenant's execution of this Lease, Tenant shall deposit with Landlord a security deposit (the "Security Deposit") in the amount set forth in Section 8 of the Summary, as security for the faithful performance by Tenant of all of its obligations under this Lease. If Tenant defaults with respect to any provisions of this Lease, including, but not limited to, the provisions relating to the payment of Rent, the removal of property and the repair of resultant damage, Landlord may, without notice to Tenant, but shall not be required to apply all or any part of the Security Deposit for the payment of any Rent or any other sum in default and Tenant shall, upon demand therefor, restore the Security Deposit to its original amount. Any unapplied portion of the Security Deposit shall be returned to Tenant, or, at Landlord's option, to the last assignee of Tenant's interest hereunder, within sixty (60) days following the expiration of the Lease Term. Tenant shall not be entitled to any interest on the Security Deposit.

ARTICLE 22

SUBSTITUTION OF OTHER PREMISES

Intentionally deleted.

ARTICLE 23

SIGNS

Any signs, notices, logos, pictures, names or advertisements ("Signage") to be installed in, on or about the Premises shall be subject to Landlord's prior approval, which approval may be granted, withheld or conditioned in Landlord's sole and absolute discretion. Any Signage installed in, on or about the Premises without Landlord's approval may be removed without notice by Landlord at the sole expense of Tenant. Landlord shall provide to Tenant, at Landlord’s expense, one (1) Building Standard suite sign immediately outside the Premises (one for each Suite 1450 and Suite 1740). Landlord, at Landlord’s sole cost and expense, shall provide Tenant with directory signage on the digital directory located in the Building lobby. Tenant shall also have the right to install a sign on one panel of the shared monument sign, utilizing Landlord’s designated vendor for such trade. All costs associated with the design, permitting, installation, maintenance and removal (either at expiration or earlier termination of this Lease) of Tenant’s monument signage will be at Tenant’s sole expense. Size, location and design shall be subject to Landlord’s approval (not to be unreasonably withheld, delayed or conditioned) and any and all applicable city codes and prior Tenant’s rights with respect to existing signs currently on the shared monument sign.

ARTICLE 24

COMPLIANCE WITH LAW

Tenant shall not do anything or suffer anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or other governmental rule, regulation or requirement now in force or which may hereafter be enacted or promulgated (collectively, "Applicable Laws"). At its sole cost and expense, Tenant shall promptly comply with all such governmental measures (including the making of any alterations to the Premises required by Applicable Laws). Should any standard or regulation now or hereafter be imposed on Landlord or Tenant by a state, federal or local governmental body charged with the establishment, regulation and enforcement of occupational, health or safety standards for employers, employees, landlords or tenants, then Tenant agrees, at its sole cost and expense, to comply promptly with such standards or regulations. Landlord shall comply with all Applicable Laws relating to the Base Building, provided that compliance with such Applicable Laws is not the responsibility of Tenant under this Lease, and provided further that Landlord's failure to comply therewith would prohibit Tenant from obtaining or maintaining a certificate of occupancy for the Premises, or would unreasonably and materially affect the safety of Tenant's employees or create a significant health hazard for Tenant's employees. Landlord shall be permitted to include in Operating Expenses any costs or expenses incurred by Landlord under this Article 24 to the extent consistent with the terms of Section 4.2.4, above.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(19)

ARTICLE 25

LATE CHARGES AND INSUFFICIENT FUNDS

If any installment of Rent or any other sum due from Tenant shall not be received by Landlord or Landlord’s designee within five (5) calendar days after the date when due, then Tenant shall automatically pay to Landlord a late charge equal to five percent (5%) of the amount due plus any attorneys’ fees incurred by Landlord by reason of Tenant’s failure to pay Rent and/or other charges when due hereunder. If any check delivered by Tenant to Landlord is rejected by Landlord’s bank due to insufficient funds ("NSF"), then Tenant shall automatically pay to Landlord a NSF charge equal to $50.00 per occurrence. The late charge and the NSF charge shall be deemed Additional Rent and the right to require these charges shall be in addition to all of Landlord’s other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord’s remedies in any manner. In addition to the late charge and NSF charge, described above, any Rent or other amounts owing hereunder which are not paid when due shall thereafter bear interest until paid at the "Interest Rate." For purposes of this Lease, the "Interest Rate" shall be an annual rate equal to the lesser of (i) the annual "Bank Prime Loan" rate cited in the Federal Reserve Statistical Release Publication G.13(415), published on the first Tuesday of each calendar month (or such other comparable index as Landlord and Tenant shall reasonably agree upon if such rate ceases to be published), plus four (4) percentage points, and (ii) the highest rate permitted by applicable law.

