April 5, 2006
Mr. Eugene A. Soltero
Chief Executive Officer
Zion Oil & Gas, Inc.
6510 Abrams Road, Suite 300
Dallas, Texas 75231
Re: Zion Oil & Gas, Inc.
Amendment No. 1 to Registration Statement on Form SB-2
Filed March 20, 2006
File No. 333-131275
Form 10-KSB for the Fiscal Year Ended December 31, 2004
Filed April 15, 2005, as amended
File No. 333-107042
Dear Mr. Soltero:
We have reviewed your filings and your response letter dated
March 17, 2006 and have the following comments. Where indicated,
we
think you should revise your document in response to these
comments.
If you disagree, we will consider your explanation as to why our
comment is inapplicable or a revision is unnecessary. Please be
as
detailed as necessary in your explanation. In some of our
comments,
we may ask you to provide us with information so we may better
understand your disclosure. After reviewing this information, we
may
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form SB-2, as amended
Cover Page
1. We note your added disclosure that your "...founder and
chairman
has indicated his interest in exchanging all his compensation
payable
in 2006 for shares in the offering." Please add a cross-reference
here directing readers to the additional disclosure on this issue
provided on page 23.
Risk Factors, page 3
Earnings will be diluted due to charitable contributions...., page
9
2. Please explain further here or provide a cross-reference to
such
disclosure about how you determine to which charities you will
contribute and the corresponding amounts.
Plan of Distribution, page 23
Placement by Zion Officers and Directors, page 23
3. We note that cash purchases by affiliates and control persons
will
be counted as part of the minimum subscription amount necessary to
effect an initial closing, whereas exchange purchases for
reduction
of accounts payable will not be so counted. Please revise to
clarify
what constitutes exchange purchases for reduction of accounts
payable. For instance, it is not clear if an affiliates`
conversion
of deferred compensation for shares in this offering, as Mr. Brown
intends, constitutes an exchange purchase for reduction of
accounts
payable.
4. Please provide us with the name and telephone number of the
person
you have been working with at NASD.
Certain Relationships and Related Party Transactions, page 39
5. We read your response to prior comment 26, and note that you
have
expanded your disclosures to include a list of restrictions on the
common stock you issued to Mr. Rinberg for future services, to
justify a fifty percent discount on the per share price of $5.00.
Please tell us if a valuation analysis was performed to conclude
that
a fifty percent discount would be fair under the circumstances.
If
so, please provide us with a copy of your analysis.
6. We read your response to prior comment 27, and note that you
have
expanded your disclosures to discuss whether your related party
transactions were consummated on terms equivalent to those that
prevail in arm`s-length transactions. We understand from your
revised disclosures that you entered into a loan agreement with
Mr.
Brown, your promoter, in 2000 and 2002, in which he waived the
interest payments on each of the loans. This appears to be
inconsistent with your statement that the loans were on no less
favorable terms than could have been obtained from unaffiliated
third
parties. Please revise your disclosures to eliminate what appears
to
be an inconsistency regarding whether this transaction was at
arm`s
length.
Financial Statements
7. We read your response to prior comment six, in which you
indicate
that under FASB rules you are required to use the words "A
Development Stage Company" in your financial statements and have
labeled them as such. We recognize that for accounting purposes
you
should follow the reporting and disclosure rules required by SFAS
7.
However, we continue to believe you should re-label your financial
statements as being those of an "exploration stage" entity, which
will more clearly convey that you are not engaged in the
preparation
of proven reserves for extraction. See Instruction 1 to paragraph
(a) of Industry Guide 7.
Note 5 - Related Party Transactions, page F-16
8. We read your response to prior comment 41, and note that you
have
revised the disclosures under this heading to explain that you
classified the full balance of your notes payable as current
liabilities, due to options by the makers to accelerate them.
However, it appears that you later re-classified $37,000 of these
notes to long-term debt in your financial statements for the
quarter
ended September 30, 2005. Please expand the disclosures in your
interim financial statements to discuss your reclassification.
Note 7 - Loan Transactions, page F-17
9. We read your response to prior comment 42, and note that you
have
moved your disclosure with respect to the details of the three
$100,000 loan agreements you entered into on February 28, 2004,
from
the interim financial statements to the annual financial
statements.
However, it is unclear how the reference to Note 9 carried forward
to
your annual disclosure relates to the loan transactions under this
heading.
Exhibit 10.3
10. We reissue our prior comment 45. We note that the escrow
agreement has been filed as Exhibit 10.3, yet it remains unsigned.
File an executed escrow agreement prior to effectiveness of the
registration statement.
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided all information investors require
for an informed investment decision. Since the company and its
management are in possession of all facts relating to a company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert staff comments and the declaration of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
Please contact Tracie Towner at (202) 551-3744 or, in her
absence, Donald Delaney at (202) 551-3863 if you have questions
regarding comments on the financial statements and related
matters.
Please contact Ronald Winfrey, Petroleum Engineer, at (202) 551-
3704
if you have questions regarding comments on the engineering
matters.
Please contact Jason Wynn at (202) 551-3756 or, in his absence, me
at
(202) 551-3740 with any other questions. Direct all
correspondence
to the following ZIP code: 20549-7010.
Sincerely,
H. Roger Schwall
Assistant Director
cc: T. Towner
D. Delaney
J. Wynn
R. Winfrey
via facsimile
Alice A. Waters, Esq.
(972) 938-9091
Mr. Eugene A. Soltero
Zion Oil & Gas, Inc.
April 5, 2006
page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF CORPORATION FINANCE
MAIL STOP 7010