Attached files
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| EX-10 - EXHIBIT 10.10, EXHIBIT J TO PROPOSED SHARESHOLDERS' AGREEMENT; OMAGINE LLC - Omagine, Inc. | ex10-10final.htm |
| EX-31 - EXHIBIT 31.1, SARBANES-OXLEY 302 CERTIFICATION - Omagine, Inc. | sect302cert_ex31.txt |
| EX-32 - EXHIBIT 32.1, SARBANES-OXLEY 1350 CERTIFICATION - Omagine, Inc. | sec1350cert_ex32.txt |
| EX-99 - EXHIBIT 99.4, OMAGINE, INC. 2003 STOCK OPTION PLAN - Omagine, Inc. | ex99-4omagineplan.txt |
| EX-21 - EXHIBIT 21, SUBSIDIARIES OF THE REGISTRANT - Omagine, Inc. | ex21-subsidiaries.txt |
| EX-3 - EXHIBIT 3.12, AMENDED CERTIFICATE OF INCORPORATION - Omagine, Inc. | ex3-12amendcertofinc.txt |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
-----------------
Commission File Number 0-17264
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Omagine, Inc.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 20-2876380
------------------------ ----------------------
(State of incorporation) (I.R.S. Employer
Identification Number)
350 Fifth Avenue, Suite 1103, New York, N.Y. 10118
--------------------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number and area code: (212) 563-4141
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
-----------------------------
(Title of Class)
1
Indicate by check mark if the Registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act of
1933, as amended ("Securities Act"). [ ] Yes [x] 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 [x] 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 (the "Act") 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. [x] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (229.405 of this chapter)
is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.[x]
Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company.
Large accelerated filer[ ] Accelerated filer[ ]
Non-accelerated filer [ ] Smaller reporting company[x]
Indicate by check mark whether the Registrant is a shell company
(as defined in Rule 12b-2 of the Act). [ ] Yes [x] No
On December 30, 2009, as previously disclosed, the Company
effected a 100-for-1 reverse split of its Common Stock
immediately followed by a 1-for-20 forward split ("Stock
Splits"). The financial statements contained herein give
retroactive effect to the Stock Splits.
The aggregate market value of the 7,554,880 shares of voting
stock held by non-affiliates of the Registrant (based upon the
average of the high and low bid prices) on June 30, 2009, the
last business day of the Registrant's most recently completed
second fiscal quarter, was $3,777,440. (SEE: "Market for
Registrants' Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities").
As of April 1, 2010, the Company had outstanding 11,034,157
shares of Common Stock, par value $.001 per share ("Common
Stock").
2
Documents Incorporated By Reference
-----------------------------------
The Index to Exhibits appears on page 64.
Omagine, Inc.
Table of Contents to Annual Report on Form 10-K
Fiscal Year Ended December 31, 2009
Page
----
Forward-Looking Statements 4
Part I
Item 1. Business 5
Item 2. Properties 25
Item 3. Legal Proceedings 26
Item 4. Submission of Matters to a Vote
of Security Holders 26
Part II
Item 5. Market for Registrant's Common Equity,
Related Stockholder Matters and
Issuer Purchases of Equity Securities 27
Item 6. Selected Financial Data 31
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 31
Item 8. Financial Statements and Supplementary
Data 39
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 39
Item 9A. Controls and Procedures 39
3
Item 9A(T) Controls and Procedures 40
Item 9B. Other Information 41
Part III
Item 10. Directors, Executive Officers and
Corporate Governance 41
Item 11. Executive Compensation 46
Item 12. Security Ownership of Certain
Beneficial Owners and Management
and Related Stockholder Matters 57
Item 13. Certain Relationships and Related
Transactions and Director
Independence 59
Item 14. Principal Accountant Fees and Services 61
PART IV
Item 15. Exhibits, Financial Statement Schedules 62
Forward-Looking Statements
--------------------------
Some of the information contained in this Report may constitute
forward-looking statements or statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are based on current expectations and
projections about future events. The words "estimate", "plan",
"intend", "expect", "anticipate" and similar expressions are
intended to identify forward-looking statements which involve,
and are subject to, known and unknown risks, uncertainties and
other factors which could cause the Company's actual results,
financial or operating performance or achievements to differ
from future results, financial or operating performance, or
achievements expressed or implied by such forward-looking
4
statements. Projections and assumptions contained and expressed
herein were reasonably based on information available to the
Company at the time so furnished and as of the date of this
filing. All such projections and assumptions are subject to
significant uncertainties and contingencies, many of which are
beyond the Company's control and no assurance can be given that
the projections will be realized. Potential investors are
cautioned not to place undue reliance on any such forward-
looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to publicly release any
revisions to these forward-looking statements to reflect events
or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
PART I
------
Item 1. Business.
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Introduction
------------
Omagine, Inc. ("Registrant", the "Company" or "Omagine") is the
successor to Alfa International Corp. ("Alfa") which was
incorporated in New Jersey in 1978.
Alfa International Holdings Corp. ("AIHC"), was incorporated on
October 8, 2004 in Delaware solely for the purpose of changing
Alfa's corporate domicile from New Jersey to Delaware via the
merger of Alfa with and into AIHC which was effected on May 23,
2005.
In June 2007 AIHC changed its corporate name to Omagine, Inc.
Omagine is a holding company which conducts substantially all
its operations through its wholly-owned subsidiaries, Journey of
Light, Inc., a New York corporation ("JOL") and Omagine LLC an
Omani corporation. JOL and Omagine LLC are engaged primarily in
the business of real estate development in the Sultanate of Oman
("Oman").
Omagine, JOL and Omagine LLC are sometimes collectively referred
to herein as the "Company".
5
Omagine had two other wholly-owned subsidiaries: Contact Sports,
Inc. ("Contact") and Ty-Breakers Corp. ("Ty-Breakers"), both of
which were engaged in the apparel business and both of which
were merged with and into Omagine on March 26, 2008.
The Company plans to continue its focus on real estate
development, entertainment and hospitality ventures and on
developing, building, owning and operating tourism and
residential real estate development projects, primarily in the
Middle East and North Africa.
Omagine presently concentrates its efforts on the development of
the business of Omagine LLC. (See: "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Certain Relationships and Related Transactions, and Director
Independence").
The Company's executive office is located at The Empire State
Building, 350 Fifth Avenue, Suite 1103, New York, NY 10118,
and its telephone number is 212-563-4141. The Company also
leases an office in Muscat, Oman and a warehouse in Jersey City,
New Jersey. All facilities are leased from unaffiliated third
parties.
Products, Services, Marketing and Distribution
----------------------------------------------
The Omagine Project
-------------------
The Company is engaged primarily in the business of real estate
development in the country of the Sultanate of Oman ("Oman").
The Company has proposed to the Government of Oman (the
"Government") the development of a real estate and tourism
project (the "Omagine Project") to be developed in Oman by
Omagine LLC (the "Project Company"). The Project Company will
design, develop, own and operate the entire Omagine Project.
The Omagine Project is planned to be developed on one million
square meters (equal to approximately 245 acres) of beachfront
land facing the Gulf of Oman (the "Omagine Site") just west of
the capital city of Muscat and nearby Muscat International
Airport. It is presently planned to be an integration of
6
cultural, heritage, educational, entertainment and residential
components, including: a "high culture" theme park containing
seven pearl shaped buildings, each approximately 60 feet in
diameter, associated exhibition buildings, a boardwalk, an open
air amphitheater and stage; open space green areas; a canal and
an enclosed harbor and marina area; associated retail shops and
restaurants, entertainment venues, boat slips, and docking
facilities; a five-star resort hotel, a four-star resort hotel
and possibly a three or four-star hotel; commercial office
buildings; shopping and retail establishments integrated with
the hotels, and approximately two thousand residences to be
developed for sale.
The Government will issue a license to the Project Company
designating the Omagine Project as an Integrated Tourism Complex
("ITC") and as such, the Project Company will be allowed to sell
the freehold title to residential properties developed on the
Omagine Site to any person, including any non-Omani person. Non-
Omani persons (such as expatriates living and working in Oman)
are forbidden by law to purchase any land outside of an ITC.
Significant commercial, retail, entertainment and hospitality
elements are also included in the Omagine Project which is
expected to take about 5 years to complete. The Company
plans, over time, to also be in the property management,
hospitality and entertainment businesses.
In accordance with Omani law, Omagine LLC was legally formed in
Oman as a limited liability company on November 23, 2009, the
date of formal approval by the Ministry of Commerce and Industry
("MOCI"). Omagine LLC is presently 100% owned by the Company.
The Company plans to reduce its 100% ownership of Omagine LLC in
the near future by causing Omagine LLC to sell newly issued
shares of its capital stock to investors. The investors are
Consolidated Contractors International Company, S.A.L. ("CCIC")
and three Omani investors (the "Omani Shareholders"). All
proceeds from such sales of capital stock will belong to Omagine
LLC. The three Omani Shareholders are: (i) the Office of Royal
Court Affairs, an Omani organization representing the interests
of His Majesty, Sultan Qaboos bin Said, the ruler of Oman,
("RCA"), (ii) Al-Mabkharah LLC, an Omani limited liability
company ("ALM"), and (iii) the Oman Integrated Tourism Projects
Fund (the "OITP Fund").
7
None of the Omani Shareholders are affiliates of the Company.
The OITP Fund is an investment fund managed by Bank Muscat, its
designated fund manager. On October 21, 2009 the Omani Union
Real Estate Development Company LLC ("ORDC") and the Company
decided that ORDC would not be an investor in Omagine LLC. On
the same day - October 21, 2009 - the Company made arrangements
with the OITP Fund to replace ORDC as an investor in Omagine LLC
on terms identical to those memorialized in the prior Investor
Agreement with ORDC. Because the Company intends as previously
disclosed, to appoint Bank Muscat as the financial advisor to
Omagine LLC, the Company views the participation of the OITP
Fund as an equity investor in Omagine LLC as a positive event
that aligns the interests of a major investor in Omagine LLC
with the interests of the bank that will be responsible for
arranging the project financing that Omagine LLC will ultimately
require.
The agreement which will govern the design, development,
construction, management and ownership of the Omagine Project is
the Development Agreement. The Company's prior quarterly and
annual reports filed with the Securities and Exchange Commission
("SEC")on Forms 10-K, 10-KSB, 10-Q and 10-QSB have exhaustively
detailed the many delays experienced to date in our efforts to
get the Development Agreement signed with the Government of
Oman. The narrative of these delays is available in such reports
and need not be repeated here.
The Development Agreement consists of two (2) parts: (i) the
"Main Agreement", and (ii) the "Schedules" to the Main
Agreement.
Prior to the signing of the Development Agreement, the Omani
Shareholders and CCIC (collectively, the "New Shareholders") and
the Company will enter into a written "Shareholders' Agreement"
with respect to, among other things, their respective
investments in Omagine LLC and the corporate governance and
management of Omagine LLC. The Shareholders' Agreement is
presently being reviewed by attorneys for the New Shareholders
in anticipation of its imminent signing. The attorneys for the
New Shareholders will also review the final draft Development
Agreement as soon as it becomes available, after which the
Shareholders' Agreement will be executed, the New Shareholders
8
will be formally registered as such with the Ministry of
Commerce and Industry in Oman and the Development Agreement will
be signed by Omagine LLC and the Government.
The review of the final draft Development Agreement by the
attorneys for the New Shareholders, while perfunctory, is a
necessary condition precedent to the signing of the
Shareholders' Agreement by them and such review obviously cannot
occur until there is a final approved draft Development
Agreement to review.
As of the date hereof the Main Agreement has been approved by
the ("MOT") and on April 11, 2010 Omagine LLC responded to the
MOT's fifteen (15) final comments on the Schedules by accepting
eleven (11) of the proposed MOT changes and clarifying the
inadvertent errors and mistakes made by MOT in the remaining
four (4) proposed MOT changes. Omagine LLC's replies to the
final comments on the remaining few Schedules have been
delivered to MOT and we are awaiting the imminent approval of
the complete final draft Development Agreement.
In April 2010 a representative of the Office of Royal Court
Affairs (which is one of the Omani Shareholders) met with the
Minister of Tourism to determine the status of the final
approval process by the Government. The Minister informed the
RCA representative that the final draft Development Agreement
would be approved shortly by MOT and a copy delivered to Omagine
LLC for delivery to and review by the attorneys for the New
Shareholders.
The Company presently anticipates that the final draft
Development Agreement will be approved within the next 2 weeks
whereupon it will be delivered to the attorneys for the New
Shareholders for their review (which review is anticipated to
take no more than a few days), and that thereafter the Company
and the New Shareholders will execute the Shareholders'
Agreement.
As of the date of this Report, no date has yet been established
for the signing of the Development Agreement but the Company
presently anticipates that the Development Agreement will be
signed by Omagine LLC and the Government within thirty (30) days
after the aforementioned execution of the Shareholders
Agreement.
9
As presently contemplated, the Company's 100% ownership
of Omagine LLC will be reduced to 50.5% as detailed in Exhibit
10.10 attached to this Report on Form 10-K in the following
manner:
1. The New Shareholders (CCIC, RCA, ALM, and the OITP Fund)
will subscribe for and purchase an aggregate of 49.5% of the
capital stock of Omagine LLC for an aggregate cash investment
into Omagine LLC of one hundred nine million three hundred
fifteen thousand three hundred seventy five U.S. dollars
($109,315,375), and
2. In addition to the fifty two thousand U.S. dollars ($52,000)
of initial capital invested by the Company to organize Omagine
LLC in November 2009, the Company will invest an additional one
hundred forty four thousand nine hundred fifty U.S. dollars
($144,950) prior to the date the Development Agreement is signed
(the "Execution Date",) and will invest an additional four
hundred fifty nine thousand five hundred fifty U.S. dollars
($459,550) subsequent to the Execution Date, for a total
aggregate investment by the Company of six hundred fifty six
thousand five hundred U.S. dollars ($656,500).
The "Financing Agreement Date" is the day subsequent to the
signing of the Development Agreement upon which Bank Muscat
and/or other lenders execute and deliver to Omagine LLC a
written term sheet with respect to and describing the terms and
conditions of a proposed financing agreement for the Omagine
Project. The foregoing investments are presently planned to be
made on the following schedule:
1. Prior to the Execution Date the New Shareholders will invest
one hundred ninety three thousand fifty U.S. dollars in
cash ($193,050) and the Omani Shareholders will purchase variable
convertible promissory notes from the Company ("Notes"), and the
Company will invest the aforementioned additional one hundred
forty four thousand nine hundred fifty U.S. dollars in cash
($144,950), and
2. During the six month period subsequent to the Execution Date
the Omani Shareholders will partially fund the Notes by paying
the Company an aggregate of forty four million eight hundred
seven thousand three hundred forty two U.S. dollars in cash
($44,807,342), and Omagine LLC will pay the Company four hundred
10
fifty nine thousand five hundred fifty U.S. dollars ($459,550)
which Omagine LLC will owe to the Company after the
Shareholders' Agreement is signed (the "Exchange Amount") and
promptly after receiving the Exchange Amount from Omagine LLC,
the Company will invest the Exchange Amount of four hundred
fifty nine thousand five hundred fifty U.S. dollars ($459,550)
into Omagine LLC, and
3. The Financing Agreement Date is projected by management to
occur approximately six months after the Execution Date. Within
ten (10) days after the Financing Agreement Date the Omani
Shareholders will fund the balance of the Notes by paying the
Company an aggregate of fourteen million nine hundred thirty
five thousand seven hundred eighty three U.S. dollars in cash
($14,935,783), and all the Notes will automatically be converted
into shares of Omagine LLC in accordance with their terms, and
CCIC will invest an additional forty nine million three hundred
seventy nine thousand two hundred U.S. dollars in cash
($49,379,200) into Omagine LLC.