ARTICLE 26

LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT

All covenants and agreements to be kept or performed by Tenant under this Lease shall be performed by Tenant at Tenant’s sole cost and expense and without any reduction of Rent. If Tenant shall fail to perform any of its obligations under this Lease, within a reasonable time after such performance is required by the terms of this Lease, Landlord may, but shall not be obligated to, after reasonable prior notice to Tenant, make any such payment or perform any such act on Tenant’s part without waiving its right based upon any default of Tenant and without releasing Tenant from any obligations hereunder. Except as may be specifically provided to the contrary in this Lease, Tenant shall pay to Landlord, within fifteen (15) days after delivery by Landlord to Tenant of statements therefore: (i) sums equal to expenditures reasonably made and obligations incurred by Landlord in connection with the remedying by Landlord of Tenant’s defaults pursuant to the provisions of this Article 26; (ii) sums equal to all losses, costs, liabilities, damages and expenses referred to in Article 10 of this Lease; and (iii) sums equal to all expenditures made and obligations incurred by Landlord in collecting or attempting to collect the Rent or in enforcing or attempting to enforce any rights of Landlord under this Lease or pursuant to law, including, without limitation, all legal fees and other amounts so expended. Tenant’s obligations under this Article 26 shall survive the expiration or sooner termination of the Lease Term.

ARTICLE 27

ENTRY BY LANDLORD

Landlord reserves the right at all reasonable times and upon reasonable notice to the Tenant to enter the Premises to (i) inspect them; (ii) show the Premises to prospective purchasers, mortgagees or tenants, or to the ground or underlying lessors;; or (iii) alter, improve or repair the Premises or the Building if necessary to comply with current building codes or other Applicable Laws, or for structural alterations, repairs or improvements to the Building. Notwithstanding anything to the contrary contained in this Article 27, Landlord may enter the Premises at any time to (A) perform services required of Landlord; (B) take possession due to any breach of this Lease in the manner provided herein; and (C) perform any covenants of Tenant which Tenant fails to perform. Any such entries shall be without the abatement of Rent (except as otherwise expressly provided in this Lease) and shall include the right to take such reasonable steps as required to accomplish the stated purposes; provided, however, except for (i) emergencies, (ii) repairs, alterations, improvements or additions required by governmental or quasi-governmental authorities or court order or decree, or (iii) repairs which are the obligation of Tenant hereunder, any such entry shall be performed in a manner so as not to unreasonably interfere with Tenant's use of the Premises and shall be performed after normal business hours if reasonably practical. With respect to items (ii) and (iii) above, Landlord shall use commercially reasonable efforts to not materially interfere with Tenant's use of, or access to, the Premises. Except as otherwise set forth in Section 6.4, Tenant hereby waives any claims for damages or for any injuries or inconvenience to or interference with Tenant’s business, lost profits, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. For each of the above purposes, Landlord shall at all times have a key with which to unlock all the doors in the Premises, excluding Tenant’s vaults, safes and special security areas designated in advance by Tenant. In an emergency, Landlord shall have the right to use any means that Landlord may deem proper to open the doors in and to the Premises. Any entry into the Premises in the manner hereinbefore described shall not be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an actual or constructive eviction of Tenant from any portion of the Premises.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(20)

ARTICLE 28

TENANT PARKING

Tenant shall have the right to use, commencing on the Lease Commencement Date, the amount of parking spaces set forth in Section 9 of the Summary, on a monthly basis throughout the Lease Term, which parking spaces shall pertain to the Project parking facilities. Tenant shall only be allowed to park in the parking spaces designated by Landlord for the use of tenants. Tenant shall not park in any parking spaces designated for visitors. Tenant shall not park in any parking spaces designated for reserved or executive use, except if specifically authorized to do so, as set forth in Section 9 of the Summary. Landlord reserves the right to tag, boot and/or tow any improperly parked vehicles, at Tenant’s expense, with no liability to Landlord. Tenant's continued right to use the parking spaces is conditioned upon Tenant abiding by all rules and regulations which are prescribed from time to time for the orderly operation and use of the parking facilities where the parking spaces are located, including any sticker or other identification system established by Landlord, Tenant's cooperation in seeing that Tenant's employees and visitors also comply with such rules and regulations and Tenant not being in default under this Lease. Landlord specifically reserves the right to change the size, configuration, design, layout and all other aspects of the Project parking facilities at any time and Tenant acknowledges and agrees that Landlord may, without incurring any liability to Tenant and without any abatement of Rent under this Lease, from time to time, close-off or restrict access to the Project parking facilities for purposes of permitting or facilitating any such construction, alteration or improvements. Landlord may delegate its responsibilities hereunder to a parking operator in which case such parking operator shall have all the rights of control attributed hereby to the Landlord. The parking spaces used by Tenant pursuant to this Article 28 are provided to Tenant solely for use by Tenant's own personnel and such spaces may not be transferred, assigned, subleased or otherwise alienated by Tenant without Landlord's prior approval.

ARTICLE 29

MISCELLANEOUS PROVISIONS

29.1Terms; Captions. The words "Landlord" and "Tenant" as used herein shall include the plural as well as the singular. The necessary grammatical changes required to make the provisions hereof apply either to corporations or partnerships or individuals, men or women, as the case may require, shall in all cases be assumed as though in each case fully expressed. The captions of Articles and Sections are for convenience only and shall not be deemed to limit, construe, affect or alter the meaning of such Articles and Sections.

29.2Binding Effect. Subject to all other provisions of this Lease, each of the covenants, conditions and provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit not only of Landlord and of Tenant, but also of their respective heirs, personal representatives, successors or assigns, provided this clause shall not permit any assignment by Tenant contrary to the provisions of Article 14 of this Lease.

