UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Delaware 20-2876380
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(State of incorporation) (I.R.S. Employer
Identification Number)
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350 Fifth Avenue, Suite 1103, New York, N.Y. 10118
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:
Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [x] Yes [ ] No
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB.[x]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [x] No
The registrant's total revenue for the fiscal year ended December 31, 2007 was $29,590.
The aggregate market value of the 25,498,184 shares of voting stock held by non-affiliates of the registrant (based upon the average of the high and low bid prices) on March 31, 2008 was $8,669,383. (SEE: "Market for Common Equity and Related Stockholder Matters").
As of March 31, 2008 the Company had outstanding 45,492,439 shares of common stock, par value $.001 per share ("Common Stock")
The Index to Exhibits appears on page 69.
Omagine, Inc.
Table of Contents to Annual Report on Form 10-KSB
Year Ended December 31, 2007
Page
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Forward-Looking Statements 4
Part I
Item 1. Description of Business 5
Item 2. Description of Property 23
Item 3. Legal Proceedings 23
Item 4. Submission of Matters to a Vote
of Security Holders 24
Part II
Item 5. Market for Common Equity and
Related Stockholder Matters 25
Item 6. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 37
Item 7. Financial Statements 45
Item 8. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 46
Item 8A. Controls and Procedures 46
Item 8A(T) Management's Report on Internal Control 47
Item 8B. Other Information 48
Part III
Item 9. Directors, Executive Officers and
Control Persons; Compliance with
Section 16(a) of the Exchange Act 48
3
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Item 10. Executive Compensation 53
Item 11. Security Ownership of Certain
Beneficial Owners and Management
And Related Stockholder Matters 65
Item 12. Certain Relationships and Related
Transactions 67
Item 13. Exhibits and Reports on Form 8-K 69
Item 14. Principal Accountant Fees and Services 70
Forward-Looking Statements
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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 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.
Alfa International Holdings Corp. ("AIHC"), was incorporated on October 8, 2004 in Delaware solely to change Alfa's corporate domicile from New Jersey to Delaware via a merger which was effected on May 23, 2005.
In June 2007 AIHC changed its corporate name to Omagine, Inc. to align the Company's corporate identity with its real estate development business.
Omagine is a holding company which conducts substantially all its operations through its wholly-owned subsidiary, Journey of Light, Inc., a New York corporation ("JOL"). JOL is engaged primarily in the business of real estate development in the Sultanate of Oman ("Oman").
Omagine and JOL are sometimes collectively referred to herein as the "Company".
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 JOL's business. (See: "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Certain
Relationships and Related Transactions").
The Company's executive office is located at The Empire State Building, 350 Fifth Avenue, Suite 1103, New York, N.Y. 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.
JOL has proposed to the Government of Oman (the "Government") the development of a real-estate and tourism project (the "Omagine Project") in Oman. On April 6, 2008 the Ministerial Committee for Tourism met and discussed the Omagine Project and its commercial terms. Management has been informally notified that this committee has approved the commercial terms for the development of the Omagine Project. Approval of such commercial terms by the committee is required before signing a development agreement with the Government ("Development Agreement").
JOL's attorneys are presently conducting discussions with the Ministry of Tourism of Oman ("MOT") regarding the final wording of the Development Agreement.
The Omagine Project will be developed by Omagine S.A.O.C. (the "Project Company"), an Omani company presently under formation by the Company and other founder shareholders ("Founder Shareholders").
The three Founder Shareholders are Omagine, Inc., Journey of Light, Inc. and Consolidated Contractors International Company, S.A.L. ("CCIC").
In addition to the previously reported agreement with CCIC
regarding its $49 million investment in the Project Company, the Company recently signed a memorandum of understanding ("MOU") with an Omani company ("Newco") comprised of prominent Omani business people pursuant to which Newco will invest approximately $48 million into the Project Company in return for a 30% equity participation.
The Company also has, as previously reported, an MOU with Bank Muscat regarding project financing, equity participation and financial advisory services.
The execution and delivery of the definitive legal documents (the "Financial Closing")necessary for the provision of the required construction financing for the Omagine Project ("Construction Financing")will occur on the "Financial Closing Date" and such date is estimated to be approximately three to six months after the Development Agreement with the Government becomes effective (the "Effective Date"). Although CCIC's agreement with the Company contemplates its equity contribution to the Project Company occurring on the Financial Closing Date, Newco's agreement with the Company contemplates its equity contribution to the Project Company occurring in monthly installments between the Effective Date and the Financial Closing Date.
As of the date hereof therefore, the Project Company has arranged (i) approximately $99 million of equity capital for itself, (ii) the financial capacity (from Newco's investment)to begin development of the Omagine Project almost immediately after the Effective Date without having to wait for the Financial Closing, and (iii) an agreement with Oman's largest financial institution to arrange the Construction Financing and, although it is unlikely to be required, provide additional equity capital to the Project Company if it is required.
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. The Omagine Project is planned to be an integration of 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 enclosed harbor area; associated retail shops and restaurants, entertainment venues, boat slips, and docking facilities (collectively, the "Landmark"); two five-star resort hotels; commercial office buildings; shopping and retail establishments integrated with the hotels; 450 serviced apartments and 150 employee apartments, and approximately 3,300 residences consisting of a combination of villas, townhomes and apartments.
In September 2006 the MOT engaged the services of a third party consultant to review of the financial viability of the "Landmark". JOL was thereafter informed that the consultant's report made some minor recommendations but was otherwise positive.
The Development Agreement governs the design, development, construction, management and ownership of the Omagine Project.
In March 2007, JOL received a letter (the "Approval Letter") from the Minister of Tourism wherein the MOT notified JOL that the Government of Oman had approved the development of the Omagine Project. The Approval Letter specified certain commercial terms to be incorporated into the Development Agreement.
Throughout 2007 and the first quarter of 2008, JOL management had further meetings, discussions and negotiations with MOT officials regarding the terms and conditions of the Development Agreement.
In December 2007 JOL delivered to the Government what it believed to be the final draft of the Development Agreement ("Final Draft").
In late February 2008 the MOT informed management that it wished to implement a standard form for all development agreements (a "Standard Agreement").
On April 6, 2008 the commercial terms were approved by the
Government.
As of the date hereof JOL's attorneys are conducting discussions with the MOT regarding the conversion of Omagine's Final Draft into the format of the Standard Agreement. The use of a Standard Agreement is not expected to cause any material change to the terms and conditions specified in the Final Draft.