The Notes include a provision requiring (after being fully
funded) their mandatory conversion into shares of Omagine LLC
(See: Exhibits - Exhibit 10.10 - Exhibit J to the proposed
Shareholders' Agreement among the proposed shareholders of
Omagine LLC). In the event that any Note is not fully funded in
accordance with the funding schedule in the Note (an unlikely
event in the opinion of management), then Omagine LLC is not
obligated to accept further funding installments from the Note
holder and the outstanding principal, if any, of such Note
becomes due and payable without interest after one (1) year from
such date of failure to pay such funding installment, and the
Company (Omagine, Inc.) has the option to purchase any shares
then owned by such Note holder.
The Company and the New Shareholders are referred to herein and
in the Development Agreement as the "Founder Shareholders" of
Omagine LLC.
The Company capitalized Omagine LLC at formation by depositing
20,000 Omani Rials, equal to approximately USD $52,000, (the
"Company Capital Contribution") into a bank account opened in
Bank Muscat in the name of Omagine LLC and the Company was
subsequently issued all 200,000 of the presently issued and
outstanding shares of Omagine LLC.
11
Pursuant to the proposed Shareholders' Agreement, after the
issuance of the Omagine LLC shares purchased by the New
Shareholders and the Company, and the conversion of the Notes
into shares of Omagine LLC, and the purchase by CCIC of shares
as described above and in Exhibit 10.10 attached to this Report
on Form 10-K, Omagine LLC will have 5,000,000 shares issued and
outstanding and such shares will be owned as follows:
the Company will own 2,525,000 shares (50.5%), and
the OITP Fund will own 1,000,000 shares (20%), and
RCA will own 625,000 shares (12.5%), and
CCIC will own 600,000 shares (12.0%), and
ALM will own 250,000 shares (5%).
Pursuant to the Shareholder's Agreement and the Oman Companies
Law, the Omagine LLC shareholders plan to change the corporate
form and structure of Omagine LLC at some point after the
Execution Date from a limited liability company to a closed
joint stock company and such change will have no effect on the
investment amounts or percentage ownership amounts outlined
above.
All of the aforementioned investment amounts and ownership
percentages were negotiated in arms-length transactions between
the Project Company and the New Shareholders by Company
management and on behalf of Omagine LLC. No New Shareholder is
an affiliate of the Company.
As presently contemplated by the proposed Shareholders'
Agreement:
1. the Company and the New Shareholders will have
representation on the Board of Directors of Omagine LLC but the
Company's representatives will at all times have a majority of
the votes on such Board of Directors.
2. The Government is not a shareholder of Omagine LLC.
3. The current Managing Director and chief executive officer of
Omagine LLC, Frank J. Drohan, will continue in that position.
12
4. The Chairman, who shall have no day to day operating role in
the management or operation of the business of Omagine LLC but
shall be the primary spokesman and advocate in Oman for the
Project Company, shall be a representative of RCA.
5. The Deputy Managing Director shall be Mr. Sam Hamdan.
The Company has again updated its projected financial model for
the Omagine Project since doing so in November 2009 and such
updated financial model presently forecasts net positive cash
flows for Omagine LLC in excess of 900 million dollars over the
five year period subsequent to the signing of the Development
Agreement with a net present value of the project in excess of
400 million dollars. Although the Oman economy has not been as
severely affected by the recent worldwide financial crisis as
nearby Dubai or other countries, it did experience some negative
effects, slowdowns and volatility. Raw material and labor prices
initially dropped dramatically and are now experiencing a
recovery. Recent sales prices for housing in other integrated
tourism projects are stabilizing and, in Oman, the inventory of
unsold housing in the secondary (re-sale) market has dropped
dramatically in recent months which some observers see as an
important indicator of pent up future demand. Management
cautions however that investors should not place undue reliance
on this financial model forecast as all such projections are
subject to significant uncertainties and contingencies, many of
which are beyond the Company's control and no assurance can be
given that the projections will be realized. Potential investors
are cautioned not to place undue reliance on any such forward-
looking statement or forecast, which speaks only as of the date
hereof.
The date of signing the Development Agreement is entirely in the
hands of the Government. Based on the recent conversations with
Government officials, the Omani Shareholders, and the Company's
attorneys, the Company understands that the Government is
anxious to conclude this matter swiftly. Subsequent to the
signing of the Development Agreement, it must be ratified by the
Ministry of Finance ("MOF") on behalf of the Government. The
Company anticipates notice from the Government of the signing
date for the Omagine Development Agreement in the next several
weeks.
13
Consolidated Contractors Group S.A.L. (www.ccc.gr) is a Lebanese
multi-national corporation ("CCG") whose main activities involve
general building contracting services in the Middle East. CCG
employs approximately 125,000 people worldwide and has annual
revenue of approximately $5 billion. Consolidated Contractors
International Company, S.A.L., a Panamanian corporation ("CCIC")
is the investment arm of CCG. Consolidated Contractors Company
Oman, LLC, an Omani limited liability corporation ("CCC") is a
construction company with approximately 6,000 employees in
Oman and is CCG's operating subsidiary in Oman. Neither CCG,
CCIC, CCC nor any of the Omani Shareholders is an affiliate of
the Company.
As of the date hereof, the Company has arranged approximately
$110 million of equity capital (the "Minority Equity") for the
Project Company via the proposed sale of equity interests
totaling 49.5% of the Project Company to: CCIC (12%); the OITP
Fund (20%); RCA (12.5%); and ALM (5%), for a total of $109.3
million. (See: Exhibits - Exhibit 10.10 - Exhibit J to the
proposed Shareholders' Agreement among the shareholders of
Omagine LLC, attached to this Report on Form 10-K)
The Company's agreements with the New Shareholders have now been
reduced to writings and they constitute the Shareholders'
Agreement and subscription agreements with each New Shareholder
and with the Company ("Subscription Agreements") as described
above and in Exhibit 10.10 to this Report on Form 10-K.
Although the Company expects such agreements to be executed in
the next few weeks, until they actually are executed, no
assurance can be given that they will be executed.
The Company invested the Company Capital Contribution of
approximately USD $52,000 in the Project Company at formation.
Additional cash investments of approximately USD $144,950 and
approximately USD $459,550 are planned to be made by the Company
into Omagine LLC as described above and in Exhibit 10.10 to this
Report on Form 10-K.
The Company has agreed with CCIC regarding (i) its approximately
USD $49.4 million investment in Omagine LLC, and (ii) the
appointment of CCC as the general contractor for the
construction of the Omagine Project. The written Shareholders'
Agreement among the Founder Shareholders and the Subscription
Agreements are presently under review by the New Shareholders
and their legal counsel.
14
The Shareholders' Agreement and the Subscription Agreements may
be modified but any such modification is expected to be minor
and is not expected to alter the Company's majority ownership
position of Omagine LLC nor to materially change the investment
amounts or timing as outlined above.
As presently planned, the Shareholders' Agreement and
Subscription Agreements will provide that the funding
installments of the Notes will be paid by the Omani Shareholders
to Omagine LLC in monthly installments during the period
beginning immediately after the Execution Date of the
Development Agreement and ending on the Financing Agreement
Date. The Subscription Agreement with CCIC provides that its
investment into the Project Company will be paid to Omagine LLC
on the Financing Agreement Date. Therefore, as presently
contemplated by the terms of the proposed Subscription
Agreements, Omagine LLC will not have to wait for the Financing
Agreement Date to begin development and design of the Omagine
Project as it will have the financial capacity to begin such
design and development activities immediately after the
Development Agreement is signed.
The Company presently plans to cause Omagine LLC to hire Michael
Baker Corp. ("Baker") as its Program and Project Manager. Baker
is a publicly traded U.S. firm (AMEX: BKR) in the business of
providing program management, engineering, design and
construction management services to a wide variety of clients
including the Department of Defense and several state
governments. No agreement has yet been concluded with Baker for
project management, but the Company has employed Baker through
the feasibility and engineering study phases of the Omagine
Project and anticipates that it will execute an agreement with
Baker soon after the signing of the Development Agreement.
Several Baker representatives have made several trips to Oman to
visit with management, examine the project site and plan for its
future involvement with the Omagine Project. In April, 2010, a
Vice-President of Baker, who will be the resident manager in
Oman of Baker's proposed local Omani subsidiary, spent two weeks
in Muscat making such preparations.
Baker (www.mbakercorp.com) is headquartered in Pittsburgh, PA,
with offices throughout the U.S. and abroad and is experienced
in all aspects of design, program management and construction
management for large scale construction and development projects
15
of the magnitude of the Omagine Project. Baker has significant
program management and construction management contracts with
the United States military worldwide - including in the Middle
East.
The Company is in the final selection process for interpretive
designers and entertainment content and visitor experience
designers to be hired by Omagine LLC. The candidates have been
narrowed to a short list of professional companies. One or more
of such companies ("Content Developers") will be engaged by
Omagine LLC to transform Omagine's high level strategic vision
for the content of the Pearl structures and surrounding areas
into physical places offering emotional, physical and
intellectual interactions. Each of the prospective candidates
has serviced a diverse client base, including theme parks,
museums, zoos, aquariums and other such complex entertainment
centers around the world, including in the Middle East.
In order to move into the actual development stage of the
Omagine Project, Omagine LLC and the Government must first sign
the Development Agreement. The Company and the New Shareholders
are closely following this matter, and although this process has
often been delayed to date, management and the Founder
Shareholders remain confident that attainment of the ultimate
objective of signing the Development Agreement with the
Government is now imminent - although the precise date for such
signing is not possible to predict at this time.
Notwithstanding the foregoing, no assurance can be given at this
time that the Development Agreement actually will be signed.
As presently contemplated the Company will ultimately own 50.5%
of Omagine LLC and the financial results of Omagine LLC will be
consolidated with the financial results of the Company in such
manner as to reflect the Company's presently anticipated 50.5%
majority ownership. Previously, it was expected that beginning
after the signing of the DA the Company would - on a
consolidated basis - experience a monthly increase in net worth
culminating in an aggregate increase in net worth of
approximately USD $55 million on the Financing Agreement Date as
a result of the approximately USD $110 million capitalization of
Omagine LLC. Since the methodology of funding Omagine LLC has
now been re-structured as a series of funding installments on
the Notes, this increase in net worth on a consolidated basis
16
will not occur gradually over the aforementioned six month
period, but instead it is now expected to occur as a single
aggregate increase in the Company's net worth of approximately
USD $55 million on or shortly after the Financing Agreement Date
when the Notes are converted and the CCIC investment is made.
The capital of Omagine LLC as well as its proceeds from the
sales of residential units and from bank borrowings will be
utilized by it to develop the Omagine Project. Omagine LLC's
ongoing financial results will continue to be consolidated with
the Company's results as appropriate.
The Company has been, and continues the preparation for its
anticipated future business activities in various ways including
but not limited to: (i) recruiting various executive level
personnel that will be required to ramp up organizationally for
the Omagine Project, (ii) negotiating initial contracts with the
major vendors, contractors and financial institutions proposed
to be involved in the Omagine Project, (iii) arranging the
appropriate and required legal, accounting, tax and other
professional services both in Oman and the U.S., (iv) examining
various tax structures, (v) reviewing and complying (to the
extent we are presently able) with the listing requirements of
various stock exchanges so we may be prepared to apply for such
listing(s) subsequent to the Financial Closing Date, (vi)
examining various other matters we believe will enhance
shareholder value subsequent to the Financial Closing Date
(including but not limited to hiring an in-house Investor
Relations manager to enhance our presently modest public
relations efforts) (See: "LIQUIDITY AND CAPITAL RESOURCES"), and
(vii) examining other potential Company revenue streams which
are ancillary to, and derivative of, the Omagine Project.
As presently contemplated, Bank Muscat, Oman's largest financial
institution, will be hired by Omagine LLC to arrange all of the
necessary construction and other financing for the Omagine
Project ("Construction Financing"). The Shareholders' Agreement
contemplates the approval by the Omagine LLC shareholders of a
draft agreement with Bank Muscat regarding project financing and
financial advisory services (the "Mandate Agreement"). The
Mandate Agreement provides for Bank Muscat to be the financial
advisor for Omagine LLC and to, among other things, arrange for
the Construction Financing.
17
While the project financing environment is challenging at the
present moment given the worldwide bank liquidity issues,
management continues to be in contact with Bank Muscat on a
regular basis regarding the financing of the Omagine Project and
Bank Muscat has continued to indicate that it expects the
project finance market to be substantially more stable when
Omagine LLC will be seeking such financing. Based upon local
newspaper reports and conversations with Bank Muscat officials,
management believes that the Omani banks have very little
exposure to the sub-prime market problems afflicting other
financial institutions outside Oman. Management and the Project
Company's prospective Omani bankers and shareholders are of the
opinion that the present financial market turmoil is expected to
increase the Project Company's cost of borrowing but otherwise
have no material effect or impact on the Omagine Project. As
noted earlier however, the costs of labor and material as well
as the selling prices of housing remain somewhat volatile and no
completely accurate projection can be made at this time. The
Company views Bank Muscat's decision to have the OITP Fund
become an equity investor in Omagine LLC as a positive indicator
of Bank Muscat's opinion with respect to the likely availability
to Omagine LLC of the necessary Construction Financing.
The Company had previously expected, based on then present
assumptions of its previous development program, that the
development costs (including the costs for design, construction
management, program management and construction) for the entire
Omagine Project would be less than the approximately $1.6
billion dollars that it had budgeted in 2006 for such work. The
Company presently expects, based on present assumptions which
include an expansion of the elements in the previous budget to
be constructed in the Omagine Project since the 2006 program was
conceived, that the development costs (including the costs for
design, construction management, program management and
construction) for the entire Omagine Project will be between
approximately $1.9 and $2.1 billion dollars. The Company also
presently expects, based on present assumptions and market
activity, that although the selling prices of housing in Oman
have fallen from their 2007/2008 peaks, they will still be
greater than that which the Company had previously budgeted. As
previously noted however, costs and selling prices remain
somewhat volatile as the economy in Oman and the surrounding
18
region improves and undue reliance on present projections should
be avoided. Management cautions that future events rarely
develop exactly as forecast, and the best estimates routinely
require adjustment.
Subsequent to the signing of the Development Agreement, the
Omagine Site's value will be definitively determined by a
qualified independent real-estate appraiser and such appraisal
will be utilized by Bank Muscat in its discussions with other
financial institutions to optimize Omagine LLC's capital
structure and to arrange the Construction Financing.
Omagine LLC's requirements for bank financing of Construction
Costs is expected to be reduced by its ability to pre-sell
residence units by entering into sales contracts with third
party purchasers and receiving deposits and progress payments
during the construction of such residences.
The sale of residential and commercial properties, including
sales to non-Omani persons combined with the increase in the
value of the land constituting the Omagine Site over the last
several years are the main drivers supporting the Project
Company's financial projections. The Development Agreement has
evolved over the years and as presently contemplated and agreed
allows for sales and pre-sales of any of the residential or
commercial buildings that will be developed and built on
approximately three hundred thousand square meters
(approximately 75 acres) of land within the Omagine Site. The
balance of the Omagine Site will consist of open areas, roads,
walkways, green areas, etc. The freehold title to the land
within the Omagine Site underlying such residences or commercial
properties shall be transferred to the buyer at the closing of
such sales transactions.
The present nature of the Company's business is such that it is
not expected to generate revenue until after the occurrence of
an event - the signing of the Development Agreement for the
Omagine Project - which, as of the date hereof, is not certain
to occur. Moreover, revenues from real estate development
associated with the Omagine Project are not expected to occur
until subsequent to the Financing Agreement Date. The Company is
planning to enter businesses other than real estate development
- and ancillary to the Omagine Project - subsequent to signing
19
the Development Agreement and expects to generate ongoing
revenue streams from such businesses, but no projections of the
amount of such revenue, if any, can be made at this time.