29.3No Air Rights. No rights to any view or to light or air over any property, whether belonging to Landlord or any other person, are granted to Tenant by this Lease. If at any time any windows of the Premises are temporarily darkened or the light or view therefrom is obstructed by reason of any repairs, improvements, maintenance or cleaning in or about the Project, the same shall be without liability to Landlord and without any reduction or diminution of Tenant's obligations under this Lease.

29.4Modification of Lease. Should any current or prospective mortgagee or ground lessor for the Building or Project require a modification of this Lease, which modification will not cause an increased cost or expense to Tenant or in any other way materially and adversely change the rights and obligations of Tenant hereunder, then and in such event, Tenant agrees that this Lease may be so modified and agrees to execute whatever documents are reasonably required therefor and to deliver the same to Landlord within ten (10) days following a request therefor. At the request of Landlord or any mortgagee or ground lessor, Tenant agrees to execute a short form of Lease and deliver the same to Landlord within ten (10) days following the request therefor.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(21)

29.5Transfer of Landlord’s Interest. Tenant acknowledges that Landlord has the right to transfer all or any portion of its interest in the Project and in this Lease, and Tenant agrees that in the event of any such transfer, Landlord shall automatically be released from all liability under this Lease and Tenant agrees to look solely to such transferee for the performance of Landlord’s obligations hereunder after the date of transfer. The liability of any transferee of Landlord shall be limited to the interest of such transferee in the Project and such transferee shall be without personal liability under this Lease, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. Tenant further acknowledges that Landlord may assign its interest in this Lease to a mortgage lender as additional security and agrees that such an assignment shall not release Landlord from its obligations hereunder and that Tenant shall continue to look to Landlord for the performance of its obligations hereunder.

29.6Prohibition Against Recording. Neither this Lease, nor any memorandum, affidavit or other writing with respect thereto, shall be recorded by Tenant or by anyone acting through, under or on behalf of Tenant.

29.7Landlord's Title. Landlord's title is and always shall be paramount to the title of Tenant. Nothing herein contained shall empower Tenant to do any act which can, shall or may encumber the title of Landlord.

29.8Relationship of Parties. Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint venturer or any association between Landlord and Tenant.

29.9Application of Payments. Landlord shall have the right to apply payments received from Tenant pursuant to this Lease, regardless of Tenant's designation of such payments, to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord, in its sole discretion, may elect.

29.10Time of Essence. Time is of the essence of this Lease and each of its provisions.

29.11Partial Invalidity. If any term, provision or condition contained in this Lease shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, provision or condition to persons or circumstances other than those with respect to which it is invalid or unenforceable, shall not be affected thereby, and each and every other term, provision and condition of this Lease shall be valid and enforceable to the fullest extent possible permitted by law.

29.12No Warranty. In executing and delivering this Lease, Tenant has not relied on any representations, including, but not limited to, any representation as to the amount of any item comprising Additional Rent or the amount of the Additional Rent in the aggregate or that Landlord is furnishing the same services to other tenants, at all, on the same level or on the same basis, or any warranty or any statement of Landlord which is not set forth herein or in one or more of the exhibits attached hereto.

29.13Landlord Exculpation. It is expressly understood and agreed that notwithstanding anything in this Lease to the contrary, and notwithstanding any applicable law to the contrary, the liability of Landlord and the Landlord Parties hereunder (including any successor landlord) and any recourse by Tenant against Landlord or the Landlord Parties shall be limited solely and exclusively to an amount which is equal to the lesser of (a) the interest of Landlord in the Building or (b) the equity interest Landlord would have in the Building if the Building were encumbered by third-party debt in an amount equal to eighty percent (80%) of the value of the Building (as such value is determined by Landlord), and neither Landlord, nor any of the Landlord Parties shall have any personal liability therefore, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. Notwithstanding any contrary provision herein, neither Landlord nor the Landlord Parties shall be liable under any circumstances for injury or damage to, or interference with, Tenant's business, including but not limited to, loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, in each case, however occurring.

29.14Entire Agreement. It is understood and acknowledged that there are no oral agreements between the parties hereto affecting this Lease and this Lease constitutes the parties' entire agreement with respect to the leasing of the Premises and supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, if any, between the parties hereto or displayed by Landlord to Tenant with respect to the subject matter thereof, and none thereof shall be used to interpret or construe this Lease. None of the terms, covenants, conditions or provisions of this Lease can be modified, deleted or added to except in writing signed by the parties hereto.

29.15Right to Lease. Landlord reserves the absolute right to effect such other tenancies in the Project as Landlord in the exercise of its sole business judgment shall determine to best promote the interests of the Building or Project. Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant or type or number of tenants shall, during the Lease Term, occupy any space in the Building or Project.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(22)

29.16Abandonment of Premises. If Tenant elects to abandon or vacate the Premises but is otherwise in compliance with all the terms, covenants and conditions of this Lease, Landlord shall (i) have the right to reduce the services provided to Tenant pursuant to the terms of this Lease to such levels as Landlord reasonably determines to be adequate services for unoccupied Premises and (ii) have the right to enter into the Premises at any time to show the space to prospective tenants. Tenant expressly acknowledges that none of the foregoing acts of Landlord pursuant to this Section 29.16 shall constitute a termination of Tenant’s right to possession or an acceptance of Tenant’s surrender of the Premises, and the Lease shall continue in full force and effect.