As presently contemplated Omagine SAOC will, upon corporate
formation, be owned eighty-eight (88%) percent by JOL and ten
percent(10%) by Omagine, Inc., JOL's parent company,
(collectively, the "Company Equity") and two percent (2%) by
CCIC. The Company Equity of 98% is expected to be reduced
subsequent to the signing of the Development Agreement by up to
a maximum of 40% (to no less than 58%) depending upon the
finalization of shareholder agreements between the Project
Company and each of CCIC and Newco. The Company Equity will
remain the majority equity stake in the Project Company and the
Government will not own any equity of the Project Company.
Pursuant to the BankMuscat Agreement and as presently planned the Bank will be appointed as the exclusive financial advisor to the Project Company and, among other things, will advise on its optimal capital structure; negotiate with financial institutions and potential investors; and act as placement agent for the Project Company's future debt and capital requirements, including the Construction Financing.
Consolidated Contractors Company Oman LLC, ("CCC") which is the Omani subsidiary of CCIC will be responsible for all construction activities for the Omagine Project.
In order to move into the actual development stage of the Omagine Project, the Founder Shareholders and the Government must sign the Development Agreement - an event which the Company previously expected to occur in the first quarter of 2008 but presently expects to occur during the second quarter of 2008.
On December 9, 2007 JOL signed an agreement with CCIC and CCC (the "CCIC Agreement") memorializing the agreement between JOL
and CCIC and JOL and CCC regarding, among other things: (i)
CCC being the General Contractor for the Omagine Project, (ii)
CCIC being a minority Founder Shareholder of Omagine SAOC, and
(iii) CCC's rapid mobilization to start the construction of the
Omagine Project. Pursuant to the CCIC Agreement CCIC, which is
an investment arm of Consolidated Contractors Group SAL ("CCG"),
(http://www.ccc.gr), will invest nineteen million ten thousand
Omani Rials (equivalent to U.S. $49,426,000) in Omagine SAOC in
exchange for a twelve percent (12%) equity stake in the Project
Company. The CCIC Agreement expires on April 30, 2008.
The Company anticipates that Omagine SAOC will sign a shareholder agreement with both CCIC and Newco shortly after the Development Agreement is signed which shareholder agreements will, among other things, memorialize the sales to them of minority equity stakes in Omagine SAOC.
CCG is an international construction company headquartered in Athens, Greece with annual revenues approaching $5 billion. CCG has been in business for over 50 years and is one of the largest building contractors in Oman and the Middle East with worldwide operations and over 125,000 employees, many of which are in GCC countries. Approximately 6,000 of such employees are presently working in Oman and it is expected that CCC will be able to quickly mobilize the substantial manpower and equipment resources required following the signing of the Development Agreement. CCG and CCC both enjoy a strong reputation for quality workmanship and on time and within budget delivery. The CCIC Agreement contemplates CCC being appointed as the general contractor for the Omagine Project and being awarded the contract for its construction.
The Company believes that the CCIC Agreement has aligned the interests of all parties toward a successful Financial Closing with BankMuscat which is is a necessary condition precedent to the successful construction, completion and operation of the Omagine Project.
In December 2007 JOL signed an agreement (the "Financial Advisory MOU") with Bank Muscat SAOG ("BankMuscat" or the
"Bank"), the largest commercial bank in Oman, memorializing the
agreement between JOL and the Bank regarding, among other
things: (i) JOL appointing the Bank as its financial advisor
immediately subsequent to signing the Development Agreement,
(ii) the Bank undertaking the task of structuring the optimal
capital structure for Omagine SAOC, (iii) the Bank arranging for
and placing equity, debt and mezzanine capital requirements for
Omagine SAOC as required, and (iv) the Bank, or its nominee
investing up to twenty-five percent (25%) of the capital of
Omagine SAOC.
The Founder Shareholders and Bank Muscat have agreed that at the Financial Closing and subject to the agreement of the lending institutions at the time, JOL will (i) be paid a success fee of approximately 0.5% of the total construction costs (exclusive of design and management fees) of the Omagine Project (such construction costs being presently estimated at approximately one billion U.S. dollars), and (ii) be reimbursed in full for all the expenses it has incurred in pursuing the development of the project up to and including the Financial Closing Date.
The present nature of JOL's business is such that, other than the foregoing, it is not expected to generate revenue until after the occurrence of an event - the beginning of the development of the Omagine Project - which, as of the date hereof, is not certain to occur.
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 used by Bank Muscat to arrange the Construction financing, optimize the Project Company's capital structure and in its discussions with other financial institutions and investors.
Management is aware that due to market conditions the value of the Omagine Site has increased sharply over the past 2 years and, provided such values are sustained, this increased value will have a materially positive effect on the Project Company's future cash flows as well as its financing activities.
Pursuant to the terms of the Development Agreement and the
Usufruct Agreement, the Project Company is permitted to use its rights over and with respect to the Omagine Site as collateral (the "Pledged Collateral")in any financing transaction (e.g. the Construction Financing) with lenders and to grant such lenders security interests in the Pledged Collateral. As the value of the Pledged Collateral increases one could reasonably expect the Project Company's negotiating leverage with lenders as well as its borrowing capacity would likewise be proportionately increased.
Pursuant to the Final Draft, Omagine SAOC's rights over and with respect to the Omagine Site will be represented by a "Usufruct Agreement" wherein Omagine SAOC is granted a ninety-nine (99) year usufruct (similar to a lease) over the Omagine Site at an annual land rental cost of USD $0.80 per square meter, except that the land rental cost during the first five years of the Usufruct Agreement(the construction period of the Omagine Project) will be zero and such land rental is only due on land upon which a building other than a residence is located (which is approximately 15% of the Omagine Site).
Unlike a standard lease however, the Usufruct Agreement, specifically allows Omagine SAOC to (i) as mentioned above, pledge and use its rights over the land constituting the Omagine Site as collateral in any construction or other financing arrangements, and (ii) sell to third parties on a freehold basis the land constituting the plots upon which any of the approximately 3,300 residential units are situated.
Upon the closing of any residential sale by the Project Company and the transfer of the freehold title to the underlying land, a land payment of 25 Omani Rials ($65) per meter of land within such plot (the "Land Price") becomes due and payable to the Government by the Project Company. Again, the increased value of the Omagine Site, if sustained, will obviously contribute directly to increases in the Project Company's future cash flows as a result of sales at increasing market prices while the Land Price remains constant.
Significantly the Government will issue a license to the Project Company designating the Omagine Site as an Integrated Tourism Complex ("ITC") and as such, the Project Company will be allowed to sell residential properties developed on the Omagine Site
including the underlying land to any person, any non-Omani persons. Non-Omani persons (such as expatriates living and working in Oman) are forbidden by law to purchase any land outside of an ITC.