Notwithstanding the positive nature of the foregoing "forward
looking statements", no assurances can be given at this time
that the Development Agreement will actually be signed or that
the Financing Agreement Date will actually occur.
All "forward looking statements" contained herein are subject
to, known and unknown risks, uncertainties and other factors
which could cause Omagine LLC's and the Company's actual
results, financial or operating performance or achievements to
differ from management's projections for them as expressed or
implied by such forward-looking statements. Projections and
assumptions contained and expressed herein are based on
information available to the Company at the time so furnished
and as of the date of this report and are, in the opinion of
management, reasonable. All such projections and assumptions are
subject to significant uncertainties and contingencies, many of
which are beyond the Company's control, and no assurances can be
given that the projections will be realized. Potential investors
are cautioned not to place undue reliance on any such forward-
looking statements, which speak only as of the date hereof.
Competition:
------------
The real-estate development business in Oman is a competitive
business populated by companies with substantially greater
financial, managerial and personnel resources than the Company
presently possesses. Management believes that the Company's
ability to assemble and coordinate a team of experienced
American, European and Middle Eastern consultants in a wide
variety of specialized fields was crucial to its success to
date in advancing the Omagine Project to its present status.
These consultants, some of whom, depending upon future events,
may become employees of the Company are each highly experienced
in their respective fields. These fields of expertise include
the following: strategic planning; visioning; branding;
marketing; Islamic scholarship and research; master planning;
architecture; conceptual design; project management;
construction management; general contracting; quantity surveying
and costing; interior design; landscape design; art; public
20
policy; engineering (structural, civil, mechanical, electrical,
marine); Omani law; cultural and exhibition design;
interpretative design; tourism experience designers;
recreational operations planning and management; investment
banking; structured finance; motion based ride technology; film
technology; training and hotel management. In addition the
Company's president, Frank J. Drohan, has over 30 years of
experience doing business across most of the Middle East and is
familiar with the cultural and business environment of the
region.
Although several of Omagine LLC's competitors have well
established businesses and brand reputations, management
believes that Omagine LLC's advantages are (i) the uniqueness
of the Omagine Project is particularly attractive to the
Government (ii) the Company's and Omagine LLC's senior
management have established strong and trusting relationships
with the relevant Government officials, and (iii) the proposed
Shareholders' Agreement with the New Shareholders demonstrates
the strong professional partners that have been recruited to
develop the Omagine Project. Company management believes
Omagine LLC can successfully compete in this marketplace through
a combination of unique development concepts, effective
relationship management and the utilization of highly
professional, competent and experienced sub-contractors and
consultants who are well known to the Government.
Engineering, Design and Construction
------------------------------------
The Company does not presently own or directly operate any
engineering, design or construction companies or facilities but
the Company or Omagine LLC may, depending upon events, set up
its own in-house design supervision team and/or enter into joint
ventures with firms providing the aforesaid services. To date,
the Company has generally conceived the development concepts and
defined the "scope of work" and then, as required, contracted
with various designers, architects, contractors and consultants
in the United States, Europe and the Middle East to perform
those tasks. There are many such designers, architects,
contractors and consultants available with competitive pricing
and the Company does not believe that the loss or inability to
perform of any such designer, architect, contractor or
21
consultant would have a material adverse impact on its business
or operations. The Company believes it maintains a good working
business relationship with its designers, architects,
contractors and consultants. All copyrights to documents,
designs and drawings executed by such independent designers,
architects, contractors and consultants are the property of the
Company. (See: "Patents, Copyrights and Trademarks").
Marketing
---------
The Company has engaged in significant marketing and promotional
activities with respect to the Omagine Project and has to date
incurred a significant amount of costs associated with these
activities. These costs and expenses are generally associated
with travel, consulting and professional fees, pre-planning and
feasibility studies and with preparing and making presentations
to the Government of Oman (collectively "Development Costs").
All, or a portion of these Development Costs may be
recoverable from Omagine LLC. Some of these costs, however, may
be non-recoverable costs.
Manufacturing and Production
----------------------------
The Company does not engage in any manufacturing activities and
as such does not maintain any inventory and has no present plans
to do so.
Patents, Copyrights and Trademarks
----------------------------------
The Company filed trademark applications with the United States
Patent and Trademark Office ("USPTO") in the first quarter of
2008 for the mark OMAGINE and related marks (collectively, the
"Marks"). This USPTO filing created "Priority Applications" for
filing such Marks with the Sultanate of Oman and many other
foreign countries. The Company has filed trademark applications
in Oman and Kuwait within the applicable time period required.
In February 2009 the USPTO approved publication of the OMAGINE
Marks for opposition. The mark OMAGINE and three of five of the
related Marks were issued Certificates of Registration from
the USPTO in the first quarter of 2010 and are now officially
22
registered Marks in the United States. The remaining two
related Marks have successfully passed the opposition period and
the USPTO has issued "Notice(s) of Allowance" to each
application. A Notice of Allowance signals that the applications
have completed the examination process and will be approved for
registration upon the filing of a valid "Statement of Use"
attesting that the respective Marks are in commercial use.
Following acceptance of the Statement of Use by the USPTO each
respective application will mature to full registration
permitting use of the registered (r) designation.
Trademark applications for the OMAGINE Marks filed in Oman and
Kuwait have been examined by trademark offices in each
respective jurisdiction and no third-party applications or
registrations exist that would bar registration of the Marks.
The local Omani trademark office has requested that all OMAGINE
Marks be "associated" to indicate a common ownership. This
requirement will not alter the applications in any way, except
that the applications will indicate common ownership among the
various OMAGINE Marks. The Company has accepted the association
requirement. Certificates of Registration have been issued in
Oman for the Omagine Mark and for five of the seven related
Marks as each of the now registered Marks have matured to full
registration in Oman. The Company's New York trademark attorneys
continue to monitor the process which remains ongoing.
The Company's website is www.omagine.com and a dedicated
investor relations hub for the Company may be found at
www.agoracom.com/IR/Omagine.
Government Regulation
---------------------
The Company expects Omagine LLC will require several Omani
governmental licenses, permits and approvals for its services
and products during the development, construction and operation
of the Omagine Project.
The Company does not anticipate any negative effects on its or
Omagine LLC's business from any existing or probable Omani
government laws or regulations. Omagine LLC will in all
likelihood incur certain costs and sustain certain effects on
its operations, all of which costs and effects are expected to
be in the normal course of its business and associated with
23
compliance with Omani regulations and laws, including
environmental laws. The Company does not require any U.S.
government approval of its services, products or activities in
Oman nor does the Company anticipate any negative effects on its
business from any existing or probable U.S. or Omani government
laws or regulations.
Employees and Consultants
-------------------------
The Company presently has three full time employees. None of our
employees is represented by a labor union for purposes of
collective bargaining. We consider our relations with our
employees to be good. Subsequent to the signing of the
Development Agreement the Company intends to significantly
increase the number of its employees.
Omagine is obligated to pay its President and Chief Executive
Officer an annual base salary of $125,000 through December 31,
2010 plus an additional amount based on a combination of net
sales and earnings before taxes. The majority of salary payments
to this individual between October 1, 2004 and August 1, 2007
and for the past year were deferred and accrued.
Omagine had been obligated to employ its Vice-President and
Secretary under an employment agreement which has been canceled.
A portion of the salary payments for prior years and for the
past year due to this individual were deferred and accrued.
Effective August 1, 2007 the Company re-employed this individual
at an annual salary of $85,000. If the Development Agreement is
signed the Company will enter into a new employment agreement
with this individual. The terms of such employment agreement
cannot be determined at this time but it will recognize this
individual's loyal service to the Company. (See "Directors,
Executive Officers and Corporate Governance" and "Executive
Compensation")
Consulting Agreement
--------------------
On March 19, 2007, Omagine and Mr. Sam Hamdan ("Hamdan")
executed a consulting agreement (the "Hamdan Agreement") wherein
Hamdan has agreed that (i) he will provide ongoing consulting
24
services to the Company up until the Financing Agreement Date,
and (ii) under certain circumstances and conditions precedent,
Mr. Hamdan may become the Company's Chief Operating Officer
subsequent to the Financing Agreement Date. Pursuant to the
Hamdan Agreement, the Company issued Hamdan options to purchase
up to 160,000 shares of Omagine's Common Stock at $1.25 per
share (the "Hamdan Option"), exercisable ratably at 32,000
shares per year during the first 5 years subsequent to the
Hamdan Agreement. The Hamdan Option is exercisable only if (i)
the Hamdan Agreement is in effect, or (ii) Hamdan is an Omagine
employee. The Hamdan Agreement has been amended to expire on
December 31, 2010.
Mr. Hamdan is currently the Chairman and Chief Executive of The
Global Leadership Team, Inc. ("GLT") (www.gltweb.com)
headquartered in Birmingham, MI, with a branch office in Beirut,
Lebanon. GLT is a professional services organization comprised
of highly skilled visionaries, branding strategists, management
consultants and thought leaders and it consults for many U.S.
and Arab client companies.
Mr. Hamdan was the chief strategist and founder of the U.S. Arab
Economic Forum and has an extensive network of business,
diplomatic and government contacts in the U.S., Europe and
throughout the Arab world. The World Summit on Innovation and
Entrepreneurship (www.wsie.org) is owned and operated by GLT and
was held in Dubai, U.A.E. in April 2008 and in Muscat, Oman in
2006.
Item 2. Properties.
------- -----------
The Company maintains its corporate offices at The Empire State
Building, Suite 1103, 350 Fifth Avenue, New York, N.Y. 10118.
The premises are leased by the Company under a lease expiring
February 28, 2013. The Company also leases office space in
Muscat, Oman under a one year lease expiring December 31, 2010
and warehouse space in Jersey City, N.J. on a month to month
basis.
25
Item 3. Legal Proceedings.
------- ------------------
The Company is not a party to any legal proceedings which would
have a material adverse effect on it or its operations.
Item 4. Submission of Matters to a Vote of Security Holders.
------- ----------------------------------------------------
On December 29, 2009, the Company held its Annual Meeting of
shareholders for the year ended December 31, 2008 and the
shareholders:
(a) elected five (5) directors as follows:
Nominee Votes For Withheld
------- --------- --------
Salvatore J. Bucchere 48,272,865 806,068
Kevin O'C. Green 48,344,921 734,012
Louis J. Lombardo 48,371,056 707,877
Charles P. Kuczynski 48,302,617 776,316
Frank J. Drohan 48,302,617 776,316
(b) voted to amend the Certificate of Incorporation of the
Company to (i) effect a 1-for-100 reverse split ("Reverse
Split"), and immediately after the Reverse Split, (ii) effect a
20-for-1 forward split ("Forward Split") (collectively, the
"Stock Splits"), (iii) establish 50 million as the number of
shares of Common Stock that the Company shall be authorized to
issue subsequent to the Forward Split, and (iv) authorize a
Rights Offering;
For: 46,222,855 Against: 2,854,726 Abstain: 1,350
(c) voted to amend the Certificate of Incorporation of the
Company to (i) effect the Reverse Split, and immediately after
the Reverse Split, (ii) effect the Forward Split;
For: 46,324,023 Against: 2,753,496 Abstain: 1,412
26
(d) Voted to amend the Alfa International Corp. 2003 Stock
Option Plan to change its name to the Omagine, Inc. 2003 Stock
Option Plan (the "Plan"), and to continue to reserve 2,500,000
shares of Common Stock for issuance under the Plan subsequent to
the Forward Split.
For: 30,612,983 Against: 667,466 Abstain: 6,183
(e) Voted for the ratification of independent auditor for the
fiscal year ending December 31, 2009.
For: 48,553,233 Against: 513,028 Abstain: 12,673
PART II
-------
Item 5. Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of
Equity Securities.
------- -----------------------------------------------
Common Stock
------------
The stock ticker symbol for the Registrant's Common Stock is
"OMAG". On February 9, 2010, the Company was notified by the
Financial Industry Regulatory Authority ("FINRA") that the
necessary changes to reflect the Stock Splits would be effected
in the market reporting of the Company's Common Stock at the
start of trading on February 10, 2010. For a period of twenty
trading days beginning on February 10, 2010, the Company's
Common Stock traded under the symbol "OMAG", with the letter "D"
added to the end of the trading symbol to indicate that the
Stock Splits were reflected in the market reporting of the
Company's Common Stock. As of March 11, 2010 the symbol for the
Company's Common Stock reverted to its previous trading symbol
of "OMAG".
On September 17, 2009 the Board of Directors of Omagine
authorized and directed the Company, subject to shareholder
approval, (i) to execute the Reverse Split of the Company's
27
Common Stock by issuing one (1) new share of Common Stock (a
"Reversed Share") in exchange for each one hundred (100) shares
of Common Stock held by any shareholder on the record date for
such Reverse Split, (ii) to execute the Forward Split by issuing
twenty (20) new shares of Common Stock in exchange for each one
(1) Reversed Share held by any shareholder on the record date
for such Forward Split, (iii) not to issue any fractional shares
of Common Stock ("Fractional Shares") which might be otherwise
issuable pursuant to the Reverse Split, and (iv) in lieu of
issuing any such Fractional Shares, to make a cash payment
("Payment") for such Fractional Shares to any shareholder who,
but for the elimination of such Fractional Shares, would have
held such Fractional Shares immediately subsequent to the
Reverse Split. The Payment was equal to the number derived for
any shareholder by multiplying (x) the fraction representing
such shareholder's Fractional Shares, by (y) one hundred (100),
and then by (z) the average of the daily closing bid prices for
a share of Common Stock for the five consecutive trading days
immediately prior to the record date for the Reverse Split; (iv)
to amend its Certificate of Incorporation amending Article
"Fourth" in compliance with Delaware Corporation Law to reflect
(a) the Reverse Split, (b) the Forward Split, and (c) that the
total number of shares of Common Stock that the Corporation will
be authorized to issue is fifty million (50,000,000) shares; and
(v) authorized the Company, at the discretion of the Board of
Directors, to conduct the Rights Offering of "Units" consisting
of Common Stock and warrants and further authorized the Company
to (a) establish an exercise period for the Rights Offering not
to exceed six (6) weeks from its record date, (b) establish the
exercise period for the warrants not to exceed one (1) year from
their issuance, and (c) file a registration statement with the
Securities and Exchange Commission to register the shares of
Common Stock underlying the Units. The Company included a
proposal in its definitive Proxy Statement filed with the SEC on
November 30, 2009 seeking stockholder approval for the Stock
Splits, the amending of the Company's Certificate of
Incorporation and for the Rights Offering. The Company's
proposal was approved by the stockholders at the Company's
Annual Meeting held on December 29, 2009 and the appropriate
Amendment of the Certificate of Incorporation was filed with the
Secretary of State of Delaware. The Amendment was effective as
of December 30, 2009, the day that such Amendment was so filed.
A copy of the Amended Certificate of Incorporation of the
Company is filed as Exhibit 3.12 to this Report on Form 10-K.
28
The Omagine Board of Directors presently has the authority, at
its sole discretion, to conduct the Rights Offering at any time
exclusively for the benefit of its stockholders. All
stockholders of the Company on the record date for such Rights
Offering shall, for each one (1) share of Common Stock held by
any such stockholder on such record date, be entitled to
purchase one (1) ("Unit") at a purchase price of twenty-five
cents ($0.25) per Unit, each Unit consisting of (a) one (1)
share of Common Stock and (b) one (1) warrant to purchase one
(1) share of Common Stock from the Company at a warrant exercise
price of $6.00. As of the date of this Report, the Board of
Directors has not determined whether or not to conduct the
Rights Offering.
The Company's total authorized capital stock is 50,850,000
shares of which 50,000,000 shares are common stock, par value
$.001 per share ("Common Stock"), and 850,000 shares are
preferred stock, par value $.001 per share. As of April 1, 2010,
there are 11,034,157 shares of Common Stock issued and
outstanding and no shares of preferred stock issued or
outstanding.