29.17Waiver of Redemption by Tenant. Tenant hereby waives for Tenant and for all those claiming under Tenant all right now or hereafter existing to redeem by order or judgment of any court or by any legal process or writ, Tenant’s right of occupancy of the Premises after any termination of this Lease.

29.18Notices. All notices, demands, statements or communications (collectively, “Notices”) given or required to be given by either party to the other hereunder shall be in writing, shall be sent by United States certified or registered mail, postage prepaid, return receipt requested, or delivered personally (i) to Tenant at the appropriate address set forth in Section 10 of the Summary, or to such other place as Tenant may from time to time designate in a Notice to Landlord; or (ii) to Landlord at the addresses set forth in Section 11 of the Summary, or to such other firm or to such other place as Landlord may from time to time designate in a Notice to Tenant. Any Notice will be deemed given on the date it is mailed as provided in this Section 29.18 or upon the date personal delivery is made. If Tenant is notified of the identity and address of Landlord’s mortgagee or ground or underlying lessor, Tenant shall give to such mortgagee or ground or underlying lessor written notice of any default by Landlord under the terms of this Lease by registered or certified mail, and such mortgagee or ground or underlying lessor shall be given a reasonable opportunity to cure such default prior to Tenant’s exercising any remedy available to Tenant.

29.19Joint and Several. If there is more than one Tenant, the obligations imposed upon Tenant under this Lease shall be joint and several.

29.20Authority. If Tenant is a corporation, trust or partnership, each individual executing this Lease on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in Texas and that Tenant has full right and authority to execute and deliver this Lease and that each person signing on behalf of Tenant is authorized to do so. In such event, Tenant shall, within ten (10) days after execution of this Lease, deliver to Landlord satisfactory evidence of such authority and, if a corporation, upon demand by Landlord, also deliver to Landlord satisfactory evidence of (i) good standing in Tenant's state of incorporation and (ii) qualification to do business in Texas.

29.21WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION SEEKING SPECIFIC PERFORMANCE OF ANY PROVISION OF THE LEASE, FOR DAMAGES FOR ANY BREACH UNDER THE LEASE, OR OTHERWISE FOR ENFORCEMENT OF ANY RIGHT OR REMEDY UNDER THE LEASE.

29.22Attorneys’ Fees. If either party commences litigation against the other for the specific performance of this Lease, for damages for the breach hereof or otherwise for enforcement of any remedy hereunder, the parties hereto agree to and hereby do waive any right to a trial by jury per Article 29.21, above, and in the event of any such commencement of litigation, the prevailing party shall be entitled to recover from the other party such costs and reasonable attorneys’ fees as may have been incurred, including any and all costs incurred in enforcing, perfecting and executing such judgment.

29.23Governing Law. This Lease shall be construed and enforced in accordance with the laws of the State of Texas. Any dispute or other legal action concerning this Lease, including any arbitration or litigation proceedings must be conducted in Dallas County, Texas.

29.24Submission of Lease. Submission of this instrument for examination or signature by Tenant and delivery of Tenant executed copies to Landlord, do not constitute a reservation of, option for, or option to lease, and it is not effective as a lease or otherwise until full execution by both Landlord and Tenant and until Landlord delivers a fully executed copy of the Lease to Tenant.

29.25Brokers. Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, excepting only the real estate brokers or agents specified in Section 12 of the Summary (the "Brokers"), and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Lease. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, costs and expenses (including without limitation reasonable attorneys' fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of any dealings with any real estate broker or agent (other than the Brokers) occurring by, through, or under the indemnifying party.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(23)

29.26Independent Covenants. This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent and not dependent and Tenant hereby expressly waives the benefit of any statute to the contrary and agrees that if Landlord fails to perform its obligations set forth herein, Tenant shall not be entitled to make any repairs or perform any acts hereunder at Landlord's expense or to any setoff of the Rent or other amounts owing hereunder against Landlord except as may be otherwise provided herein.

29.27Project or Building Name and Signage. Landlord shall have the right at any time to change the name of the Project or Building and to install, affix and maintain or modify any and all signs on the exterior and on the interior of the Project or Building as Landlord may, in Landlord's sole discretion, desire. Tenant shall not use the name of the Project or Building or use pictures or illustrations of the Project or Building in advertising or other publicity or for any purpose other than as the address of the business to be conducted by Tenant in the Premises, without the prior written consent of Landlord.

29.28Counterparts. This Lease may be executed in counterparts with the same effect as if both parties hereto had executed the same document. Both counterparts shall be construed together and shall constitute a single lease.

29.29Confidentiality. Tenant acknowledges that the content of this Lease and any related documents are confidential information. Tenant shall keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than Tenant's financial, legal, and space planning consultants.

29.30Transportation Management. Tenant shall fully comply with all present or future programs intended to manage parking, transportation or traffic in and around the Building, and in connection therewith, Tenant shall take responsible action for the transportation planning and management of all employees located at the Premises by working directly with Landlord, any governmental transportation management organization or any other transportation-related committees or entities.