The Project Company may pre-sell any residence by entering into sales contracts with third party purchasers and receive deposits and progress payments during the construction of such residence further reducing its requirement for bank financing of such construction costs. Only after it receives full payment from the third-party buyer and transfers the title to the underlying land does the Project Company become obligated to pay the Government the Land Price.
The sale of residential and commercial properties, including sales to non-Omani persons plus the sharp increase in the value of the Omagine Site over the last several years are the main drivers supporting the Project Company's projections of estimated net positive cash flow in excess of USD $600 million over the five year period immediately subsequent to the signing of the Development Agreement. The Final Draft imposes no restriction on sales or pre-sales of the approximately 3,300 residences (villas, town homes and apartments), or the land underlying such residences.
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, that the Financial Closing will actually occur or that such cash flows will actually be realized.
As indicated earlier in this Report, all such "forward looking statements" are subject to, known and unknown risks, uncertainties and other factors which could cause Omagine SAOC's
and the Company's actual results, financial or operating performance, or achievements to differ from management's projected or predicted future results, financial or operating performance, or achievements as expressed or implied by such forward-looking statements. Projections and assumptions contained and expressed herein are reasonably based on information available to the Company at the time so furnished and as of the date of this Report. 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 entire Omagine Project is to be owned and operated
by Omagine SAOC. The corporate ownership of the Landmark and the
Landmark Zone is planned to be transferred to a new company (the
"Landmark Company") which will be a 100% owned subsidiary of
Omagine SAOC. The Landmark Company will lease the land
underlying the Landmark and Landmark Zone from Omagine SAOC,
will operate and manage the Landmark Zone, and will be
restricted from selling any of its assets (unless such sales are
used to finance the construction of infrastructure within the
Landmark Zone) until after the Landmark demonstrates twelve
consecutive months of net positive cash flow, after which (the
"Release Date") it may, in its sole discretion, sell any and all
of its assets. Prior to the Release Date, the Landmark Company
may declare, but may not pay, dividends to its sole shareholder
- the Project Company.
Except in the case of a listing on the local Muscat Securities Market, the Government will have a "right of first refusal" with respect to any sale of the Landmark Company.
Present development plans call for the Omagine Site to constitute approximately 70% open areas (roads, green areas, pathways, parking areas etc.) ["Open Area"], 15% residential land and 15% non-residential non-Open Area land ("Tourism & Commercial Components").Only residential land may be sold by the Project Company to third parties. No land constituting Open Area or land underlying Tourism & Commercial Components may be sold but any and all such land may be leased by the Project Company
to third parties and the buildings thereon may be sold. There shall never be any land rent due to the Government on the Open Area and there shall always be land rent due to the Government on the land underlying Tourism & Commercial Components.
JOL expects, based on present assumptions which are subject to modification, that the development costs (including the costs for design, construction management, program management and construction) for the entire Omagine Project will be approximately $1.6 billion dollars.
Management is presently in Oman to finalize the Development Agreement with the Company's attorneys and the Ministry of Tourism.
It is management's understanding and belief that all commercial terms were approved by the Government on April 6, 2008 and that only the recasting of the Final Draft into the format of the Standard Agreement remains to be accomplished before the Development Agreement can be signed by the Government and Founder Shareholders. This process is underway.
Through its presently estimated 58% ownership interest in Omagine SAOC, the Company plans over time to also be in the property management, hospitality, media and entertainment businesses.
Omagine's website is www.omagine.com.
Joannou & Paraskevaides (Overseas) Ltd. ("J&P") and JOL had an agreement in December 2006 with respect to J&P being a Founder Shareholder of Omagine SAOC and the General Contractor for the Omagine Project (the "J&P Agreement"). The J&P Agreement was terminated in October 2007 without consequence.
On May 1, 2006 a previously disclosed contract dispute between
JOL and the State of Qatar regarding the proposed development of a real-estate project in Doha, Qatar was settled in a friendly manner by the State of Qatar paying JOL $1 million.
Both Contact and Ty-Breakers were wholly owned subsidiaries of Omagine in the business of designing, manufacturing and marketing apparel and both were merged with and into Omagine on March 28, 2008 whereupon the separate existence of each ceased. Contact had developed a "private label" product line under the Ty-Breakers label consisting of outerwear. As previously disclosed, Contact exited the "branded business" during the third quarter of 2006 and management attempted to salvage Contact as a viable business by re-positioning it as a "private label" apparel supplier and subsequently the Company discontinued Contact's business in its entirety. Contact's sales targets were not met in 2006. Between June and December of 2006, the Company and Contact terminated the employment and consulting agreements of Contact's former President and of its former Vice-President of Sales.
As previously disclosed Ty-Breakers has not represented a material portion of the Company's revenue during the past several years. While the Company is focusing its efforts on JOL's real estate development business, the Company may elect to accept private-label or Ty-Breaker's orders in the future subject to time constraints and its ability to fill such orders.
Omagine is a holding company which conducts substantially
all its operations through its wholly-owned subsidiary JOL. Since its acquisition of JOL Omagine has concentrated its efforts on building and expanding JOL's business and, as indicated above, on re-positioning and attempting to salvage its Contact Sports business. Omagine presently concentrates all of its efforts on the development and expansion of JOL's business. Omagine maintains its corporate website at www.omagine.com.
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 JOL'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 JOL's 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 - (See: "Employees: the Hamdan Agreement") - 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 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 JOL's competitors have well established businesses and brand reputations, management believes that JOL's advantages are (i) the uniqueness of the Omagine Project is particularly attractive to the Government (ii) JOL's senior
management and Mr. Hamdan have established strong and trusting relationships with the relevant Government officials, and (iii) JOL has signed the CCC Agreement and Omagine has signed the previously disclosed Hamdan Agreement (See: "Exhibits - The CCC Agreement"). JOL management believes it 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.
The apparel businesses previously conducted by Contact and Ty-Breakers were highly-competitive businesses populated by many companies with substantially greater financial, managerial and personnel resources than either Contact, Ty-Breakers or the Company possessed. The apparel business is characterized by frequent fashion changes, heavy advertising, promotion and fierce price competition. Ty-Breakers had few competitors but very little demand for its Tyvek apparel. Within its branded niche of fashion athletic and lifestyle apparel, management believed that Contact's branded products were unique and distinctive, of superior quality and priced competitively. Management concluded, however, that it could only successfully compete in Contact's highly competitive marketplace through aggressive brand-building efforts requiring extensive and expensive marketing, promotion, advertising and public relations expenditures. In the third quarter of 2006, management determined that the financial resources required to fund the significant effort to establish Contact's brand identity were too onerous and the attempts to establish the branded business were ended. As discussed above Contact then focused on its private-label business but did not meet its 2006 sales objectives. Management ultimately discontinued the Contact and Ty-Breakers business and merged both subsidiaries with and into Omagine.