The holders of our Common Stock are entitled to one vote per
share on all matters to be voted on by our stockholders,
including the election of directors. Our stockholders are not
entitled to cumulative voting rights, and, accordingly, the
holders of a majority of the shares voting for the election of
directors can elect the entire Board of Directors if they choose
to do so and, in that event, the holders of the remaining shares
will not be able to elect any person to our Board of Directors.
The holders of the Company's Common Stock are entitled to
receive ratably such dividends, if any, as may be declared from
time to time by the Board of Directors, in its discretion, from
funds legally available therefore and subject to prior dividend
rights of holders of any shares of our preferred stock which may
be outstanding. Upon the Company's liquidation, dissolution or
winding up, subject to prior liquidation rights of the holders
of our preferred stock, if any, the holders of our Common Stock
are entitled to receive on a pro rata basis our remaining assets
available for distribution. Holders of the Company's Common
Stock have no preemptive or other subscription rights, and there
are no conversion rights or redemption or sinking fund
29
provisions with respect to such shares. All outstanding shares
of the Company's Common Stock are fully paid and not liable to
further calls or assessment by the Company.
The following table sets forth the range of the high and low
prices for the Common Stock for the four quarters in 2008 and
2009. The table reflects inter-dealer prices, without retail
mark-up, markdown or commission and may not represent actual
transactions. For comparative purposes these prices give
retroactive effect to the Stock Splits effected on December 30,
2009.
Common Stock
------------
Quarter Ended High Low
------------- ---- ---
3/31/08 2.00 1.35
6/30/08 4.40 4.40
9/30/08 2.75 2.55
12/31/08 2.25 1.85
3/31/09 1.25 1.25
6/30/09 0.50 0.50
9/30/09 0.60 0.50
12/31/09 0.70 0.65
At December 31, 2009, Omagine had 10,660,904 shares of its
Common Stock issued and outstanding, and there were
approximately 826 holders of record of such Common Stock.
Omagine has never declared any dividends on its Common Stock,
and it is anticipated that any earnings in the foreseeable
future will be retained for use in the Company's business. Any
declaration in the future of any cash or stock dividends on the
Common Stock will be at the discretion of the Board of Directors
and will depend upon, among other things, earnings, the
operating and financial condition of the Company, capital
requirements and general business conditions.
The Company did not purchase any of its issued and outstanding
shares of Common Stock during the fiscal year ended December 31,
2009.
30
The Company adopted the Omagine, Inc. 401(k) Plan DTD 10-01-2008
(the "401(k) Plan"), qualified under Section 401(k) of the
Internal Revenue Code, which is a pre-tax plan for eligible
employees of the Company. The 401(k) Plan is a professionally
customized derivation of an IRS-approved prototype 401(k) plan
and the Company's choices are detailed within our 401(k) Plan
Adoption Agreement. The Company does not presently match any
employee contributions made to the 401(k) Plan. The Company made
the maximum allowable discretionary contribution to the 401(k)
Plan in 2008 and 2009 to all eligible employees in the form of
20,192 and 72,500 shares respectively of the Company's Common
Stock. Future discretionary contributions, if any, will be made
at the recommendation of the Company's Board of Directors.
The transfer agent for Omagine's Common Stock is Continental
Stock Transfer and Trust Company, 17 Battery Place, New York,
New York 10004.
Item 6. Selected Financial Data.
------- ------------------------
Information required by this Item is not required for a smaller
reporting company.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
------- -------------------------------------------------
The financial statements for fiscal years 2009 and 2008 have
been audited by the Company's independent certified public
accountants. All of the Company's operations were conducted
through its wholly-owned subsidiaries, JOL, Omagine LLC, Contact
and Ty-Breakers.
During 2009, the Company concentrated on concluding the
Development Agreement with the Government of Oman with respect
to the Omagine Project.
31
Critical Accounting Policies
----------------------------
Our financial statements have been prepared in accordance
with accounting principles generally accepted in the United
States. The preparation of these financial statements requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. The policies discussed below are
considered by management to be critical to an understanding of
our financial statements because their application places the
most significant demands on management's judgment, with
financial reporting results relying on estimation about the
effect of matters that are inherently uncertain. Specific risks
for these critical accounting policies are described in the
following paragraphs. For all of these policies, management
cautions that future events rarely develop exactly as forecast,
and the best estimates routinely require adjustment.
Revenue Recognition. Revenue was recognized at Contact and Ty-
Breakers when goods were shipped to customers from an outside
warehouse. The method of revenue recognition at Omagine
LLC will be determined by management when and if it becomes
likely that Omagine LLC will begin generating revenue.
Valuation Allowance for Deferred Tax Assets. The carrying value
of deferred tax assets assumes that the Company will not be able
to generate sufficient future taxable income to realize the
deferred tax assets, based on management's estimates and
assumptions.
General Statement: Factors that may affect future results
---------------------------------------------------------
With the exception of historical information, the matters
discussed in Management's Discussion and Analysis of Financial
Condition and Results of Operations contain "forward-looking
statements" (as that term is understood under the 1995 Private
Securities Litigation Reform Act) that involve various risks and
uncertainties. Typically, these forward-looking statements are
32
indicated by words such as "anticipates", "expects", "believes",
"plans", "could", and similar words and phrases. Factors that
could cause the Company's actual results to differ materially
from management's projections, forecasts, estimates and
expectations include, but are not limited to, the following:
* Failure of Omagine LLC to sign the Development Agreement with
the Government of Oman.
* Failure of Omagine LLC to obtain the necessary Construction
Financing required to design, build and operate the Omagine
Project.
* Inability of the Company to secure additional financing;
* Unexpected economic or political changes in the United States
or abroad; and
* The imposition of new restrictions or regulations by
government agencies in the U.S. or abroad that affect the
Company's business activities.
The following discussion highlights the Company's business
activities during fiscal years 2009 and 2008.
Results of Operations:
Fiscal Year Ended December 31, 2009 Compared to
Fiscal Year Ended December 31, 2008
The present nature of JOL's business is such that it is not
expected to generate revenue until after the occurrence of an
event - the development of the Omagine Project - which, as of
the date hereof, is not certain to occur. (See: " Business -
Products, Services - The Omagine Project").
The Company did not generate any revenue nor incur any cost of
sales for the years ending 2009 and 2008. The Company
discontinued its Contact and Ty-Breakers apparel business in
March 2008. The Company is now focusing all of its efforts on
Omagine LLC's real estate development and entertainment
business.
The Company will hereafter rely on its JOL and Omagine LLC
subsidiaries' operations for future revenue generation.
33
Management is presently examining other possible sources of
revenue for JOL which, subject to the Development Agreement
being executed, may be added to JOL's operations.
Selling and marketing expenses were $36,616 during 2009,
compared to $24,917 in 2008. This increase in 2009 of $11,699
(47%) was primarily due to automobile and other travel costs.
Assuming Omagine LLC signs the Development Agreement for the
Omagine Project with the Government of Oman, the Company is
expected to incur significant expenses related to marketing,
public relations and promotional expenditures in the future.
General and administrative expenses of $1,047,074 in fiscal 2009
were $236,012 (18%) lower than the $1,283,086 incurred in fiscal
2008. This decrease was primarily attributable to the decreases
in 2009 of: fringe benefits ($35,048); legal fees ($77,905);
consulting fees ($161,273); travel expense ($78,261);
stockholder relations ($15,354) and the net of various other
expenses ($1,034), offset by increases in stock option expense
($51,699); pension expense ($20,000); directors' fees ($10,500)
and rent ($50,664).
The Company sustained a net loss of $1,114,409 during 2009 as
compared to a net loss of $1,307,630 during 2008. This decrease
of $193,221 in the Company's loss was due primarily to the
decreased general and administrative expenses mentioned above,
the increase in interest charges of $23,072 and the decrease in
miscellaneous income of $7,989.
The Company incurred $1,471 in capital expenditures during
fiscal year 2009. Assuming Omagine LLC signs the Development
Agreement for the Omagine Project with the Government of Oman,
the Company may incur significant expenses related to capital
expenditures during fiscal 2010.
Liquidity and Capital Resources
In 2009 the Company experienced a positive cash flow of
$106,310. This was due to the Company's negative cash flows
from operating activities of $482,486 and investing activities
of $1,471 being offset by its positive cash flow of $590,217
from financing activities which consisted of $556,400 proceeds
34
from the sale by the Company of shares of its Common Stock; the
issuance of convertible notes payable of $50,000; less the
$16,183 decrease in loans to the Company from Officers and
Directors.
The Company incurred net losses of $1,114,409; $1,307,630 and
$1,043,190 in fiscal years 2009, 2008 and 2007, respectively.
At December 31, 2009, the Company had a working capital deficit
of $978,251, compared to working capital deficit of $609,991 at
December 31, 2008. This $368,260 increase in the Company's
working capital deficit is attributable to the following:
(a) $106,310 increase in cash and equivalents primarily,
due to the sale of stock in 2009 and the loss for
2009;
(b) $74,736 increase in convertible notes payable and
accrued interest;
(c) $99,357 increase in accounts payable;
(d) $40,774 increase in prepaid expenses and other current
assets;
(e) $16,183 decrease in loans to the Company from officers
and directors;
(f) $254,500 increase in accrued officer payroll; and
(g) $21,386 increase in accrued expense and other current
liabilities.
At December 31, 2009, the Company had $155,821 in current
assets, consisting of cash.
The Company's current liabilities at December 31, 2009 totaled
$1,134,072, consisting of $313,464 convertible notes payable and
accrued interest, $483,455 of accounts payable and accrued
expenses, $10,153 due to officers and directors and $327,000 in
accrued payroll. Of the $1,134,072 of current liabilities at
December 31, 2009, $520,306 or 46% represents amounts which
are due to officers and/or directors.
35
The $482,436 of funds used by operating activities during 2009
were used primarily to fund the net loss of $1,114,409 [less the
non-cash charges totaling $191,077] plus the increases in
prepaid expenses and other current assets ($40,917) and the
increases in accrued officers' payroll ($254,500) and accrued
expenses and other current liabilities ($21,386). Operating
funds were provided by increases in accrued interest on
convertible notes payable ($24,736) and accounts payable
($99,357).
Funds totaling $590,217 were provided by financing activities
during 2009 from proceeds realized from the sale of Common Stock
to investors ($556,400); proceeds from the issuance of
convertible notes payable ($50,000) offset by a decrease of
loans and advances to the Company from officers and directors
($16,183).
As a result of the foregoing, the Company had a cash balance at
December 31, 2009 of $155,821 as compared to a cash balance of
$49,511 at December 31, 2008.
The Company will rely upon the business of its JOL and Omagine
LLC subsidiaries for revenue growth. The continuation of Omagine
LLC's efforts to sign the Development Agreement and develop the
Omagine Project is also contingent upon the receipt by Omagine
of the necessary financing to fund Omagine LLC's operations
prior to the signing of the Shareholders' Agreement and the
Development Agreement.
On December 22, 2008, Omagine entered into a Standby Equity
Distribution Agreement (the "SEDA") with YA Global Investments,
L.P. ("YA"). The term of the SEDA is for two years and pursuant
to its terms Omagine may, at its sole option and upon giving
written notice to YA (a "Purchase Notice"), periodically sell
shares of its Common Stock to YA (the "Shares") at a "Purchase
Price" equal to 95% of the lowest daily volume weighted average
price for a share of Omagine's Common Stock as quoted by
Bloomberg, L.P. during the five (5) consecutive trading days
following such Purchase Notice (the "Pricing Period"). During
the term of the SEDA, the Company is not obligated to sell any
Shares to YA but may, at its sole discretion, sell that number
of Shares valued at the Purchase Price from time to time in
effect that equals five million dollars ($5,000,000). YA is
36
obligated to purchase such Shares from the Company subject to
certain conditions including (i) Omagine filing a registration
statement with the Securities and Exchange Commission (the
"SEC") to register the Shares ("Registration Statement"), (ii)
the SEC declaring such Registration Statement effective, (iii)
periodic sales of Shares to YA must be separated by a time
period equal to the Pricing Period, and (iv) the amount of any
such individual periodic sale of Shares may not exceed two
hundred thousand Dollars ($200,000). The SEC declared Omagine's
Registration Statement to be effective as of May 1, 2009 and the
Company intends to file a post-effective amendment to continue
its effectiveness. The SEDA expires on April 30, 2011. All sales
of Shares pursuant to the SEDA are made at the sole discretion
of the Company.
To fund its operations prior to the date hereof, the Company has
to a great extent relied on the net proceeds from sales of its
equity securities pursuant to the SEDA and in private
placements. The Company intends to utilize the SEDA to fund its
operations as necessary and to fund the Company's additional
approximately $144,950 capital contribution to Omagine LLC which
will be made prior to the signing of the Development Agreement.
The Company does not presently intend to utilize the SEDA to
fund the Company's other additional approximately $459,950
capital contribution (the "Final Capital Contribution") to
Omagine LLC which will be made subsequent to the signing of the
Development Agreement. Upon the execution of the Shareholders'
Agreement, Omagine LLC will owe approximately $459,950 to the
Company (the "Exchange Amount") and promptly after receiving
payment of the Exchange Amount from Omagine LLC, the Company
will invest the Exchange Amount of $459,550 into Omagine LLC as
the Final Capital Contribution.
Contrary to previously disclosed plans, the Company does not now
intend to utilize the SEDA to fund advances to Omagine LLC
during the Project Company's initial start-up phase. All Omagine
Project development expenses incurred by the Company over the
past several years (less the Exchange Amount) are expected to be
re-paid to the Company by Omagine LLC.
In March of 2009 the Company issued 72,500 shares of the
Company's Common Stock to all eligible employees of the
Omagine,Inc.401 (k) Plan.
37
From May to December of 2009, the Company sold 1,308,877 shares
of its Common Stock for proceeds of $555,000 under the Standby
Equity Distribution Agreement.
In August of 2009 the Company sold 2,000 shares of Common
Stock to a Director for proceeds of $1,400.
Impact of Inflation
-------------------
The general level of inflation in the U.S. has been relatively
low during the last several fiscal years and has not had a
significant impact on the Company. While the general level of
inflation in Oman has also been relatively low during the last
several fiscal years, Oman has experienced some rapid rises and
falls and volatility in the prices of construction materials and
labor during 2009 and 2010 and, if continued into 2011, it may
have a significant impact on Omagine LLC and the Company.
Forward Looking Statements
--------------------------
As discussed just prior to Item 1, "Business", certain
statements made in this report on Form 10-K are "forward-
looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve known and unknown
risks, uncertainties and other factors that may cause actual
results, performance or achievements of the Company to be
materially different from any future results implied by such
forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements
are based upon reasonable assumptions, the Company's actual
results could materially differ from those set forth in the
forward-looking statements. Certain factors that could cause
such differences include but are not limited to: the uncertainty
of success associated with Omagine LLC's ongoing efforts to sign
the Development Agreement with the Government of the Sultanate
of Oman relating to the Omagine Project; the uncertainty
associated with political events in the Middle East in general
and with the continuing worldwide financial crisis in
particular; and the success or failure of Omagine LLC's and the
Company's efforts to secure additional financing.
38
Item 8. Financial Statements and Supplementary Data.
------- --------------------------------------------
The response to this Item is submitted as a separate section to
this Report commencing on Page F-1.
Item 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.
------- -------------------------------------------------
None
Item 9A. Controls and Procedures.
-------- ------------------------
The Company carried out an evaluation under the supervision
and participation of management, including the Company's chief
executive and financial officer, of the effectiveness as of the
end of the period covered by this report of the design and
operation of the Company's disclosure controls and procedures
that are designed to ensure that information required to be
disclosed by the Company in this report is recorded, processed,
summarized and reported, within the time periods specified in
the SEC's rules and forms (an "Evaluation"). Disclosure controls
and procedures include, without limitation, controls and
procedures designed to ensure that information required to be
disclosed by the Company in this report is accumulated and
communicated to the Company's management, including its
principal executive and principal financial officers or persons
performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
Based upon that Evaluation, the Company's chief executive and
financial officer concluded that the Company's disclosure
controls and procedures are effective as of December 31, 2009.