29.31Building Renovations. It is specifically understood and agreed that Landlord has made no representation or warranty to Tenant and has no obligation and has made no promises to alter, remodel, improve, renovate, repair or decorate the Premises, Building, Project or any part thereof and that no representations respecting the condition of the Premises the Building or Project have been made by Landlord to Tenant except as specifically set forth herein or in the Tenant Work Letter. However, Tenant hereby acknowledges that Landlord is currently renovating or may during the Lease Term renovate, improve, alter, or modify (collectively, the "Renovations") the Project, the Building and/or the Premises including without limitation the parking facilities, common areas, systems and equipment, roof, and structural portions of the same, which Renovations may include, without limitation, (i) installing sprinklers in the Building common areas and tenant spaces, (ii) modifying the common areas and tenant spaces to comply with Applicable Laws, including regulations relating to the physically disabled, seismic conditions, and building safety and security, and (iii) installing new floor covering, lighting, and wall coverings in the Building common areas, and in connection with any Renovations, Landlord may, among other things, erect scaffolding or other necessary structures in the Project, limit or eliminate access to portions of the Project, including portions of the common areas, or perform work in the Project, which work may create noise, dust or leave debris in the Project. Tenant hereby agrees that such Renovations and Landlord's actions in connection with such Renovations shall in no way constitute a constructive eviction of Tenant nor entitle Tenant to any abatement of Rent. Landlord shall have no responsibility or for any reason be liable to Tenant for any direct or indirect injury to or interference with Tenant's business arising from the Renovations, nor shall Tenant be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises or of Tenant's personal property or improvements resulting from the Renovations or Landlord's actions in connection with such Renovations, or for any inconvenience or annoyance occasioned by such Renovations or Landlord's actions.

29.32No Violation. Tenant hereby warrants and represents that neither its execution of nor performance under this Lease shall cause Tenant to be in violation of any agreement, instrument, contract, law, rule or regulation by which Tenant is bound, and Tenant shall protect, defend, indemnify and hold Landlord harmless against any claims, demands, losses, damages, liabilities, costs and expenses, including, without limitation, reasonable attorneys' fees and costs, arising from Tenant's breach of this warranty and representation.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(24)

29.33Communications and Computer Lines. Tenant may install, maintain, replace, remove or use any communications or computer wires and cables (collectively, the "Lines") at the Project in or serving the Premises, provided that (i) Tenant shall obtain Landlord's prior written consent, use an experienced and qualified contractor approved in writing by Landlord, and comply with all of the other provisions of Articles 7 and 8 of this Lease, (ii) an acceptable number of spare Lines and space for additional Lines shall be maintained for existing and future occupants of the Project, as determined in Landlord's reasonable opinion, (iii) the Lines therefor (including riser cables) shall be (x) appropriately insulated to prevent excessive electromagnetic fields or radiation, (y) surrounded by a protective conduit reasonably acceptable to Landlord, and (z) identified in accordance with the "Identification Requirements," as that term is set forth herein below, (iv) any new or existing Lines servicing the Premises shall comply with all applicable governmental laws and regulations, (v) as a condition to permitting the installation of new Lines, Tenant shall remove existing Lines located in or serving the Premises and repair any damage in connection with such removal, and (vi) Tenant shall pay all costs in connection therewith. All Lines shall be clearly marked with adhesive plastic labels (or plastic tags attached to such Lines with wire) to show Tenant's name, suite number, telephone number and the name of the person to contact in the case of an emergency (A) every four feet (4') outside the Premises (specifically including, but not limited to, the electrical room risers and other Common Areas), and (B) at the Lines' termination point(s) (collectively, the "Identification Requirements"). Landlord reserves the right to require that Tenant remove any Lines located in or serving the Premises which are installed in violation of these provisions, or which are at any time (1) are in violation of any Applicable Laws, (2) are inconsistent with then-existing industry standards (such as the standards promulgated by the National Fire Protection Association (e.g., such organization's "2002 National Electrical Code")), or (3) otherwise represent a dangerous or potentially dangerous condition.

29.34Development of the Project.

29.34.1Subdivision. Landlord reserves the right to further subdivide all or a portion of the Project. Tenant agrees to execute and deliver, upon demand by Landlord and in the form requested by Landlord, any additional documents needed to conform this Lease to the circumstances resulting from such subdivision.

29.34.2Construction of Other Improvements. Tenant acknowledges that portions of the Project may be under construction following Tenant's occupancy of the Premises, and that such construction may result in levels of noise, dust, obstruction of access, etc. which are in excess of that present in a fully constructed project. Tenant hereby waives any and all rent offsets or claims of constructive eviction which may arise in connection with such construction.

29.35Hazardous Substances. Tenant shall not cause or permit any hazardous materials or substances to be generated, produced, brought upon, used, stored, treated or disposed of in or about the Premises or the Project by Tenant, its agents, employees, contractors, affiliates, sublessees or invitees. However, notwithstanding the preceding sentence, Landlord agrees that Tenant may use, store and properly dispose of commonly available household cleaners and chemicals to maintain the Premises and Tenant's routine office operations (such as printer toner and copier toner). **** At any time following Tenant's receipt of a request from Landlord, Tenant shall promptly complete an "environmental questionnaire" using the form then-provided by Landlord.