The Company does not presently own or directly operate any engineering, design or construction companies or facilities but Omagine 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, JOL 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 JOL does not believe that the loss or inability of any such designer, architect, contractor or consultant to perform would have a material, adverse impact on JOL's business or operations. JOL believes it maintains a good working business relationship with its designers, architects, contractors and consultants and has written agreements with several of them. All copyrights to documents, designs and drawings executed by such independent designers, architects, contractors and consultants are the property of JOL. (See: "Patents, Copyrights and Trademarks").
JOL 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 prospective clients (collectively "Development Costs"). A number of, or possibly all, of these Development Costs may be recoverable as "development expenses" on the Financial Closing Date. Some of these costs, however, may be non-recoverable costs.
Neither Contact nor Ty-Breakers incurred any marketing or promotion expenses during 2007 or 2008.
JOL does not engage in any manufacturing activities and as such does not maintain any inventory and has no present plans to do so.
Neither Contact nor Ty-Breakers owned or directly operated any manufacturing or production facilities nor did they engage in any significant research and development activities. From time to time, Contact had maintained risk inventories but as of the date of this Report no inventory remains on hand.
Ty-Breakers purchased all of its Tyvek requirements directly from Du Pont in the United States or from Du Pont's Asian agent on an "as required" basis as orders were received.
The Company is not dependent upon any patent, trademark or proprietary right of another with respect to its designs, drawings or development concepts. Under agreements with its outside designers, architects, contractors and consultants, JOL owns the copyrights, if any, to all documents, designs and drawings executed on behalf of JOL by such independent designers, architects, contractors and consultants.
Omagine filed applications for the mark OMAGINE with the United States Patent and Trademark Office ("USPTO") on March 24, 2008. Omagine now has "Priority Applications" for filing its marks with the Sultanate of Oman and many other foreign countries based upon its recorded filing with the USPTO. Omagine intends to file such trademark applications in Oman and possibly several other foreign countries within the six month Priority Application window.
Contact was not dependent upon any patent, trademark or proprietary right of another with respect to its designs or products. Contact owned all U.S. rights to the trademark "Contact Sports" as registered with the U.S. Patent & Trademarks Office, which rights were assigned to Omagine when Contact was merged into Omagine.
Ty-Breakers was the owner by assignment of U.S. Patent number 5,150,660 (the "Patent") which covers the material marketed under its registered trademark, Kensel. Ty-Breakers' exclusive right under the Patent to manufacture and sell Kensel products in the United States runs until the year 2009 and such rights were assigned to Omagine when Ty-Breakers was merged into
Omagine.
If the Development Agreement is signed, the Company expects Omagine SAOC 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 the Project Company's business from any existing or probable Omani governmental laws or regulations. Omagine SAOC 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 compliance with Omani regulation and laws, including environmental laws. Neither Omagine nor JOL requires any U.S. governmental 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 governmental laws or regulations.
Neither Contact nor Ty-Breakers required any governmental approval of their products Nor had any costs or effects on either of their operations associated with compliance with any local, state or federal environmental laws.
The Company presently has three full time employees and upon the signing of the Development Agreement will significantly increase the number of its employees. The Company had been obligated under separate consulting agreements to compensate Contact's former President and former Vice-President of Sales. These two consulting agreements were canceled in accordance with their terms during the third and fourth quarters of 2006, and these two individuals are no longer employees of or consultants to the Company.
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 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 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 and Executive Officers" and "Executive Compensation")
On March 19, 2007, Omagine and Mr. Sam Hamdan ("Hamdan") executed a consulting agreement (the "Hamdan Agreement") wherein Hamdan has agreed that up until the Financial Closing Date he will act in the capacity of Omagine's chief operating officer.
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 prestigious 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.
Among other things, GLT and Hamdan developed the "Omagine" brand for JOL. Hamdan presently has a consulting agreement with Omagine and, under certain circumstances, Hamdan may become
Omagine's President and Chief Operating Officer.
The Hamdan Agreement contemplates that, subsequent to the Financial Closing Date, Hamdan will become Omagine's President and Chief Operating Officer and an Omagine employee. The Hamdan Agreement was amended to expire on December 31, 2008.
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 Contact Sports under a lease expiring February 28, 2013. The lease specifically allows Omagine and JOL as co-occupants. Contact leased warehouse space in Jersey City, N.J. under a lease expired and now continues on a month to month basis. The Company will maintain this warehouse space for general corporate purposes on the same month to month rental basis. The Company also leases office space in Muscat, Oman under a one year lease expiring December 14, 2008.
The Company knows of no material legal proceedings pending or threatened against it or any of its subsidiaries which, in the opinion of management, would have a materially, adverse effect upon the Company's business or operations.
AmeriCapital Renaissance Group, LLC ("AmeriCapital"), is, to the best of the Company's understanding, not a corporation in good standing. To the best of the Company's information and belief, the president and sole shareholder of AmeriCapital is Mr. Agron Telaku ("Telaku"). After often admitting the contrary during intermittent and erratic communications between 2006 and 2008, Telaku recently claimed to have an advisory agreement (the "Advisory Agreement") with JOL. The alleged Advisory Agreement was executed in February 2006 in Oman by JOL subject to the explicit contemporaneous understanding between JOL and Telaku and AmeriCapital and witnessed by other parties that the Advisory Agreement was not valid until it was reviewed, modified and amended to JOL's satisfaction before the end of 2006, and
possibly discarded. From February 2006 and continuing to date Telaku has made himself habitually unavailable and refused to meet or perform any duties for the Company while saying he was willing to do so and putting forth a wide variety of legal, financial and personal difficulties and an ever varying number of personal reasons for his behavior. The Company advanced Telaku approximately $80,000 in 2006 and he has at least two computers belonging to the Company. The Company believes Telaku and AmeriCapital used deceptive methods to take advantage of the Company and the Company has terminated all contact with Telaku and informed him of this action. Shortly thereafter Telaku made the above claim to have an advisory agreement with JOL. The Company, JOL and Company counsel consider the Advisory Agreement to be null and void for a variety of reasons, not the least of which is Telaku's acknowledgement of that fact and the Company has informed Telaku of this fact. The Company cannot rule out any possible litigation on this matter and will vigorously pursue any that may ensue. Management believes the Company has basis for several claims against Telaku and that the Company has no liability to Telaku.