The Evaluation did not identify the occurrence during the fourth
fiscal quarter of any change in the Company's internal control
over financial reporting that materially affected or is
reasonably likely to materially affect, the Company's internal
control over financial reporting.
39
The Company is a non-accelerated filer and is required to comply
with the internal control reporting and disclosure requirements
of Sections 404 and 302 of the Sarbanes-Oxley Act for fiscal
years ending on or after December 15, 2007.
Effective December 4, 2007 the Company adopted a web-based
software solution to automate and streamline its Sarbanes-Oxley
compliance program. The software product enables the Company to
document and assess the design of controls, track the testing of
their effectiveness and locate and remedy any deficiencies. The
software was utilized for the filing of this Report on Form
10-K.
Item 9A(T). Controls and Procedures.
---------- ------------------------
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting for the
Company in accordance with and as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable
assurance regarding the (i) effectiveness and efficiency of
operations, (ii) reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles, and
(iii) compliance with applicable laws and regulations. Our
internal controls framework is based on the criteria set forth
in the Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management's assessment herein of the effectiveness of the
Company's internal control over financial reporting is made as
of the year ended December 31, 2009. We believe that internal
control over financial reporting is effective. We have not
identified any material weaknesses or any risks or errors in
financial reporting.
40
This annual report does not include an attestation report of
the Company's registered public accounting firm regarding
internal control over financial reporting. Management's report
was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission.
Item 9B. Other Information.
------- ------------------
None
PART III
--------
Item 10. Directors, Executive Officers and Corporate
Governance.
-------- -------------------------------------------
The present Directors and Executive Officers of the Company are
as follows:
Name Age Position
---- --- --------
Frank J. Drohan 64 Chairman of the Board of
Directors, President, Chief
Executive & Financial Officer
Charles P. Kuczynski 56 Vice-President, Secretary and
Director
Salvatore J. Bucchere 66 Director
Kevin O'C. Green 61 Director
Louis J. Lombardo 64 Director
41
Frank J. Drohan has served as a Director, Chairman of the Board,
President and CEO of Omagine since 1991. Mr. Drohan is the
Managing Director and Chief Executive Officer of Omagine LLC.
Mr. Drohan was also Chairman of the Board, President and sole
shareholder of Rif International Corp., a privately held company
which had extensive overseas activities in the Middle East
between 1977 and 1986. Rif ultimately acquired the Ty-Breakers
business and was itself acquired by Omagine in 1997. Mr. Drohan
serves as a Director and the Chairman of JOL, and served in
those capacities for both Contact and Ty-Breakers until they
were merged with and into Omagine. He is also a Director and the
Chairman of The Renaissance Team, Inc. ("TRT") which is a
privately held company offering a wide variety of services
including: branding, marketing, management, political and
strategic visioning, and development management consulting
services.
Charles P. Kuczynski is Vice-President, Secretary and a Director
of Omagine, Inc. since 1996 and previously served as a Director
and Secretary of Omagine, Inc. from 1988 to 1993. Mr. Kuczynski
was also President of Ty-Breakers Corp and Vice-President of
Contact Sports until both Contact and Ty-Breakers were merged
into Omagine in March 2008. Mr. Kuczynski is a Director and
Secretary of JOL and also serves as the Secretary of TRT.
Salvatore J. Bucchere has served as an independent Director of
Omagine since October 2001. Mr. Bucchere holds a bachelors
degree in business administration in Accounting from St. Johns
University in New York. From 1965 to 1968 he was employed as a
management consultant with Arthur Young & Co. and Main LaFrentz
& Co. in New York. From 1968 to 1971, Mr. Bucchere taught
accounting and law at Bishop Ford High School in Brooklyn. From
1971 to 1977, he served as the Secretary and Vice President of
Centennial Industries, as a director of its Biddle Purchasing
Co. subsidiary and as president of its Jabro Automotive Co.
subsidiary. During this time, he was one of the founders, with
Mr. Drohan, of Biddle International Sales Co. From 1977 to 1979,
he was a Vice President and Director of Rif International Corp.
From 1979 to 1982 he was Executive Vice President of Custom
Carburetor Company and from 1982 until 2003, he was Chairman of
the Board and controlling shareholder of Columbia Products Co.,
formerly a manufacturer and distributor of rebuilt carburetors
and automotive parts in the eastern United States. Presently,
Mr. Bucchere is president of an energy conservation consulting
firm.
42
Kevin O'C. Green graduated from the College of St. Thomas, St.
Paul in Minnesota in 1970 with majors in Geology and Philosophy.
He graduated from the University of Minnesota Law School in 1975
and has practiced law in Minnesota as a trial lawyer since that
time. He has extensive experience in business litigation
including securities fraud and his law practice extends to
several different states. Mr. Green also has business interests
in Honduras where he is the owner of a mining company. Mr. Green
lives and practices law in Mankato, MN and he has been an
independent Omagine director since 2001.
Louis J. Lombardo has been an independent Omagine Director since
July 1, 2005. Mr. Lombardo retired after 35 years at American
Express where he was Executive Vice President - Travel Related
Services. In this capacity he led an organization of worldwide
operating centers employing over 14,000 people and managed a
$1.3 billion operating budget and a $600 million capital budget.
His responsibilities included controlling International Risk
Management & Global Fraud as well as customer service for both
Cardmembers and Merchants. Mr. Lombardo holds an MBA degree from
New York University. Presently, Mr. Lombardo runs his own
consulting company and owns and operates two privately held
businesses. He lives in New York City.
At December 31, 2009, the Board of Directors of Omagine, Inc.
consisted of two inside employee directors: Frank J. Drohan and
Charles P. Kuczynski, and three independent outside directors:
Salvatore J. Bucchere, Kevin O'C. Green and Louis J. Lombardo.
Directors are elected to serve for one-year terms or until their
successors are duly elected and qualified. Officers serve at the
discretion of the Board of Directors. Inside Directors receive
no fees for acting as such. Independent outside Directors
receive stock options and receive a minimal fee for attendance
at the Company's annual meeting and are entitled to
reimbursement of reasonable out-of-pocket expenses incurred in
attending meetings.
The Company has an audit committee, a compensation committee, a
nominating committee and a stock option committee each
designated by the Board of Directors. The members of the Audit
Committee are Mr. Bucchere, Mr. Green and Mr. Drohan. Mr.
Bucchere, who is an independent outside director, is the
Chairman of the Audit Committee and is an audit committee
43
financial expert. (See: "Item 10 - Salvatore J. Bucchere"). The
three independent outside members of the Board of Directors, Mr.
Lombardo, Mr. Bucchere and Mr. Green comprise the compensation
committee and the nominating committee. Mr. Lombardo is the
Chairman of the Compensation Committee. Mr. Bucchere is the
Chairman of the Nominating Committee. The Stock Option Committee
is chaired by Mr. Green, and both Mr. Bucchere and Mr. Drohan
are committee members.
The Company has adopted and its Board of Directors has approved
a Code of Ethics and Business Conduct ("Code"). The Code applies
to all Directors, officers and employees of the Company. The
Company believes that the policies and procedures contained
in the Code are consistent with the requirements for a Code of
Ethics as required by the SEC. A copy of the Code is on the
Company's website, www.omagine.com and was filed as an exhibit
on the Company's 2007 Form 10-KSB.
The Company's primary strategic consultant, Mr. Sam Hamdan
("Hamdan"), is President and Chief Strategist of the Michigan
based Global Leadership Team, a native of Lebanon, a citizen of
the U.S. and widely known across the Middle East for his work in
organizing and directing various high level conferences dealing
with leadership, strategic planning, entrepreneurship,
innovation and economic matters. Mr. Hamdan, who has two Masters
Degrees and is fluent in both Arabic and English, is the
visionary who created the "U.S.- Arab Economic Forum" held bi-
annually in the United States (see: www.usaeforum.org). The
Forum is held in cooperation with, among others, the U.S.
Departments of State and Commerce. In 2006 Mr. Hamdan and GLT
also organized and delivered the World Summit on Innovation and
Entrepreneurship in Muscat, Oman, and duplicated the event in
April 2008 in Dubai, United Arab Emirates (www.wsie.org).
Mr. Hamdan and his branding experts at GLT were the developers
of the Omagine brand for the Company. On March 19, 2007 Omagine
and Hamdan signed a consulting agreement (the "Hamdan
Agreement") (see: "Employees and Consultants"). The Hamdan
Agreement does not obligate Omagine to pay any cash compensation
to Hamdan for his continuing consulting services there under but
does grant Hamdan options to purchase up to 160,000 shares of
Omagine's Common Stock at a purchase price of $1.25 per share,
exercisable ratably over five (5) years from the date of the
Hamdan Agreement (the "Hamdan Options"). In addition the Hamdan
44
Agreement contemplates that, subsequent to the Financing
Agreement Date, Hamdan may become Omagine's President and Chief
Operating Officer and an Omagine employee. The Hamdan Options
are exercisable only during periods which (i) the Hamdan
Agreement remains in effect, or (ii) Mr. Hamdan is an employee
of Omagine. The Hamdan Agreement has been amended to expire on
December 31, 2010.
Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
As of the date hereof, the Company's officers and directors are
in compliance with the requirements to file ownership reports as
required by Section 16(a) of the Act.
45
Item 11. Executive Compensation
-------- ----------------------
The following table sets forth information relating to the
aggregate compensation received by the then current Executive
Officers of the Company for services in all capacities during
the Registrant's three fiscal years indicated for (i) the Chief
Executive and Financial Officer, and (ii) each then current
executive officer whose total cash compensation exceeded
$100,000.
SUMMARY COMPENSATION TABLE
(a) (b) (c) (d) (e) (f) (g)
Accrued Salary Option
Name and Principal Salary(1) Bonus Payable(1) Awards(2) Total
Position Year ($) ($) ($) ($) ($)
------------------- ---- --------- ----- ------------- ------ ----------
Frank J. Drohan
Chief Executive and
Financial Officer 2009 $ 0 0 $125,000 $ 47,170 $172,170
2008 $ 93,750 0 31,250 $ 47,170 $172,170
2007 $ 52,083 0 62,500 $ 0 $114,583
(1) Amounts included under Column (c) represent cash salary
payments and amounts included under Column (e) represent
unpaid salary which has been accrued on Registrant's books.
(2) Column (f) represents the dollar amount recognized as
compensation expense for financial statement reporting
purposes for the year indicated under ASC 718,
and not an amount paid to or realized by the named
Executive Officer. There can be no assurance that the
amounts determined by ASC 718 will ever be
realized. Assumptions used in the calculation of these
amounts are included in Note 1- STOCK-BASED COMPENSATION
- to the Company's audited financial statements for the
fiscal year ended December 31, 2009.
Management has concluded that the aggregate amount of personal
benefits does not exceed 10% of the total compensation reported
in column (g) of the foregoing table as to any person
specifically named in such table.
46
The following table shows the number of shares covered by
exercisable and un-exercisable options held by the Company's
Chief Executive Officer on December 31, 2009.
OMAGINE, INC.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
DECEMBER 31, 2009
(b) (c)
Number of Number of
Securities Securities
Underlying Underlying (d)
Unexercised Unexercised Option Exercise (e)
(a) Options (#) Options (#) Price Option Expiration
Name Exercisable Un-exercisable ($) Date
---- ---------- ------------- ------------- -----------------
Frank J. Drohan 100,000 0 $1.25 August 31, 2011
20,000 80,000 $2.60 September 23, 2018
There were 12,000 shares of the Company's Common Stock acquired
during 2008 upon the exercise of options.
162,000 stock options were granted in 2008 to the Company's
Chief Executive Officer and to other Officers and Directors.
There can be no assurance that the Grant Date Fair Value of
Stock Option Awards will ever be realized.
47
The following table summarizes information as of the close of
business on December 31, 2009 about (i) the options under the
Omagine, Inc. 2003 Stock Option Plan (the "Plan") which was
renamed by approval by the Company's stockholders and (ii) the
adjustment of stock options for the Stock Splits authorized by
the Company's stockholders and effected as of December 30, 2009.
Equity Compensation Plan Information
------------------------------------
Number of securities
remaining available
for future issuance
Number of securities Weighted-average under equity
to be issued upon exercise price of compensation plans
exercise of outstanding (excluding securities
outstanding options options in column (a)
(a) (b) (c)
--------------- ----------------- --------------------
Omagine Plan 530,000 $2.01 1,970,000
-----------------------------------------------------------------------------------------
Non-Omagine Plan 0 $0.00 0
-----------------------------------------------------------------------------------------
TOTAL 530,000 $2.01 1,970,000
-----------------------------------------------------------------------------------------
160,000 Stock options previously not included in the Omagine
Plan have now been included in the Omagine Plan and no stock
options currently issued exist outside of the Omagine Plan.
48
Our current stock option plan (the "Plan") is explained
below under the heading "Stock Options" and in Note 5 to the
accompanying consolidated financial statements.
The following chart summarizes the annual compensation for the
Company's non-employee independent directors during 2009.
Director Compensation
---------------------
(b) (c) (e)
Fees Stock (d) All Other (f)
(a) Earned Awards Option Awards Compensation Total
Name ($) ($) ($) (1) ($) ($)
------------------------ ------ ------- ------------- ------------ -----
Salvatore Bucchere $3,500 0 6,865 0 10,365
Kevin Green $3,500 0 6,865 0 10,365
Louis Lombardo $3,500 0 5,108 0 8,608
49
(1) Column (d) represents the dollar amount recognized as
compensation expense for financial statement reporting
purposes for the year indicated under ASC 718,
and not an amount paid to or realized by the named
director. There can be no assurance that the amounts
determined by ASC 718 will ever be realized.
Assumptions used in the calculation of these amounts are
included in Note 1 - STOCK-BASED COMPENSATION - to the
Company's audited financial statements for the fiscal year
ended December 31, 2009. Directors who are not Company
employees are compensated for their service as a director
as shown in the chart below:
Schedule of Independent Director Fees
December 31, 2009
Compensation Item Amount ($)
-------------------------------------------- ----------
Annual Retainer $ 0
Attendance at Annual Meeting 500
Per Board Meeting Fee (attendance in person) 500
Per Board Meeting Fee (attendance by teleconference) 250
Per Committee Meeting Fee (in person or by teleconference) 0
Appointment Fee Upon Election to Board of Directors 0
Non-qualified stock options (1)(2)
(1) On the date of appointment to the Board, new non-employee
outside Directors are entitled to a one-time grant of 6,000
non-qualified stock options at the closing price on the date
of grant, vested ratably over three years.
(2) For non-employee outside Board members that have served on
the Board for at least 3 years, 2,000 options (or such
other number of options as determined by the Board in its
discretion) will be granted on the first business day of
each fiscal year, at the closing price on the date of grant,
vesting ratably over three years (or such other vesting
period as determined by the Board in its discretion).
50
Stock Options Granted to Independent Directors
----------------------------------------------
On the date of appointment to the Board, new non-employee
outside Directors are entitled to a one-time grant of 6,000
non-qualified stock options (or such other number of options
as determined by the Board in its discretion). The price of the
Common Stock underlying such options is the closing bid price on
the date of grant and the options vest over three years provided
the Board member continues to hold office. On January 1, 2004,
the Company awarded options to purchase 6,000 shares of its
Common Stock to each of its then two outside Directors - Mr.
Green and Mr. Bucchere, at an exercise price of $0.85 per share.
All 12,000 of such options were exercised in December 2008 by
Messrs. Bucchere and Green. On July 1, 2005, the Company awarded
options to purchase 6,000 shares of its Common Stock to Mr.