29.36No Discrimination. Tenant covenants by and for itself, its successors and assigns, and all persons claiming under or through Tenant, and this Lease is made and accepted upon and subject to the following conditions: that there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, sex, religion, marital status, ancestry or national origin in the leasing, subleasing, transferring, use, or enjoyment of the Premises, nor shall Tenant itself, or any person claiming under or through Tenant, establish or permit such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy, of tenants, lessees, sublessees, subtenants or vendees in the Premises.

29.37Prohibited Persons; Foreign Corrupt Practices Act and Anti-Money Laundering. Neither Tenant nor any of its affiliates, nor any of their respective members, partners or other equity holders, and none of their respective officers, directors or managers is, nor prior to or during the Lease Term, will they become a person or entity with whom U.S. persons or entities are restricted from doing business under (a) the Patriot Act (as defined below), (b) any other requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of the Treasury ("OFAC") (including any "blocked" person or entity listed in the Annex to Executive Order Nos. 12947, 13099 and 13224 and any modifications thereto or thereof or any other person or entity named on OFAC's Specially Designated Blocked Persons List) or (c) any other U.S. statute, Executive Order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit or Support Terrorism) or other governmental action (collectively, "Prohibited Persons"). Prior to and during the Lease Term, Tenant, and to Tenant's knowledge, its employees and any person acting on its behalf have at all times fully complied with, and are currently in full compliance with, the Foreign Corrupt Practices Act of 1977 and any other applicable anti-bribery or anti-corruption laws. Tenant is not entering into this Lease, directly or indirectly, in violation of any laws relating to drug trafficking, money laundering or predicate crimes to money laundering. As used herein, "Patriot Act" shall mean the USA Patriot Act of 2001, 107 Public Law 56 (October 26, 2001) and all other statutes, orders, rules and regulations of the U.S. government and its various executive departments, agencies and offices interpreting and implementing the Patriot Act. Landlord represents and warrants to Tenant that Landlord is not, and shall not during the Term of this Lease become, a person or entity with whom Tenant is restricted from doing business under the USA Patriot Act and Anti-Terrorism Laws, including without Prohibited Persons. To Landlord’s best knowledge, Landlord is not currently engaged in any transactions or dealings, or otherwise associated with, any Prohibited Persons in connection with the ownership, use or occupancy of the Premises, the Building or the Project. Landlord shall not, during the Term of this Lease, engage in any transactions or dealings with, or be otherwise associated with, any Prohibited Persons in connection with the ownership, use or occupancy of the Premises or the Project. If at any time after the date hereof Landlord becomes a Prohibited Person, then Landlord shall notify Tenant within five (5) business days after becoming aware of such designation. If Landlord breaches any representation or covenant set forth in this Section 29.37, or Landlord hereafter becomes a Prohibited Person, then it shall constitute an Event of Default under this Lease, entitling Tenant to any and all remedies under this Lease or at law or in equity.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(25)

29.38Public Health Crises. **** All claims of any kind, at law or in equity, in relation to this Lease, the Premises, or the Project resulting or alleged to result from COVID-19 or any similar pandemic, epidemic, plague, outbreak of infectious disease, or other public health crisis (collectively, a "Public Health Crisis"), to specifically include without limitation claims for frustration of purpose; impossibility or impracticality of performance; force majeure; and Lease termination are expressly and knowingly waived by Tenant. Tenant releases Landlord and its agents from any claims related to a Public Health Crisis, past, present, and future; and acknowledges that Landlord is under no obligation whatsoever to modify, amend, or restructure the terms of this Lease at any time as a result of a Public Health Crisis.

29.39Signatures. The parties hereto consent and agree that this Lease may be signed and/or transmitted by facsimile, e-mail of a .pdf document or using electronic signature technology (e.g., via DocuSign or similar electronic signature technology), and that such signed electronic record shall be valid and as effective to bind the party so signing as a paper copy bearing such party’s handwritten signature. The parties further consent and agree that (1) to the extent a party signs this Lease using electronic signature technology, by clicking “SIGN”, such party is signing this Lease electronically, and (2) the electronic signatures appearing on this Lease shall be treated, for purposes of validity, enforceability and admissibility, the same as handwritten signatures.

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(26)

IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed the day and date first above written.

"LANDLORD":<br><br> <br><br><br> <br>LLL Four Forest, LP,<br><br> <br>a Texas limited partnership
By:	GP LLL Four Forest, LLC,<br><br> <br>a Texas limited liability company,<br><br> <br><br><br> <br>its General Partner
	By:
	Name: Eduardo Gildenson
	Title: Manager
"TENANT":<br><br> <br><br><br> <br>Zion Oil and Gas, INC.,<br> a Texas corporation,
---	---
By:
	Name: Michael B. Croswell Jr.
	Title: Chief Financial Officer

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

(27)

EXHIBIT A

MERIT TOWER

OUTLINE OF PREMISES

Total Premises: Approximately 8,006 Rentable Square Feet

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

EXHIBIT A

EXHIBIT B

MERIT TOWER

FORM OF TENANT'S ESTOPPEL CERTIFICATE

The undersigned as Tenant under that certain Office Lease (the "Lease") made and entered into as of ___________, 20__ by and between _______________ as Landlord, and the undersigned as Tenant, for Premises on the ______________ floor(s) of the office building located at 12222 Merit Drive, Dallas, Texas 75251, certifies as follows:

1. Attached hereto as Exhibit A is a true and correct copy of the Lease and all amendments and modifications thereto. The documents contained in Exhibit A represent the entire agreement between the parties as to the Premises.