On December 14, 2007, the Company held its Annual Meeting of Shareholders for the year ended December 31, 2006 and the shareholders (a) elected five (5) directors, (b) ratified the appointment of Michael T. Studer. C.P.A., P.C. as the Company's independent auditor for the fiscal year ending December 31, 2007, and (c) increased to 75,000,000 the number of shares of Common Stock that the Company is authorized to issue from the previously authorized number of 50,000,000. The vote on such matters was as follows:
(a) Election of Directors:
For Withheld
--- --------
Frank J. Drohan 25,189,749 33,854
Charles P. Kuczynski 25,192,751 30,852
Louis J. Lombardo 25,208,791 14,812
Salvatore J. Bucchere 25,211,841 11,812
Kevin O'C. Green 25,211,791 11,812
|
(b) Ratification of Appointment of Independent Auditor:
For Against Abstain --- ------- ------- 25,205,332 96 18,175 |
(c) Increase to 75,000,000 the number of Authorized Shares:
For Against Abstain --- ------- ------- 24,485,896 575,079 202,628 |
Prior to June 21, 2007 the stock ticker symbol for the Registrant's Common Stock was "AHDS". From and after June 22, 2007 the new Stock ticker symbol for the Registrant's Common Stock is "OMAG".
On September 27, 2007 the Board of Directors of Omagine approved the authorized number of shares of the Company's Common Stock be increased to seventy-five million (75,000,000) from the previously authorized number of fifty million (50,000,000) shares. The Company included a proposal in the Company's definitive Proxy Statement filed with the SEC on November 23, 2007 seeking stockholder approval for the increase in authorized shares. The Company's proposal was approved by the stockholders at the Company's Annual Meeting held on December 14, 2007 and the appropriate Amendment of the Certificate of Incorporation was filed with the Secretary of State of Delaware. The Amendment was effective as of January 22, 2008, the day that such Amendment was so filed. A copy of the Amended Certificate of Incorporation of the Company is filed as an exhibit hereto.
The following table sets forth the range of the high and low
prices for the Common Stock for the four quarters in 2006 and 2007. The table reflects inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.
Quarter Ended High Low ------------- ---- --- 3/31/06 0.70 0.26 6/30/06 0.60 0.31 9/30/06 0.60 0.15 12/31/06 0.22 0.10 3/31/07 0.44 0.40 6/30/07 1.76 1.58 9/30/07 1.03 0.75 12/31/07 0.90 0.80 |
At December 31, 2007, Omagine had 45,542,439 shares of its $0.001 par value common stock ("Common Stock") issued and outstanding, and there were approximately 1,656 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.
On August 16, 2007, The Company issued a notice of redemption to all holders of its 76,437 issued and outstanding 5% Convertible Series B Preferred Stock (the "Preferred Shares"). The redemption was conducted in accordance with the terms of the Certificate of Designation, Preferences and Rights of the
Preferred Shares ("Certificate of Redemption"). Such redemption took place on September 28, 2007 ("Redemption Date") as directed by a Resolution of the Board of Directors as reported in the Company's 10QSB filing dated August 14, 2007.
The Company paid forty-one dollars and forty-eight cents ($41.48) per Preferred Share (the "Redemption Price") to the registered holders of the Preferred Shares. The Redemption Price was calculated by adding the $40.00 face value of each Preferred Share to the $1.48 of dividends on each Preferred Share that accrued as of the day immediately prior to the Redemption Date. The Redemption Price was paid in shares of the Company's Common Stock valued at one dollar ($1.00) per share of Common Stock upon surrender at the principal offices of the Company of the certificate(s) representing such Preferred Shares ("Certificate(s))".
From and after the Redemption Date the Preferred Shares were not entitled to dividend payments and all rights of the holders in respect thereof ceased, except the right to receive the Redemption Price.
All outstanding Preferred Shares were redeemed on the Redemption Date. Any Preferred Shares represented by Certificate(s) which had not been surrendered by the holders thereof on or before the Redemption Date were Redeemed in accordance with the Certificate of Redemption and the Redemption Price with respect thereto will held in trust by the Company for the holders of such Preferred Shares until such Certificate(s) are surrendered to the Company in accordance with the Redemption Notice.
The 150,000 shares of Preferred Stock, all of which have been either previously converted or redeemed on the Redemption Date are permanently retired, thereby bringing the authorized Preferred Shares to 850,000 as of the date of this Report.
As of December 31, 2007 and the date hereof, Omagine had no shares of Preferred Stock issued or outstanding.
Prior to the Redemption Date, Series B Preferred Shares had the voting powers, preferences and rights as hereinafter set forth:
Price per Share: $40
Dividends:
(1) The holders of the shares of Preferred Shares shall be entitled to receive, out of funds or out of shares of the Corporation's Common Stock legally available therefore, dividends at the annual rate of $2.00 per Preferred Share, either in shares of Common Stock or in cash, at the sole option of the Company, on the "Conversion Date" or on the "Redemption Date" (as those terms are hereinafter defined), and no more, payable in preference and priority to any payment of any cash dividend on the Common Stock or any other shares of capital stock of the Corporation. Such dividends shall be payable to the holders of record of the Preferred Shares on the close of business on either the Conversion Date or on the Redemption Date, as the case may be, (such date is referred to hereinafter as the "Dividend Payment Date"), provided that, before any dividend may be paid with respect to the Common Stock, or any other distribution of corporate assets made thereon, holders of the Preferred Shares shall receive all dividends accrued thereon.
(2) Each of such annual dividends shall be fully cumulative and shall accrue, whether or not declared, without interest, from the first day of the period in which such dividend may be payable as herein provided.
(3) No dividends shall be declared or paid or set apart for payment on the Common Stock, or on the preferred stock of any series ranking, as to dividends, junior to the Series B Preferred Stock, for any period unless fully cumulative dividends have been or contemporaneously are declared and paid (or declared and a sum sufficient for the payment thereof has been set aside for such payment) on the Series B Preferred Stock for all dividend payment periods terminating on or prior to the date of payment of such fully cumulative dividends. Unless fully cumulative dividends have been paid on the Series B Preferred Stock, no other distribution shall be made upon the Common Stock of the Corporation or upon any securities junior to the Series B Preferred Stock.