Louis J. Lombardo, an outside Director, at an exercise price of
$5.00 per share. The options expire five years after the date of
the grant.
Non-employee independent Board members that have served on the
Board for at least 3 years will be granted 2,000 options (or
such other number of options as determined by the Board of
Directors in its discretion) at an exercise price equal to the
closing bid price on the date of grant and vesting immediately
upon grant. The date of grant shall be the first business day of
each fiscal year next following completion of such three years
of service. On October 30, 2007, the Company awarded options to
purchase 6,000 shares of its Common Stock to each of Messrs.
Bucchere and Green at an exercise price $4.50 per share. The
options expire five years after the date of grant. 2,000 of
such options vested on October 30, 2007, and an additional
2,000 of such options vested each on January 1, 2008 and 2009
to each of Messrs. Bucchere and Green and all such options are
fully vested.
On January 1, 2008, 6,000 options were granted to Mr. Lombardo
at an exercise price of $4.00. 2,000 of such options vested on
the grant date. An additional 2,000 options vested on each of
January 1, 2009 and January 1, 2010, and all such options are
fully vested.
Directors of the Company who are employees of the Company do
not receive additional compensation for their services as
51
Directors.
Report on the Repricing of Any Options or Stock Appreciation
Rights
------------------------------------------------------------
There was no repricing of any options during fiscal year 2009.
The Company has never issued any stock appreciation rights.
Employment Agreements and Consulting Agreements
-----------------------------------------------
In September 2001, Omagine entered into an employment agreement
(the "Drohan Agreement") with Mr. Frank J. Drohan, Chief
Executive Officer of the Company. Pursuant to the Drohan
Agreement, Omagine is obligated through December 31, 2010 to pay
its President and Chief Executive Officer, Mr. Frank J. Drohan,
an annual base salary of $125,000, plus an additional amount
based on a combination of net sales and earnings before taxes.
Mr. Drohan's employment agreement provides for an option to
purchase 20,000 shares of Common Stock at $1.25 per share
during each of the first five years of the employment term, and
payment by the Company of certain life and disability insurance
premiums on Mr. Drohan's behalf. By mutual agreement between the
Company and Mr. Drohan, the Drohan Agreement was modified and
the Company has from time to time suspended salary payments to
Mr. Drohan and Mr. Drohan continued to provide services to the
Company pursuant to the Drohan Agreement and the Company has
accrued Mr. Drohan's unpaid salary. No salary payments were made
to Mr. Drohan in 2009. The Company, has agreed to pay such
unpaid and accrued salary to Mr. Drohan without interest when,
and if, the Company has the financial resources to do so. On
September 23, 2008 the Board of Directors granted 100,000 non-
qualified stock options to Mr. Drohan which will vest ratably
over five years from the grant date. 20,000 of such options
shall vest September 24, 2009 and each September 24 for four
years thereafter an additional 20,000 options shall vest.
Expiration of all such options is ten years from the date of
grant.
52
Pursuant to a written employment agreement effective September
1, 2001 (the "Kuczynski Agreement"), Omagine was obligated
through December 31, 2009 to pay its Vice-President & Secretary,
Mr. Kuczynski, an annual base salary of $75,000, plus an
additional bonus based on a combination of net sales and
earnings before taxes. The Kuczynski Agreement provided for an
option to purchase 10,000 shares of Common Stock at $1.25 per
share during each of the first five years of the employment term
(the "Kuczynski Options"). By mutual agreement between the
Company and Mr. Kuczynski, effective October 1, 2004, the
Kuczynski Agreement was canceled. Effective August 1, 2007 the
Company re-employed Mr. Kuczynski at an annual salary of $85,000
and the Company has from time to time suspended salary payments
to Mr. Kuczynski and Mr. Kuczynski continued to provide services
to the Company and the Company has accrued Mr. Kuczynski's
unpaid salary. The Company has agreed to keep the Kuczynski
Options in effect and to pay such unpaid and accrued salary to
Mr. Kuczynski without interest when, and if, the Company has the
financial resources to do so.
Provided the Company is successful in signing the Development
Agreement with the Government of Oman, the Company will enter
into a new employment agreement with Mr. Kuczynski. On September
23, 2008 the Board of Directors granted 50,000 non-qualified
stock options to Mr. Kuczynski which will vest ratably over five
years from the grant date. 10,000 of such options shall vest
September 24, 2009 and each September 24 for four years
thereafter an additional 10,000 options shall vest. Expiration
of all such options is ten years from the date of grant.
CONSULTING AGREEMENTS
---------------------
The Hamdan Agreement:
Effective March 19, 2007 Omagine entered into a consulting
agreement with Mr. Sam Hamdan (See: "Employees and
Consultants"). Mr. Hamdan and Omagine have entered into an
amended agreement ("Amended Agreement") changing the expiration
date to December 31, 2010. All other terms and conditions of the
Hamdan Agreement remain in full force and effect, whereby (i)
53
Mr. Hamdan will provide ongoing consulting services to the
Company, and (ii) under certain circumstances and conditions
precedent, Mr. Hamdan may become the Company's President and
Chief Operating Officer. Pursuant to the Hamdan Agreement, the
Company issued Hamdan options to purchase up to 160,000 shares
of Omagine's Common Stock at $1.25 per share (the "Hamdan
Option"), exercisable ratably at 32,000 shares per year during
the first 5 years subsequent to the Hamdan Agreement. The Hamdan
Option is exercisable only if (i) the Hamdan Agreement is in
effect, or (ii) Hamdan is an Omagine employee.
Employment Benefits:
The Company provides and pays for group medical insurance for
all employees choosing to participate in its plan and the
Company sponsors a 401(k) retirement plan for all eligible
employees.
Stock Options:
The Company instituted the "Alfa International Corp. 2003 Stock
Option Plan" ("Alfa Plan") as approved by the Board of Directors
in March 2004 and ratified by the Company's stockholders on
September 1, 2004. The Alfa Plan was amended by (a) re-naming
the Alfa Plan to the "2003 Omagine Inc. Stock Option Plan"
("Plan"), and (b) following the Forward Split, establishing two
million five hundred thousand (2,500,000) as the number of
shares of Common Stock reserved for issuance under the Plan
subsequent to the Forward Split as ratified by stockholders on
December 29, 2009. The Plan, as amended, is attached hereto as
Exhibit 99.4.
The Plan is designed to attract, retain and motivate employees,
directors, consultants and other professional advisors of the
Company and its subsidiaries (collectively, the "Recipients") by
giving such Recipients the opportunity to acquire stock
ownership in the Company through the granting of incentive stock
options and non-qualified stock options to purchase the
Company's Common Stock. According to the Plan, stock options
shall be granted at an exercise price equal to at least the fair
market value of a share of Common Stock on the date of grant.
Exercise prices for incentive options for holders of more than
10% of the outstanding Common Stock must be at least 110% of the
54
fair market value on the date of grant. Incentive stock options
are exercisable in 20% increments commencing one year after the
date of grant and generally expire five years after the date of
grant. The Plan expires on February 28, 2014.
On March 19, 2007, in accordance with the Hamdan Agreement,
Omagine issued Hamdan options to purchase up to 160,000 shares
of Omagine's Common Stock at $1.25 per share exercisable ratably
at 32,000 shares per year during the first five years subsequent
to the Hamdan Agreement. These options are exercisable only if
(i) the Hamdan Agreement is effect, or (ii) Hamdan is an Omagine
employee. 128,000 of such options are currently exercisable; the
remaining 32,000 Hamdan Options are scheduled to vest on April
1, 2011 provided the Hamdan Agreement is in effect or Mr. Hamdan
is an Omagine employee on such date.
Pursuant to an agreement dated August 27, 2007, Omagine (i)
issued Agora International Enterprises Corp. ("Agora") 40,000
shares of Common Stock (the "Agoracom Shares") as compensation
for services rendered through December 31, 2006, and (ii)
continued in effect Agora's option for 40,000 shares of Common
Stock at a purchase price of $4.10 per share (the "Agora
Options"). Agora acknowledged and agreed that both the Agoracom
Shares and the Common Stock issuable upon exercise of the Agora
Options are, or will be, "restricted securities" within the
meaning of the Securities Act of 1933, as amended. The Agora
Options are fully vested as of the date hereof and may be
exercised in whole or in part at any time before December 31,
2011 (the "Expiry Date"). Any unexercised Agora Options will
terminate on the Expiry Date.
In July 2005, the Company issued 6,000 non-qualified stock
options to Mr. Louis J. Lombardo, an independent director. These
options are exercisable at a price of $5.00 per share and expire
five years after the date of the grant. As of the date of this
Report, all 6,000 of such options are vested.
In January 2008, the Company issued an additional 6,000 non-
qualified stock options to Mr. Lombardo. These options are
exercisable at a price of $4.00 per share and expire five years
after the date of grant. As of the date of this Report, all
6,000 of such options are vested.
55
In November 2004, the Company issued 6,000 non-qualified stock
options to each of Mr. Salvatore J. Bucchere and Mr. Kevin O'C.
Green, each of whom are independent directors. These options
were exercisable at a price of $0.85 per share and all 12,000 of
such options were exercised in December 2008.
In October 2007, the Company issued an additional 6,000 non-
qualified stock options to each of Mr. Bucchere and Mr. Green.
These options are exercisable at a price of $4.50 per share and
expire five years after the date of grant. As of the date of
this Report, all 12,000 of such options are vested.
In September 2001 in connection with their employment
agreements, the Company issued non-qualified stock options to
Messrs. Drohan and Kuczynski to purchase a total of 150,000
shares of the Company's Common Stock. These options are
exercisable at a price of $1.25 per share, expire ten years
after the date of grant and the 100,000 of these options held by
Mr. Drohan and the 50,000 of these options held by Mr.
Kuczynski are currently exercisable.
In September 2008, the Board of Directors issued additional non-
qualified stock options to Messrs. Drohan and Kuczynski to
purchase a total of 150,000 shares of the Company's Common
Stock. These options are exercisable at a price of $2.60 per
share, vest ratably over five years and expire ten years after
the date of grant. 20,000 of the 100,000 of these options held
by Mr. Drohan vested on September 24, 2009, and thereafter
20,000 of these options shall vest on September 24, 2010, 2011,
2012 and 2013. 10,000 of the 50,000 of these options held by
Mr. Kuczynski vested on September 24, 2009, and thereafter
10,000 of these options shall vest on September 24, 2010, 2011,
2012 and 2013.
As of December 31, 2009, there were 530,000 stock options
outstanding under the Omagine Plan. As of December 31, 2008,
160,000 of all outstanding stock options were issued outside of
the Plan. As of December 31, 2009, these 160,000 stock options
have been moved into the Plan and all 530,000 stock options now
outstanding are issued under the Plan.
56
Following is a listing of all non-qualified stock options issued
and outstanding as of December 31, 2009: (These options have
been adjusted for the Stock Splits effected December 30, 2009).
Name No. of options Exercise Price Date of
Grant
--------------- -------------- ------------ -----------
Frank Drohan 100,000 $1.25 9/l/2001
Charles Kuczynski 50,000 $1.25 9/l/2001
Louis Lombardo 6,000 $5.00 7/1/2005
Agora 40,000 $4.10 12/16/2005
Sam Hamdan 160,000 $1.25 3/31/2007
Salvatore Bucchere 6,000 $4.50 10/30/2007
Kevin Green 6,000 $4.50 10/30/2007
Louis Lombardo 6,000 $4.00 1/01/2008
Frank Drohan 100,000 $2.60 9/23/2008
Charles Kuczynski 50,000 $2.60 9/23/2008
William Hanley 6,000 $2.60 9/23/2008
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters.
-------- ------------------------------------------------
The following table sets forth as of December 31, 2009: (i) the
number of shares of the Company's Common Stock beneficially
owned by (a) owners of more than five percent of the Company's
outstanding Common Stock who are known to the Company, and (b)
the Directors of the Company, individually, and the officers and
Directors of the Company as a group, and (ii) the percentage of
ownership of the outstanding Common Stock represented by such
shares.
57
Beneficial
Name and Address Ownership (8) Percent
---------------- -------------- -------
Frank J. Drohan (1)(3) 1,222,895 11.5%
Charles P. Kuczynski (l)(4) 196,223 1.8%
Salvatore S. Bucchere (1)(6) 57,989 0.5%
Louis J. Lombardo (1)(5) 56,260 0.5%
Kevin O. Green (1)(6) 21,953 0.2%
Muftah Benomran (2) 640,886 6.0%
Mohammed K. Al-Sada (2) 909,818 8.5%
Ali Mahmoud Hoteit (7) 552,860 5.2%
All officers and Directors
As a Group of 5 Persons 1,555,320 14.6%
----------------------------------------------------------------
(1) The address for each of these individuals is c/o the
Company and each is a director of Omagine. Messrs. Drohan and
Kuczynski are officers of Omagine.
(2) The address for each of these individuals is c/o the
Company.
(3) Does not include Mr. Drohan's (i) 100,000 stock options
currently exercisable at $1.25 per share, or (ii) 20,000
currently exercisable and 80,000 un-exercisable stock options
at $2.60 per share.
(4) Does not include Mr. Kuczynski's (i) 50,000 stock options
currently exercisable at $1.25 per share, or (ii) 10,000
currently exercisable and 40,000 un-exercisable stock options
at $2.60 per share.
58
(5) Does not include Mr. Lombardo's (i) 6,000 stock options
currently exercisable at $5.00 per share, or (ii) 6,000 stock
options currently exercisable as of the date of this Report at
$4.00 per share.
(6) Does not include the 12,000 stock options currently
exercisable at $4.50 per share (6,000 held by Mr. Bucchere and
6,000 held by Mr. Green).
(7) Does not include Mr. Hamdan's 160,000 stock options at
$1.25 per share, 128,000 of which are currently exercisable and
32,000 which are currently un-exercisable as of the date of
this Report. On April 6, 2009, Mr. Hamdan transferred and sold
all 552,860 shares of the Company's common stock owned by him to
his brother-in-law, Mr. Ali Mahmoud Hoteit. Mr. Hoteit intends
to contribute such 552,860 shares to a company ("Newco")
presently being formed by Mr. Hamdan and Mr. Hoteit. Newco will
be majority owned by Mr. Hamdan and therefore Mr. Hamdan
disavows a yet to be determined minority beneficial ownership of
such 552,860 shares but does not disavow voting control of such
552,860 shares.
(8) None of these shares are subject to rights to acquire
beneficial ownership, as specified in Rule 13d-3 (d) (1) under
the Securities Exchange Act of 1934, as amended, and the
beneficial owner has sole voting and investment power, subject
to community property laws where applicable.
Changes in Control Arrangements
-------------------------------
No change in control arrangements existed at December 31, 2009.
Item 13. Certain Relationships and Related Transactions,
and Director Independence.
-------- -----------------------------------------------
The Renaissance Team, Inc.
--------------------------
Mr. Sam Hamdan, who has a consulting agreement with Omagine
and who, under certain circumstances, may become Omagine's
59
president (See: "EMPLOYEES and CONSULTANTS" and "CONSULTING
AGREEMENTS") is also the president of The Renaissance Team,
Inc., a privately held company ("TRT"). Frank J. Drohan
("Drohan"), Omagine's President and Chief Executive Officer, is
the Chairman of TRT and Charles P. Kuczynski, Omagine's Vice
President and Secretary, is the Secretary of TRT. TRT was
organized in December 2006 by Mr. Hamdan and Mr. Drohan and its
business is not in competition with that of the Company. Mr.
Drohan's employment agreement with the Company permits him to be
involved in any other business enterprise that does not compete
with the Company. Each of Mr. Hamdan and Mr. Drohan own 50% of
TRT's equity and TRT intends to acquire the business and
certain assets of The Global Leadership Team, Inc. ("GLT"). Mr.