2. The undersigned currently occupies the Premises described in the Lease, the Lease Term commenced on __________, and the Lease Term expires on ___________, and the undersigned has no option to terminate or cancel the Lease or to purchase all or any part of the Premises, the Building and/or the Project.

3. Base Rent became payable on ____________.

4. The Lease is in full force and effect and has not been modified, supplemented or amended in any way except as provided in Exhibit A.

5. Tenant has not transferred, assigned, or sublet any portion of the Premises nor entered into any license or concession agreements with respect thereto except as follows: ________________________________________________.

6. Tenant shall not modify the documents contained in Exhibit A without the prior written consent of Landlord's mortgagee.

7. All monthly installments of Base Rent, all Additional Rent and all monthly installments of estimated Additional Rent have been paid when due through ___________. The current monthly installment of Base Rent is $_____________________.

8. All conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and Landlord is not in default thereunder. In addition, the undersigned has not delivered any notice to Landlord regarding a default by Landlord thereunder.

9. No rental has been paid more than thirty (30) days in advance and no security has been deposited with Landlord except as provided in the Lease.

10. As of the date hereof, there are no existing defenses or offsets, or, to the undersigned's knowledge, claims or any basis for a claim, that the undersigned has against Landlord.

11. If Tenant is a corporation or partnership, each individual executing this Estoppel Certificate on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in Texas and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each person signing on behalf of Tenant is authorized to do so.

12. There are no actions pending against the undersigned under the bankruptcy or similar laws of the United States or any state.

13. Other than in compliance with all Applicable Laws and incidental to the ordinary course of the use of the Premises, the undersigned has not used or stored any hazardous substances in the Premises.

14. To the undersigned's knowledge, all tenant improvement work to be performed by Landlord under the Lease has been completed in accordance with the Lease and has been accepted by the undersigned and all reimbursements and allowances due to the undersigned under the Lease in connection with any tenant improvement work have been paid in full.

The undersigned acknowledges that this Estoppel Certificate may be delivered to Landlord or to a prospective mortgagee or prospective purchaser, and acknowledges that said prospective mortgagee or prospective purchaser will be relying upon the statements contained herein in making the loan or acquiring the property of which the Premises are a part and that receipt by it of this certificate is a condition of making such loan or acquiring such property.

Executed at ______________ on the ____ day of ___________, 20__ .

"Tenant":
a
By:
---	---
	Its:
By:
	Its:

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

EXHIBIT B

-1-

EXHIBIT C

MERIT TOWER

RULES AND REGULATIONS

GENERAL RULES

1.	Tenant shall not suffer or permit the obstruction of any Common Areas, including driveways, walkways and stairways.
2.	Landlord reserves the right to refuse access to any persons Landlord in good faith judges to be a threat to the safety, reputation, or property of the Project and its occupants.
---	---
3.	Tenant shall not make or permit any noise or odors that annoy or interfere with other tenants or persons having business within the Project.
---	---
4.	Tenant shall not keep animals or birds within the Project, and shall not bring bicycles, motorcycles or other vehicles into areas not designated as authorized for same.
---	---
5.	Tenant shall not make, suffer or permit litter except in appropriate receptacles for that purpose.
---	---
6.	Tenant shall not alter any lock or install new or additional locks or bolts.
---	---
7.	Tenant shall be responsible for the inappropriate use of any toilet rooms, plumbing or other utilities. No foreign substances of any kind are to be inserted therein.
---	---
8.	Tenant shall not deface the walls, partitions or other surfaces of the Premises or Project.
---	---
9.	Tenant shall not suffer or permit anything in or around the Premises, Building or Project that causes excessive vibration or floor loading in any part of the Project.
---	---
10.	Furniture, significant freight and equipment shall be moved into or out of the building only with the Landlord's knowledge and consent, and subject to such reasonable limitations, techniques and timing, as may be designated by Landlord. Tenant shall be responsible for any damage to the Project arising from any such activity.
---	---
11.	Tenant shall not employ any service or contractor for services or work to be performed in the Building or Project, except as approved by Landlord.
---	---
12.	Landlord reserves the right to close and lock the Building on Saturdays, Sundays, and Holidays, and on other days between the hours of 6.00 pm and 7.00 am. If Tenant uses the Premises during such periods, Tenant shall be responsible for securely locking any doors it may have opened for entry.
---	---
13.	Tenant shall return all keys and access cards at the termination of its tenancy and shall be responsible for the cost of replacing any keys or access cards that are lost.
---	---
14.	No window coverings, shades or awnings shall be installed or used by Tenant.
---	---
15.	Neither Tenant nor its employees or invitees shall go upon the roof of the Building.
---	---
16.	Tenant shall not suffer or permit smoking or carrying of lighted cigars, pipes, cigarettes or electronic cigarettes, in areas reasonably designated by Landlord or by applicable governmental agencies as non-smoking areas.
---	---
17.	Tenant shall not use any method of heating or air conditioning other than as provided by Landlord.
---	---
18.	Tenant shall not install, maintain or operate any vending machines upon the Premises without Landlord's written consent.
---	---
19.	The Premises shall not be used for lodging or manufacturing, cooking or food preparation.
---	---
20.	Tenant shall comply with all safety, fire protection and evacuation regulations established by Landlord or any applicable governmental agency.
---	---
21.	Landlord reserves the right to waive any one of these rules or regulations, and/or as to any particular tenant, and any such waiver shall not constitute a waiver of any other rule or regulation or any subsequent application thereof of such tenant.
---	---
22.	Tenant assumes all risks from theft or vandalism and agrees to keep its Premises locked as may be required.
---	---
23.	Landlord reserves the right to change these rules and to make such other reasonable rules and regulations as it may from time to time deem necessary for the appropriate operation and safety of the Project and its occupants in accordance with the terms and conditions of Article 5 of the Lease. Tenant agrees to abide by these and such other Rules and Regulations.
---	---