Conversion:
The holders of the Preferred Shares shall have conversion rights
as follows:
(1) Mechanics of Conversion
In order for a holder of Preferred Shares to convert all or some portion of the Preferred Shares into shares of Common Stock, and subject to the restrictions set forth herein, such holder shall surrender the certificate or certificates for such Preferred Shares [the "Preferred Share Certificate(s)"] at the office of the transfer agent of the Preferred Stock (or the principal office of the Corporation, if the Corporation serves as its own transfer agent) together with written notice as set forth in the conversion certificate executed by such holder ("Notice") that such holder elects to convert all or a specified number of Preferred Shares represented by such Preferred Share Certificate(s), provided that conversion shall not be permitted with respect to less than 100 Preferred Shares at any one time unless such shares represent the full amount then convertible as set forth herein, and accompanied, if required by the Corporation, by such holder's blank executed stock power. The "Conversion Date" shall be the date of receipt of such Preferred Share Certificate(s) and Notice by the transfer agent (or by the Corporation, if the Corporation serves as its own transfer agent). The Corporation shall, as soon as practicable after the Conversion Date, issue and deliver to such holder of the Preferred Shares, a certificate for the number of shares of Common Stock to which such holder shall be entitled.
(2) Right to Convert
Subject to the provisions for adjustment and Redemption
hereinafter set forth, on or after the date of issuance of the
Preferred Shares (the "Issue Date"), each such Preferred Share
shall be convertible (the "Conversion Right"), at the option of
the holder thereof, into forty (40) shares of Common Stock plus
the number of shares of Common Stock determined by dividing the
sum of (x) the accrued dividends as of the Conversion Date on
the Preferred Shares to be converted, by (y) one dollar ($1.00)
[the "Conversion Price"].
(3) Reservation of Shares of Common Stock
The Corporation shall, for so long as there are Preferred
Shares outstanding, reserve and keep available out of its authorized but un-issued shares of Common Stock, for the purpose of effecting the conversion of the Preferred Shares, such number of duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Shares, and the Corporation will use its reasonable best efforts to take the action necessary to increase the number of reserved shares from time to time, if needed, and to increase the number of authorized shares of Common Stock if such an increase becomes necessary to permit exercise of the Conversion Right.
(4) Conversion Adjustment.
The number of shares of Common Stock into which the Preferred Shares may be converted shall be subject to adjustment from time to time under certain circumstances as follows:
(i) In the event that the Corporation shall at any time prior to such conversion either: (a) subdivide the outstanding shares of Common Stock into a greater number of shares, (b) combine the outstanding shares of Common Stock into a smaller number of shares, (c) change the outstanding shares of Common Stock into the same or a given number of shares of another class or classes of shares, or (d) declare a dividend on or in respect of the outstanding shares of Common Stock or other securities of the Corporation, or (e) offer to all the holders of the shares of Common Stock any rights to subscribe for shares or for other securities of the Corporation, then the holders of the Preferred Shares shall be entitled, as the case may be, to receive the same number of shares of Common Stock or other securities of the Corporation, or to purchase at the same price that the shares or securities are being offered to all the holders of the shares of Common Stock, the number of such shares or the amount of such securities as will represent the same proportional ownership of the outstanding shares of Common Stock prior to such increase or decrease as they would have been entitled to receive or subscribe for, as the case may be, had they been holders of the number of shares of Common Stock into which their Preferred Shares were convertible on the record date for any such event.
(ii) In the event of a merger, including any statutory merger
of the Corporation with and into any of its wholly-owned subsidiaries ("Merger"), lawful provision shall be made as part of the terms of such Merger that all the Preferred Shares then outstanding, if any, (together with all accumulated dividends thereon) shall be automatically converted into the right to receive the number of such shares or the amount of such securities or assets as the holders of such Preferred Shares would have been entitled to receive had they been holders of the number of shares of Common Stock into which their Preferred Shares were convertible on the record date for any such Merger.
(iii) In the event of the sale of substantially all the assets of the Corporation, lawful provision shall be made as part of the terms of such sale that all the Preferred Shares then outstanding, if any, (together with all accumulated dividends thereon) shall be automatically converted into the right to receive the same kind and amount of securities or assets as may be issuable, distributable or payable upon such sale with respect to the shares of Common Stock of the Corporation.
(5) Fractional Shares.
The Corporation shall not issue fractional shares in satisfaction of the Conversion Right of the Preferred Shares or in satisfaction of dividends on the Preferred Shares, but, in lieu thereof, all such fractional shares, if any, shall be rounded up to the nearest whole share amount on the Conversion Date or Dividend Payment Date, as the case may be.
(6) From and after the Conversion Date, unless there shall have been a default in payment of the Conversion Price, all rights of the holders of the Preferred Shares designated for conversion in the Notice or in the Merger as holders of the Preferred Shares (except the right to receive the Conversion Price without interest upon surrender of their certificate or certificates) shall cease with respect to such Preferred Shares designated for conversion, and such Preferred Shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever.
Redemption:
(1) At any time after twelve months after the Issue Date (or at
any time upon the mutual agreement of the Corporation and all holders of Preferred Shares), while there are such Preferred Shares outstanding, the Corporation may, at the option of its Board of Directors, redeem all or any number of such Preferred Shares then outstanding by paying $40 per Preferred Share for each Preferred Share so redeemed plus all accrued but unpaid dividends then outstanding on the Preferred Shares so redeemed (the "Redemption Price"). The Redemption Price may be paid, at the Company's sole discretion, in cash or in shares of the Company's Common Stock valued at one dollar ($1.00) per share of Common Stock.
(2) At least 30 days prior to the date fixed for any redemption of the Preferred Shares (hereinafter referred to as a "Redemption Date"), written notice shall be mailed, by first class or registered mail, postage prepaid, to each holder of record of Preferred Shares to be redeemed, to the address of such holder shown on the records of the Corporation, notifying such holder of the election of the Corporation to redeem such Preferred Shares, indicating whether the Redemption Price will be paid in cash or in shares of Common Stock, specifying the Redemption Date, which will also be the date on which such holder's Conversion Right pursuant to this Certificate as to such Preferred Shares being redeemed shall terminate, and calling upon such holder to surrender to the Corporation, in the manner and at the place designated, such holder's certificate or certificates representing the Preferred Shares to be redeemed (such notice is hereinafter referred to as the "Redemption Notice"). On or prior to the Redemption Date, each holder of the Preferred Shares to be redeemed shall surrender his or its certificate representing such Preferred Shares to the Corporation in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price of such Preferred Shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. From and after the Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of the Preferred Shares designated for redemption in the Redemption Notice as holders of the Preferred Shares (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such Preferred Shares designated for
redemption, and such Preferred Shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. (See Note 4 - SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK)
(3) Subject to the provisions hereof, the Board of Directors of the Corporation shall have authority to prescribe the manner in which the Preferred Shares shall be redeemed. Any Preferred Shares so redeemed shall be permanently retired, shall no longer be deemed outstanding and shall not under any circumstances be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Preferred Shares accordingly.