Hamdan is currently the president and sole shareholder of GLT
(www.gltweb.com). Prior to the organization of TRT, Mr. Hamdan
and GLT had performed significant services, including branding,
strategic consulting, strategic visioning, marketing, financial
and project finance planning, public relations, event management
and management consulting services for JOL with respect to the
proposed Qutopia Project in Qatar and the Omagine Project in
Oman. On March 19, 2007, concurrent with the execution of the
Hamdan Agreement, Omagine entered into another agreement with
GLT and Hamdan (the "Subscription Agreement") whereby pursuant
to the Subscription Agreement, the unpaid account payable of
$245,449 due to GLT from JOL for services rendered between 2003
and 2006 was extinguished and exchanged for 490,880 shares of
Omagine Common Stock. There have been no transactions between
TRT and the Company to date, but based upon JOL's use of GLT's
services in the past - and assuming TRT's ultimate acquisition
of GLT's business - the Company anticipates that such
transactions will occur in the future. Hamdan, Drohan and TRT
have agreed with respect to any such possible future
transaction(s) between TRT and the Company (a "Related Party
Transaction") that any such Related Party Transaction will be
structured such that it provides substantially better terms and
conditions to the Company than would otherwise be available to
the Company if the Company were to negotiate and conclude such
Related Party Transaction on an "arms-length" basis with a
company with which Mr. Hamdan and/or Mr. Drohan were not
associated. Furthermore, any such Related Party Transaction will
be in compliance with the Company's Code of Ethics.
60
Director Independence
---------------------
Three of the Company's five directors are independent.
Related Party Payables
----------------------
At December 31, 2009, the Company has included $520,306 of
related party payables in its balance sheet. This amount
consists of notes and accrued interest payable, unpaid salary
and unreimbursed expenses due to Officers of the Company.
Item 14. Principal Accountant Fees and Services.
------- ---------------------------------------
Audit Fees:
-----------
The Company was billed by its independent registered public
accounting firm $27,500 in 2008 and $27,500 in 2009 for all
auditing and review services performed by such firm for the
Company in connection with the Company's regulatory filings
during such fiscal years.
Audit Related Fees:
-------------------
None
Tax Fees:
---------
None
All Other Fees:
---------------
None
On behalf of the Company and in his capacity as Chairman of the
Audit Committee, Mr. Salvatore J. Bucchere hired the Company's
registered public accounting firm to perform the audit of the
Company's financial statements.
61
PART IV
Item 15. Exhibits, Financial Statement Schedules.
-------- ----------------------------------------
Index to Financial Statements Required by Article 8 of
Regulation S-X:
F-1 Report of Independent Registered Public Accounting Firm;
F-2 Consolidated Balance Sheets as of December 31, 2009 and
December 31, 2008;
F-3 Consolidated Statements of Operations for years ended
December 31, 2009 and December 31, 2008;
F-4 Consolidated Statements of Changes in Stockholders'
Equity;
F-5 Consolidated Statements of Cash Flows for the years ended
December 31, 2009 and December 31, 2008;
F-6 Notes to the Financial Statements.
Reports on Form 8-K
None.
Exhibit
Numbers Description
------- -------------
3(i) Certificate of Incorporation of the
Company (1)
3(ii) By-laws of the Company (1)
3.1 Amendments to the Certificate of
Incorporation of the Company (1)(2)(3)
3.12 Amendment to the Certificate of
Incorporation of the Company dated
December 30, 2009 *
3.2 Certificate of Ownership and Merger (3)
62
10.1 The CCIC and CCC Agreement (3)
10.2 The Standby Equity Distribution Agreement (4)
10.3 The Memorandum of Understanding by and between
Omagine, Inc., Journey of Light, Inc.,
Consolidated Contractors International
Company, S.A. and Omani Union Real estate
Development Company LLC dated June 8, 2008 (5)
10.4 The Memorandum of Understanding by and between
Omagine, Inc., Journey of Light, Inc.,
Consolidated Contractors International
Company, S.A. and Mohammed Nasser dated May
26, 2008 (5)
10.5 The Memorandum of Understanding by and between
Omagine, Inc., Journey of Light,
Inc., Consolidated Contractors International
Company, S.A. and Royal Court Affairs dated
June 26, 2008 (5)
10.6 The Memorandum of Understanding by and between
Journey of Light, Inc. and Bank Muscat, SAOG.
dated November 21, 2007 (5)
10.7 Lease agreement expiring February 28, 2013
between Contact Sports, Inc. and the Empire
State Building LLC
10.8 Employment Agreement between Omagine Inc.
(formerly Alfa International Corp.) and Frank
J. Drohan dated as of September 1, 2001 (7)
10.9 Employment Agreement between Omagine Inc.
(formerly Alfa International Corp.) and
Charles Kuczynski dated as of September 1,
2001 (7)
10.10 Exhibit J to the proposed Shareholders'
Agreement among the shareholders of Omagine
LLC
14 The Code of Ethics (3)
63
21 Subsidiaries of the registrant *
31.1 Sarbanes-Oxley 302 certification *
32.1 Sarbanes-Oxley 1350 certification *
99.1 The Omagine Inc. 401(k) Adoption Agreement (6)
99.2 The Approval Letter dated April 30, 2008
(English Translation) (5)
99.3 The Acceptance Letter dated May 31, 2008 (5)
99.4 Amended Omagine Inc. 2003 Stock Option Plan *
* Filed herewith
(1) Previously filed with the Securities and Exchange
Commission on November 18, 2005 as an exhibit to the Company's
quarterly report on Form 10-QSB for the period ended September
30, 2005 and incorporated herein by reference thereto.
(2) Previously filed with the Securities and Exchange
Commission on June 25, 2007 as an exhibit to the Company's
current Report on Form 8-K and incorporated herein by reference
thereto.
(3) Previously filed with the Securities and Exchange
Commission on April 14, 2008 as an exhibit to the Company's
Report on Form 10-KSB for the fiscal year ended December 31,
2007 and incorporated herein by reference thereto.
(4) Previously filed with the Securities and Exchange
Commission on December 31, 2008 as an exhibit to the Company's
current Report on Form 8-K and incorporated herein by reference
thereto.
(5) Previously filed as exhibits to Alfa's Registration
Statement on Form S-1 (File No. 333-156928) filed with the
Securities and Exchange Commission and incorporated herein by
reference thereto.
(6) Previously filed with the Securities and Exchange
64
Commission on February 25, 2009 as an exhibit to the Company's
Report on Form 10-KSB for the fiscal year ended December 31,
2008 and incorporated herein by reference thereto.
(7) Previously filed with the Securities and Exchange
Commission on April 15, 2002 as an exhibit to the Company's
Report on Form 10-KSB for the fiscal year ended December 31,
2001 and incorporated herein by reference thereto.
SIGNATURES
In accordance with Sections 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 on this 14th day of April 2010.
Omagine, Inc.
By: /s/ Frank J. Drohan
FRANK J. DROHAN, Chairman
of the Board of Directors,
President and Chief
Executive and Financial Officer
(Principal Executive Officer and
Principal Financial Officer)
65
Pursuant to the requirements of the Securities Exchange Act of
1934, this Annual Report has been signed below by the following
persons on April 14, 2010 on behalf of the Registrant and in the
capacity and on the date indicated.
By: /s/ Frank J. Drohan
FRANK J. DROHAN, Chairman
of the Board of Directors,
President and Chief
Executive and Financial Officer
(Principal Executive Officer and
Principal Financial Officer)
By: /s/ William Hanley
WILLIAM HANLEY, Controller and
Principal Accounting Officer
By: /s/ Charles P. Kuczynski
CHARLES P. KUCZYNSKI,
Vice President, Secretary and
Director
By: /s/ Salvatore J. Bucchere
SALVATORE J. BUCCHERE,
Director
By: /s/ Kevin O'C. Green
KEVIN O'C. GREEN,
Director
By: /s/ Louis J. Lombardo
LOUIS J. LOMBARDO,
Director
66
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Omagine, Inc.
{formerly Alfa International Holdings Corp.}
I have audited the accompanying consolidated balance sheets of
Omagine, Inc. and subsidiaries (the "Company") as of December
31, 2009 and 2008 and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for
the years then ended. These financial statements are the
responsibility of the Company's management. My responsibility is
to express an opinion on these financial statements based on my
audits.
I conducted my audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. I believe that my audits provide a
reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Omagine, Inc. and subsidiaries as of December 31,
2009 and 2008 and the results of their operations and cash flows
for the years then ended, in conformity with accounting
principles generally accepted in the United States.
The accompanying consolidated financial statements referred to
above have been prepared assuming that the Company will continue
as a going concern. As discussed in Note 2 to the consolidated
financial statements, the Company's present financial situation
raises substantial doubt about its ability to continue as a
going concern. Management's plans in regard to this matter are
also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of
this uncertainty.
/s/ Michael T. Studer CPA P.C.
April 14, 2010 ----------------------------
Freeport, New York F-1
OMAGINE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 2009 2008
-------- -------
CURRENT ASSETS:
Cash $155,821 $ 49,511
Prepaid expenses and other current assets - 40,774
-------- --------
Total Current Assets 155,821 90,285
-------- --------
PROPERTY AND EQUIPMENT:
Office and computer equipment 131,412 129,941
General plant 17,800 17,800
Furniture and fixtures 15,951 15,951
Leasehold improvements 866 866
-------- --------
Total 166,029 164,558
Less: Accumulated depreciation and amortization (156,968) (150,719)
-------- --------
Property and Equipment 9,061 13,839
-------- --------
OTHER ASSETS:
Other assets 13,606 13,749
-------- --------
TOTAL ASSETS: $ 178,488 $117,873
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Convertible notes payable and accrued
interest $ 313,464 $238,728
Accounts payable 455,724 356,368
Accrued officer payroll 327,000 72,500
Due officers and directors 10,153 26,335
Accrued expenses and other current liabilities 27,731 6,345
-------- --------
Total Current Liabilities 1,134,072 700,276
LONG-TERM LIABILITIES - -
-------- --------
TOTAL LIABILITIES 1,134,072 700,276
-------- --------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock:
$0.001 par value
Authorized: 850,000 shares,
Issued and outstanding: - 0 shares - -
Common stock:
$0.001 par value
Authorized: 50,000,000 shares and
75,000,000 shares, respectively
Issued and outstanding
10,660,904 and 9,277,527
shares respectively 10,661 9,278
Capital in excess of par value 18,030,176 17,290,331
Retained earnings (deficit) (18,996,421) (17,882,012)
----------- -----------
Total Stockholders' Equity (Deficit) (955,584) (582,403)
----------- -----------
Total Liabilities and Stockholders'
Equity $ 178,488 $ 117,873
=========== ===========
See accompanying notes to consolidated financial statements.
F-2
OMAGINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
------------------------
2009 2008
----------- -----------
REVENUES:
Net sales $ - $ -
----------- -----------
Total revenues $ - $ -
----------- ---------- -
COSTS AND EXPENSES:
Cost of sales - -
Selling, general and administrative 1,083,692 1,308,003
---------- -----------
Total Costs and Expenses 1,083,692 1,308,003
---------- -----------
OPERATING LOSS (1,083,692) (1,308,003)
Interest income 124 8,142
Interest expense (30,841) (7,769)
---------- -----------
NET LOSS $(1,114,409) $ (1,307,630)
============ ============
BASIC AND DILUTED LOSS PER SHARE $ (.12) $ (.14)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
BASIC AND DILUTED 9,686,101 9,116,901
=========== ============
See accompanying notes to consolidated financial statements.
F-3
OMAGINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Capital in Retained
Par Excess of Earnings
Shares Value Par Value Deficit)
----------------------------------------------
Balances at December 31,2007 9,108,488 9,109 $16,784,670 $(16,574,382)
Cancellation of Common Stock ( 8,712) (9) 9 -
Stock option expense - - 60,629 -
Issuance of Common Stock for
consulting services 2,230 2 7,499 -
Contribution of Common Stock
to 401K Plan 20,192 20 52,480 -
Issuance of Common Stock for
Cash 109,500 110 235,090 -
Issuance of Common Stock for
commitment fees 45,830 46 149,954 -
Net loss - - - (1,307,630)
----------- ------- ---------- ------------
Balances at December 31,2008 9,277,527 $ 9,278 $17,290,331 $(17,882,012)
Contribution of Common Stock
to 401K Plan 72,500 72 72,428 -
Stock Option Expense - - 112,328 -
Issuance of Common Stock
for cash 2,000 2 1,398 -
Sale of Stock Under Stock
Equity Distribution
Agreement 1,308,877 1,309 553,691 -
Net Loss - - - (1,114,409)
---------- ------- ----------- ----------
Balances at December 31,2009 10,660,904 $10,661 $18,030,176 $(18,996,421)
========== ======= =========== ============
See accompanying notes to consolidated financial statements.
F-4
OMAGINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------
2009 2008
-----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,114,409) $(1,307,630)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Depreciation and amortization 6,249 10,731
Stock based compensation related to stock options 112,328 60,629
Issuance of common stock for Consulting services - 7,501
Issuance of Common Stock for commitment fees - 150,000
Issuance of Common Stock for 401K contribution 72,500 52,500
Changes in operating assets and liabilities:
Prepaid expenses and other current assets and other assets 40,917 (30,601)
Convertible notes payable - 232,015
Accrued interest on convertible notes payable 24,736 6,713
Accounts payable 99,356 57,738
Accrued expenses and other current liabilities 21,386 (30,322)
Accrued officers payroll 254,500 (107,536)
---------- ----------
Net cash flows used by operating activities ( 482,437) ( 898,262)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (1,471) -
---------- -----------
Net cash flows used by investing activities (1,471) -
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans from officers and directors (16,182) ( 572)
Proceeds from issuance of common stock 556,400 225,000
Proceeds from exercise of common stock options
and warrants - 10,200
Issuance of convertible notes payable 50,000 -
---------- ----------
Net cash flows from financing activities 590,218 234,628
---------- ----------
NET CHANGE IN CASH 106,310 (663,634)
CASH BEGINNING OF YEAR 49,511 713,145
----------- ----------
CASH END OF YEAR $ 155,821 $ 49,511
=========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ - $ -
=========== ==========
Interest paid $ - $ 1,056
=========== ==========
NON-CASH FINANCING ACTIVITIES:
Issuance of convertible notes payable in satisfaction
Of accrued officer payroll $ - $ 182,015
See accompanying notes to consolidated financial statements.
F-5
OMAGINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
Principles of Consolidation - The consolidated financial
statements include the accounts of Omagine, Inc. ("Omagine")
(formerly Alfa International Holdings Corp.) and its wholly-
owned subsidiaries, Journey of Light, Inc. ("JOL"),Omagine, LLC,
Contact Sports, Inc. ("Contact") and Ty-Breakers Corp. ("Ty-
Breakers"), collectively referred to as the "Company". On March
26, 2008 Contact and Ty-Breakers were merged with and into
Omagine. On November 23, 2009, Omagine LLC ("LLC"), a foreign
corporation, was organized in the Sultanate of Oman. LLC is
presently owned 95% by Omagine and 5% by JOL. LLC's ownership
is expected to be reduced to a majority 50.5% ownership by
Omagine by the sale of newly issued common stock of LLC to four
minority investors purchasing an aggregate of 49.5% of LLC for a
total of $109.3 million. All inter-company transactions have
been eliminated in consolidation.
Nature of the Business - Omagine is a holding company which
operates through its subsidiaries, JOL and LLC. Both JOL and LLC
are in the real estate development business. LLC is the local
real estate development company established to do business in
Oman.
Financial Instruments - Financial instruments include cash,
convertible notes payable and accrued interest, accounts
payable, accrued officer payroll, due officers and directors,
and accrued expenses and other current liabilities. The amounts
reported for financial instruments are considered to be
reasonable approximations of their fair values, based on market
information available to management.