PARKING RULES

1.	Parking areas shall be used only for parking by vehicles no longer than full size, passenger automobiles herein called “Permitted Size Vehicles”.
2.	Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant's employees, suppliers, shippers, customers, or invitees to be loaded, unloaded, or parked in areas other than those designated by Landlord for such activities.
---	---

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

EXHIBIT C

-1-

3	Parking stickers, identification devices and/or access cards shall be the property of Landlord and be returned to Landlord by the holder hereof upon termination of the holder’s parking privileges. Tenant will pay such deposit and/or replacement charge as is reasonably established by Landlord for the use and/or loss of such devices, as applicable. Tenant shall only be issued an amount of access cards in accordance with the Parking Passes Ratio specified in Section 9 of the Lease Summary. Only one (1) active access card per person shall be allowed. Tenant shall have no right to additional access cards or parking spaces, which would exceed the Parking Passes Ratio.
4.	Landlord reserves the right to refuse the issuance of access cards, parking stickers or identification devices to any person or entity that willfully refuses to comply with the applicable rules, regulations, laws and/or agreements.
---	---
5.	Landlord reserves the right to relocate all or part of parking spaces to reasonably adjacent offsite location (s), and to reasonably allocate them between compact and standard size spaces, as long as the complies with Applicable Laws, ordinances and regulations.
---	---
6.	Users of the parking facilities will obey all posted signs and park only in the areas designated for vehicle parking.
---	---
7.	Unless otherwise instructed, every person using the parking facilities is required to park and lock his own vehicle. Landlord will not be responsible for any damage to vehicles, break-ins, injury to persons or loss of property, all of which risks are assumed by the party using the parking area.
---	---
8.	Validation, if established, will be permissible only by such method or methods as Landlord and /or its licensee may establish at rates general applicable to visitor parking.
---	---
9.	The maintenance, washing, waxing or cleaning of vehicles in the parking area or Common Areas is prohibited.
---	---
10.	Tenant shall be responsible for seeing that all of its employees, agents and invitees comply with the applicable parking rules, regulations, laws and agreements.
---	---
11.	Landlord reserves the right to oversell the unreserved parking spaces in the parking facilities in a manner customary to the operation of parking facilities associated with comparable buildings, provided Landlord shall not oversell rights to park in the unreserved parking spaces by more than 15% of the total number of parking spaces available in the parking facilities.
---	---
12.	Landlord reserves the right to modify these rules and/or adopt such other reasonable and non-discriminatory rules and regulations as it may deem necessary for the proper operation of the parking facilities.
---	---
13.	Such parking use as is herein provided is intended merely as a license only and no bailment is intended or shall be created hereby.
---	---

LLL FOUR FOREST, LP

MERIT TOWER

ZION OIL AND GAS, INC

EXHIBIT C

-2-

ex_881301.htm

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

I, Robert W. A. Dunn, certify that:

1.	I have reviewed this annual report on Form 10-K of Zion Oil & Gas, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
---	---
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
---	---
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
---	---
a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
---	---
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
---	---
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
---	---
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
---	---
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
---	---
a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
---	---
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
---	---

Date: March 19, 2026

/s/ Robert W. A. Dunn
Robert W. A. Dunn, Chief Executive Officer
(Principal Executive Officer)

ex_881302.htm

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

I, Michael B. Croswell Jr, certify that:

1.	I have reviewed this annual report on Form 10-K of Zion Oil & Gas, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
---	---
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
---	---
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:
---	---
a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
---	---
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
---	---
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
---	---
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
---	---
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
---	---
a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and
---	---
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
---	---

Date: March 19, 2026

/s/ Michael. B. Croswell Jr
Michael B. Croswell Jr, President and Chief Financial Officer
(Principal Financial and Accounting Officer)

ex_881303.htm

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Zion Oil and Gas, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2025 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Robert W.A. Dunn, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.
---	---
/s/ Robert W. A. Dunn
---
Robert W. A. Dunn
Chief Executive Officer
(Principal Executive Officer)
March 19, 2026

This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

ex_881304.htm

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Zion Oil and Gas, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2025 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Michael B. Croswell Jr., Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.
---	---
/s/ Michael B. Croswell Jr
---
Michael B. Croswell Jr.
President and Chief Financial Officer
(Principal Financial and Accounting Officer)
March 19, 2026