Voting:
Except as may be required by the Delaware General Corporation Law or as set forth in the next following sentence, the Preferred Shares shall not be entitled to vote on any matters submitted to the stockholders of the Corporation. Without the approval of holders of a majority of the outstanding Preferred Shares, the Corporation shall not (1) authorize, create or issue any shares of any class or series ranking senior to the Preferred Shares as to liquidation rights, (2) amend, alter or repeal, by any means, the Certificate of Incorporation whereby the powers, preferences, or special rights of the Preferred Shares would be adversely affected or (3) subject the Preferred Shares to any restrictions, other than restrictions arising solely under the Delaware General Corporation Law or existing under the Corporation's Certificate of Incorporation.
Liquidation:
In the event of a liquidation, dissolution or winding up of the Corporation, the holders of the Preferred Shares shall be entitled to receive, after due payment or provision for the payment of the debts and other liabilities of the Corporation and prior to any liquidating distribution in respect to any other class of stock, a liquidating distribution equal to the Redemption Price.
Other:
The Corporation is authorized to issue the balance of the preferred stock not designated or otherwise provided for herein, from time to time in one or more series, with such designations, relative rights, preferences or limitations permitted by the relevant provisions of the Delaware General Corporation Law as shall be fixed by the Board of Directors in the resolution or resolutions providing for the issuance of such stock, in respect of any class or classes of stock or any series of any class of stock of the Corporation which may be desired but which shall not be fixed by the provisions contained herein. The Board of Directors is expressly authorized to adopt such resolution or resolutions providing for the issuance of such stock, including the power to specify the number of shares in any series, from time to time, as the Board of Directors, in its discretion, may deem desirable.
Pursuant to the Certificate of Designation, Preferences and Rights for Series B Preferred Stock and a resolution of the Board of Directors, the Company redeemed all Preferred Shares outstanding on the Redemption Date, September 28, 2007.
On December 8, 2005, Omagine entered into a Securities Purchase Agreement (the "Purchase Agreement") with Cornell Capital Partners, LP ("Cornell"). Upon the terms and subject to the conditions contained in the Purchase Agreement and other documents executed coincident with the Purchase Agreement (collectively, the "Transaction Documents"), the Company agreed to sell to Cornell and Cornell agreed to purchase up to $500,000 of secured convertible debentures (each, a "Convertible Debenture" and collectively, the "Convertible Debentures"). Pursuant to the Purchase Agreement, on December 8, 2005 Cornell purchased a Convertible Debenture (the "First Debenture") from the Company in the face amount of $250,000 for a like amount. The principal sum of the First Debenture together with accrued but unpaid interest at an annual rate of 10% was payable on or before December 7, 2008. Pursuant to the Purchase Agreement, on January 24, 2006 Cornell purchased a second Convertible Debenture (the "Second Debenture") from the Company in the face amount of $250,000 for a like amount. The principal sum of the Second Debenture together with accrued but unpaid interest at an
annual rate of 10% was payable on or before January 23, 2009.
As of the date of this Report the Convertible Debentures and all accrued interest thereon have been paid in full.
The Company had the right, with three business day's advance written notice, to redeem a portion or all amounts outstanding under the Convertible Debentures prior to their maturity dates as follows: the Company would have had to pay an amount equal to the principal amount outstanding and being redeemed plus accrued interest thereon, plus a redemption premium of 20% of such principal amount being redeemed.
The Convertible Debentures were convertible into shares of the Company's Common Stock at the option of Cornell. The number of shares of Common Stock issuable upon a conversion equaled the quotient obtained by dividing the then outstanding amount of the Convertible Debenture to be converted (plus accrued interest thereon, if the interest was also being converted) by a price per share equal to 90% of the lowest volume weighted average price ("VWAP") of the Company's Common Stock during the fifteen trading days immediately preceding the conversion date, subject to adjustments set forth in the Convertible Debentures (the "Conversion Price").
No event of default, as defined in the Convertible Debentures, occurred. The Convertible Debentures were secured pursuant to the terms of a Pledge and Escrow Agreement the Company entered into on December 8, 2005 with Cornell and David Gonzalez, as "Escrow Agent". Pursuant to the Pledge and Escrow Agreement, the Company pledged 3,000,000 shares of its Common Stock (the "Pledged Shares") to secure payment of the Convertible Debentures. The certificate issued in the name of the Company representing the Pledged Shares which was delivered to the Escrow Agent has been returned to the Company for cancellation and Cornell has filed the appropriate documents to extinguish and terminate their security interests in any of the Company's assets.
On December 8, 2005, the Company also entered into a Registration Rights Agreement with Cornell. Pursuant to the Registration Rights Agreement, the Company agreed to prepare and file with the SEC a registration statement for the resale by
Cornell of the shares of Common Stock to be issued upon conversion of the Convertible Debentures and the 257,732 shares of Common Stock underlying the Warrant. The Company filed such registration statement with the SEC on Form SB-2 on January 23, 2006. The registration statement was declared effective by the SEC on July 24, 2006.
Pursuant to the Purchase Agreement, the Company issued a warrant dated December 8, 2005 ("Warrant") to Cornell to purchase 257,732 shares of Common Stock at an exercise price of $0.97 per share, subject to adjustment as set forth in the Warrant (the "Exercise Price"). If at the time of exercise of the Warrant, the shares of Common Stock underlying the Warrant are not subject to an effective registration statement under the Securities Act of 1933, as amended (the "Act"), the holder of the Warrant, in lieu of making payment of the Exercise Price in cash, may elect a cashless exercise in accordance with the formula set forth in the Warrant. In July 2007, the Company issued 79,161 shares of its Common Stock to the holder of the Debenture Warrant upon the "cashless exercise" thereof by such holder.
Additional adjustments were permitted, subject to the exceptions set forth in the Warrant. If during the time that the Warrant was outstanding the Company issued or sold, or was deemed to have issued or sold, any shares of Common Stock for a consideration per share less than a price equal to the then Exercise Price, then the Exercise Price would be reduced to an amount equal to such consideration per share. Upon each such adjustment, the number of shares of Common Stock issuable upon exercise of the Warrant would be adjusted to the number of shares determined by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares issuable upon exercise of the Warrant immediately prior to such adjustment and dividing the product by the Exercise Price resulting from such adjustment. Similar adjustments would be made upon any issuance or sale by the Company of options to purchase Common Stock or convertible securities.