Estimates and Uncertainties - The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
F-6
reported amounts of revenues and expenses during the reporting
period. Actual results, as determined at a later date, could
differ from those estimates.
Revenue Recognition - The Company follows the guidelines of
SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" (SAB101). Revenue from the sale of
products at Contact and Ty-Breakers was recognized upon shipment
when goods were shipped to customers from the Company's outside
warehouse. Products produced and sold by Contact and Ty-Breakers
carried an implied warranty of merchantability and fitness for
purpose only, and, except in the case of manufacturing defects,
customers did not have the right to return products sold.
Products sold on a "guaranteed sale" or "consignment" basis were
maintained on Contact's records as inventory until they were
paid for by the customer at which time the revenue was
recognized. In the event that a subsidiary of the Company signs
a development agreement with the Government of Oman, such
subsidiary will recognize revenue ratably over the development
period, measured by methods appropriate to the services or
products provided.
Property and Equipment - Property and equipment are stated
at cost. Depreciation is computed using the straight-line method
over the estimated useful lives of the respective assets.
Income Taxes - The Company is subject to income taxes at
both the federal and state level. Separate state income tax
returns are filed with each state in which the Company is
incorporated or qualified as a foreign corporation. The Company
is not presently subject to income taxes in any foreign country.
Deferred tax assets and liabilities are recognized based on
differences between the book and tax bases of assets and
liabilities using presently enacted income tax rates. The
Company establishes a provision for income taxes by applying
the provisions of the applicable enacted tax laws to taxable
income, if any, for that period. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized.
F-7
STOCK-BASED COMPENSATION:
Stock-based compensation is accounted for at fair value in
accordance with Accounting Standards Codification ("ASC") 718,
"Compensation - Stock Compensation".
For stock options granted, we have recognized compensation
expense based on the estimated grant date fair value method
using the Black-Scholes valuation model. For these awards, we
have recognized compensation expense using a straight-line
amortization method. ASC 718 requires that stock-based
compensation expense be based on awards that are ultimately
expected to vest. Stock option expense for the years ended
December 31, 2009 and 2008 were $112,328 and $60,629
respectively.
Net Loss Per Share - Basic and diluted loss per share are
based upon the weighted-average number of common shares
outstanding during the period. The computation of diluted
earnings per share does not assume the conversion, exercise or
contingent issuance of securities that would have an anti-
dilutive effect on loss per share.
NOTE 2 - GOING CONCERN AND LIQUIDITY:
At December 31, 2009, the negative working capital of the
Company was $978,251. Further, the Company incurred net losses
of $1,114,409 and $1,307,630 for the years ended December 31,
2009 and 2008 respectively. These factors raise substantial
doubt about its ability to continue as a going concern. The
continued existence of the Company is dependent upon its ability
to execute its business plan and attain profitable operations.
NOTE 3 - CONVERTIBLE NOTES PAYABLE:
On August 22, 2008, the Company issued a total of $232,015 of
convertible notes payable (the "Convertible Notes") to the
Company's president and secretary in satisfaction of $182,015
accrued payroll due them and a $50,000 loan payable due to the
Company's president for a cash loan to the Company made on
August 14, 2008.
F-8
The Convertible Notes bear interest at a rate of 8% per annum,
were due February 28, 2009, and both principal and interest are
convertible at the option of the holders into shares of the
Company's common stock at a conversion price of $2.00 per share.
The Convertible Notes are now due upon demand and continue to
accrue interest.
On March 1, 2009 and March 17, 2009, the Company issued a total
of $50,000 of convertible promissory notes ("Promissory Notes")
to three investors in exchange for cash loans to the Company in
the amount of $50,000. The Promissory Notes bear interest at a
rate of 15% per annum, are due February 28, 2010 and March 16,
2010, respectively, and both principal and interest are
convertible at the option of the holders into shares of the
Company's common stock at the conversion price of $2.50 per
share.
NOTE 4 - COMMON STOCK
In June of 2008, the Company issued 1,230 shares of its Common
Stock in payment of an account payable.
In August and September of 2008, the company sold 37,500
shares of Common Stock for total proceeds of $75,000.
In December of 2008, the Company issued 20,192 shares of Common
Stock to all eligible employees of the Omagine, Inc. 401(k)
Plan; issued 45,830 shares of Common Stock as the commitment fee
for the Standby Equity Distribution Agreement; sold 60,000
shares of Common Stock for proceeds of $150,000; and sold 12,000
shares of Common Stock for total proceeds of $10,200 pursuant to
the exercise of stock options by two directors.
In March of 2009 the Company issued and contributed 72,500
shares of Common Stock to all eligible employees of the Omagine,
Inc. 401(k) Plan.
In August of 2009, the Company sold 2,000 shares of Common Stock
to a Director of the Company at a price of $0.70 per share for
proceeds of $1,400.
F-9
From May through December of 2009 the Company issued a total of
1,308,877 shares of Common Stock for proceeds of $555,000 under
the Standby Equity Agreement with YA Global Investments, L.P.
(See Note 8)
On December 30, 2009 Omagine's stockholders authorized the Board
of Directors to effect a 1-for-100 reverse stock split
immediately followed by a 20-for-1 forward stock split of the
Company's Common Stock (collectively, the "Stock Splits"). The
Stock Splits resulted in a net reduction of 42,643,614 shares of
Common Stock leaving 10,660,904 shares of Common Stock
outstanding as of December 31, 2009. The shareholders also
authorized the Board of Directors to reduce the Common Stock
authorized from 75,000,000 to 50,000,000 shares. The
accompanying financial statements have been retroactively
adjusted to reflect the Stock Splits.
Note 5 - STOCK OPTIONS
On September 20, 2007, the Company registered 2.5 million
shares of its Common Stock reserved for issuance under the Alfa
International Corp. 2003 Stock Option Plan, renamed the Omagine,
Inc. 2003 Stock Option Plan by ratification of shareholders on
December 30, 2009 (the "Plan") for resale by filing a
registration statement with the SEC on Form S-8. This
registration statement did not increase either the total number
of shares outstanding or the number of shares reserved for
issuance under the Plan. The adoption of the Plan was approved
by the Board of Directors in March 2004 and ratified by the
Company's shareholders on September 1, 2004.
In 2007 and 2008, the Company issued a total of 18,000 non-
qualified stock options to three individuals in connection with
their continued service as independent outside directors. As of
the date hereof all 18,000 of such options are vested and 12,000
of such options are exercisable at a price of $4.50 per share
and 6,000 are exercisable at a price of $4.00 per share.
In September of 2008, the Company issued 156,000 non-qualified
stock options to two officers and the Company's controller.
The 124,000 unvested options at December 31, 2009 for the
officers are scheduled to vest 32,000 on September 24, 2010,
32,000 on September 24, 2011, 30,000 on September 24, 2012, and
30,000 on September 24, 2013.
F-10
The Plan is designed to attract, retain and motivate
employees, directors, consultants and other professional
advisors of the Company and its subsidiaries (collectively,
the "Recipients") by giving such Recipients the opportunity
to acquire stock ownership in the Company through the
issuance of stock options to purchase shares of the Company's
Common Stock.
On December 30, 2009, the shareholders authorized the Board of
Directors to change the name of the Stock Option Plan to
the Omagine, Inc. 2003 Stock Option Plan and to reserve
2,500,000 shares of Common Stock for issuance under the Plan.
A summary of stock option activity, adjusted for the effect
of Stock Splits, is as follows:
Year Ended December 31,
------------------------------------------------------
2009 2008
---------- -----------
Stock Options Stock Options
------------- -------------
Outstanding at January 1 530,000 380,000
Granted and Issued - 162,000
Exercised - (12,000)
Forfeited/expired/cancelled - -
---------- ----------
Outstanding at December 31 530,000 530,000
---------- ---------
Exercisable at December 31 340,000 270,000
---------- --------- ---------- ---------
F-11
Stock options outstanding at December 31, 2009
(all non -qualified) consist of:
Year Number Number Exercise Expiration
Granted Outstanding Exercisable Price Date
------- ----------- ----------- -------- ----------
2001 150,000 150,000 $1.25 August 31, 2011
2005 6,000 6,000 $5.00 June 30, 2010
2005 40,000 40,000 $4.10 December 31, 2011
2007 (A) 160,000 96,000 $1.25 March 31, 2017
2007 12,000 12,000 $4.50 October 29, 2012
2008 (B) 6,000 4,000 $4.00 December 31, 2012
2008 (C) 150,000 30,000 $2.60 September 23, 2018
2008 (D) 6,000 2,000 $2.60 September 23, 2018
--------- ----------
Totals 530,000 340,000
========= ==========
(A) The 64,000 unvested options relating to the 2007 grant
are scheduled to vest 32,000 on April 1, 2010 and
32,000 on April 1, 2011.
(B) The 2,000 unvested options relating to the
2008 grant will vest on January 1, 2010.
(C) The 120,000 unvested options relating to the 2008 grant
are scheduled to vest 30,000 on September 24, 2010 and
then 30,000 on each September 24 in 2011, 2012 and 2013.
(D) The 4,000 unvested options relating to the 2008 grant are
scheduled to vest 2,000 on September 24, 2010, and
2,000 on September 24, 2011.
As of December 31, 2009, there was $331,051 of total
unrecognized compensation cost relating to unexpired stock
options. That cost is expected to be recognized $110,040
in 2010, $92,498 in 2011, $75,447 in 2012, and $53,066 in 2013.
F-12
NOTE 6 - INCOME TAXES:
Deferred tax assets are comprised of the following:
December 31
----------------------
2009 2008
---------- ----------
Federal net operating loss
carry forwards $4,892,000 $4,375,000
State net operating loss
carry forwards, net of
federal tax benefit 630,000 630,000
---------- ----------
5,522,000 5,005,000
Less: Valuation allowance 5,522,000 5,005,000
----------- -----------
Total $ - $ -
========== ==========
The Company's effective tax rate differs from the expected
federal income tax rate due to changes in the valuation
allowance at December 31, 2009 and 2008.
Management has determined, based on the Company's current
condition, that a full valuation allowance is appropriate at
December 31, 2009.
At December 31, 2009, the Company had Federal net operating
loss carry forwards of approximately $13,977,000, expiring in
various amounts from fiscal year 2010 to fiscal year 2029. The
Company's issuance of shares during fiscal 1995 and subsequent
thereto resulted in a "Change of Ownership" as defined by the
Internal Revenue Code of 1986, which significantly limits the
Company's use of these net operating loss carry forwards.
NOTE 7 - SEGMENT INFORMATION:
Omagine is a holding company that operates through its wholly
owned subsidiaries. Since its acquisition of Journey of Light,
Inc. ("JOL") in October 2005, the Company has reported results
in two business segments: real estate development and apparel.
F-13
The real estate development business of the Company is conducted
through its wholly owned subsidiaries, JOL and LLC. LLC is
presently finalizing negotiations with the Government of Oman
with respect to a proposed tourism related development project
in Oman.
Prior to its discontinuance in March 2008, the apparel business
of the Company was conducted primarily through its wholly owned
subsidiaries Contact and Ty-Breakers.
Summarized financial information by business segment for the
fiscal years ended December 31, 2009 and December 31, 2008 is as
follows:
2009 2008
Revenue:
Real Estate Development $ - $ -
Apparel - -
------- -------
Total $ - $ -
------- -------
Operating Expenses:
Real Estate Development $ 243,056 $ 247,659
Apparel - -
Corporate 840,636 1,060,344
--------- ---------
Total $ 1,083,692 $ 1,308,003
--------- ---------
Operating Loss:
Real Estate Development $ (243,056) $ (247,659)
Apparel - -
Corporate ( 840,636) (1,060,344)
--------- ---------
Total $(1,083,692) $(1,308,003)
--------- ---------
F-14
Identifiable Assets:
Real Estate Development $ 53,212 $ 40,833
Apparel - -
Corporate 125,276 77,040
------- -------
Total $ 178,488 $ 117,873
------- -------
Capital Expenditures:
Real Estate Development $ 1,471 $ -
Apparel - -
Corporate - -
------- ---------
Total $ 1,471 $ -
------- -------
Depreciation and Amortization:
Real Estate Development $ 294 $ 752
Apparel - -
Corporate 5,955 9,979
------- -------
Total $ 6,249 $ 10,731
------- -------
Geographic Information - net sales:
United States $ - $ -
------- ---------
$ - $ -
------- ---------
Operating loss is total revenue less operating expenses, which
includes: cost of sales, selling, general and administrative
expenses, and other corporate expenses.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Leases
------
The Company leases its executive office in New York, New York
under a ten-year lease entered into in February 2003. Rent
expense for the Company's executive offices for 2009 and 2008
was $88,127 and $74,934 respectively. The Company also rents
F-15
warehouse space in Jersey City, New Jersey under a month to
month lease. Rent expense for the warehouse space for 2009 and
2008 was $12,075 and $13,427, respectively. The Company also
leases office space in Muscat, Oman under a one year lease
expiring December 31, 2010.
At December 31, 2009, the minimum lease payments under non-
cancelable operating leases are as follows:
2010 $ 56,800
2011 56,800
2012 56,800
Thereafter 9,466
----------
Total $ 179,866
==========
Employment Agreements
---------------------
Omagine is obligated to pay its President and Chief Executive
Officer an annual base salary of $125,000 through December 31,
2010 plus an additional amount based on a combination of net
sales and earnings before taxes.
Omagine had been obligated to employ its Vice-President and
Secretary under an employment agreement which was cancelled.
Provided the Company is successful in signing the Development
Agreement with the Government of Oman for the Omagine Project,
the Company intends to enter into a new employment agreement
with this individual.
Equity Financing Agreement
--------------------------
On December 22, 2008, Omagine entered into a Standby Equity
Distribution Agreement (the "SEDA") with YA Global Investments,
L.P.("YA").Pursuant to the terms of the SEDA Omagine may, at its
sole option and upon giving written notice to YA (a "Purchase
Notice"),sell shares of its Common Stock to YA (the "Shares") at
a "Purchase Price" equal to 95% of the lowest daily volume
weighted average price for a share of Omagine's Common Stock as
quoted by Bloomberg, L.P. during the five (5) consecutive
F-16
trading days following such Purchase Notice (the "Pricing
Period"). During the term of the SEDA, the Company is not
obligated to sell any Shares to YA but may, at its sole
discretion, sell that number of Shares valued at the Purchase
Price from time to time in effect that equals five million
dollars ($5,000,000). YA is obligated to purchase such Shares
from the Company subject to certain conditions including (i)
Omagine filing a registration statement with the Securities
and Exchange Commission (the "SEC") to register the Shares
("Registration Statement"), (ii) the SEC declaring such
Registration Statement effective, (iii) periodic sales of
Shares to YA must be separated by a time period equal to the
Pricing Period, and (iv) the amount of any such individual
periodic sale of Shares may not exceed two hundred thousand
Dollars ($200,000). The Company has filed the Registration
Statement with the SEC and the SEC has declared such
Registration Statement to be effective as of May 1, 2009.
The SEDA expires on April 30, 2011. All sales of Shares pursuant
to the SEDA shall be made at the discretion of the Company.
Omagine Project
---------------
The Company's proposed Omagine Project is planned to be
developed on one million square meters (equal to approximately
245 acres) of beachfront land facing the Gulf of Oman (the
"Omagine Site") just west of the capital city of Muscat and
nearby Muscat International Airport. The Company is awaiting the
conclusion of the documentary process with respect to the
Omagine Project and the signing of a Development Agreement with
the Government of Oman.
The Omagine Project contemplates the integration of cultural,
heritage, educational, entertainment and residential components,
including a theme park and associated exhibition buildings,
shopping and retail establishments, restaurants and several
million square feet of residential development.
NOTE 9 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the filing
date of this Form 10-K and has determined that there were no
material subsequent events to recognize or disclose in these
financial statements.
F-1