The Debentures and the Warrant were issued pursuant to Rule 506 of Regulation D promulgated under the Act and/or Section 4(2) of the Act. The transaction documents were filed as exhibits to the Company's filing on Form 8-K dated December 9, 2005.
In accordance with Emerging Issues Task Force Issue 98-5, Accounting for Convertible Securities with a Beneficial Conversation Feature or Contingently Adjustable Conversion Ratios ("EITF 98-5"), Omagine recognized an imbedded beneficial conversion feature present in the Debentures.
Omagine allocated a portion of the proceeds equal to the intrinsic value of that feature to capital in excess of par value. Omagine measured an aggregate of $184,986 of the proceeds, which is equal to the intrinsic value of the imbedded beneficial conversion feature, and recognized it to capital in excess of par value and a discount against the debentures. The discount is amortized over the convertible debentures' maturity period (three years) as interest expense.
In connection with the issuance of the Debentures, Omagine issued a warrant granting the holder the right to acquire 257,732 shares of Omagine's Common Stock at an exercise price of $0.97 per share, subject to certain adjustments.
In accordance with Emerging Issues Task Force Issue 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments ("EITF - 00-27"), Omagine recognized the value attributable to the warrant in the amount of $69,421 to capital in excess of par value and a discount against the Debenture. Omagine valued the warrant in accordance with EITF 00-27 using the Black-Scholes pricing model.
The transfer agent for Omagine's Common Stock is Continental Stock Transfer and Trust Company, 17 Battery Place, New York, New York 10004.
The transfer agent for Omagine's Preferred Stock is the Company.
The financial statements for fiscal years 2007 and 2006 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, Contact and Ty- Breakers.
During 2007, Omagine concentrated on concluding the Development Agreement with the Government of Oman with respect to the Omagine Project proposed by JOL.
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 JOL will be determined by management when and if it becomes likely that JOL 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.
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 under the 1995 Private Securities Litigation Reform Act that involve various risks and uncertainties. Typically, these statements are 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 the Founder Shareholders to sign the Development Agreement with the Government of Oman.
* Failure of Omagine SAOC 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 the fiscal years 2007 and 2006.
Results of Operations:
Fiscal Year Ended December 31, 2007 Compared to Fiscal Year Ended December 31, 2006
JOL did not generate any revenue in 2007 and the $1 million revenue in 2006 at JOL was a non-recurring item attributable to a contract settlement. On May 1, 2006 a previously disclosed dispute between JOL and the State of Qatar was settled by the
State of Qatar paying JOL $1 million. 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: "Description of Business - Products, Services - The Omagine Project").
The Company's total revenue in 2007 was $29,590, a decrease of $1,152,733 (97.5%) from fiscal year 2006. This decrease was attributable to the $1 million contract settlement at JOL in 2006 mentioned above, net of an approximately $161,733 decrease in apparel product sales during the fiscal year. Although Contact's President and Vice-President of Sales were terminated during 2006 the ongoing business operations of Contact and Ty- Breakers continued throughout 2007 and the first quarter of 2008 and the Company filled the Contact orders on hand. The Company discontinued Contact's business in its entirety in March 2008. While the Company is focusing all of its efforts on JOL's real estate development business, the Company may accept future Ty- Breaker orders subject to time constraints and its ability to fill such orders.
The cost of sales percentage for apparel sales was 111% in fiscal 2007 and 73% in fiscal 2006. The Company will hereafter rely on its JOL subsidiary's operations for future revenue generation. 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 $36,107 during 2007, compared to $105,641 in 2006. This decrease of $69,534 (66%) was a reflection of a decrease in such costs at Contact and JOL. The Company's marketing and promotional expenditures were $304 during 2007. No further selling and marketing expenses are required by Contact or Ty-Breakers. Assuming a positive outcome of the current Discussions regarding the Omagine Project, the Company is expected to incur significant expenses related to marketing, public relations and promotional expenditures in the future.
General and administrative expenses of $996,657 in fiscal 2007 were $591,197 (37%) lower than the $1,587,854 incurred in fiscal 2006. This decrease was primarily attributable to the
decrease of approximately $607,000 at JOL for travel, consulting, legal and professional fees associated with the Omagine Project, including costs and fees related to JOL's March 2006 presentation of the Omagine Project to the Government of Oman.
The Company sustained a net loss of $1,043,190 during 2007 as compared to a net loss of $767,951 during 2006. The primary reason for this increase of $275,239 (36%) was that the Company's net loss of $767,951 in 2006 was ameliorated by the $1 million extraordinary income item in 2006 attributable to the above-mentioned settlement with the State of Qatar.
The Company expects to experience losses for at least the next several quarters due to an insufficient level of revenue. The Company will need to raise significant capital and/or secure significant financing in order to execute its presently conceived business plan with respect to JOL. The continued losses for the Company are attributable to the failure to attain a sufficient level of sales and revenue. The Company will need to substantially increase its sales revenue in order to attain profitability.
No significant capital expenditures were incurred during fiscal year 2007. Depending upon the outcome of current negotiations and the availability of resources, the Company may incur significant expenses related to capital expenditures during fiscal 2008.
Liquidity and Capital Resources
The Company has experienced negative cash flows from operations for the past several years. In 2007, the Company's negative cash flow from operations of $(1,058,678) was offset primarily by its positive cash flow from financing activities of $1,769,512 consisting of: the $1,039,125 net proceeds from exercise of Common Stock warrants; the $755,000 net proceeds from the sale by the Company of shares of its Common Stock; and the $24,610 decrease in loans to the Company from Officers and Directors. The Company incurred net losses of $1,043,190; 767,951 and $5,900,662; [$820,743 before a non-cash charge of $5,079,919 for
goodwill expense] in fiscal 2007, 2006 and 2005, respectively, an aggregate net loss of $7,711,803 [$2,631,884 before a non- cash charge in 2005 of $5,079,919 for goodwill expense] for those three fiscal periods. The Company will no longer incur any Contact expenses for advertising, marketing or promotional expenses but does expect, subject to the Omagine Project going forward, such expenses to increase.
At December 31, 2007, the Company had a working capital of ($181,078),compared to a working capital deficit of ($920,162) at December 31, 2006. This $1,101,240 increase in the Company's working capital is attributable to the following:
(a) $685,184 increase in Cash and equivalents [primarily due to sales of Common Stock and exercise of Common Stock warrants};
(b) $9,642 increase in prepaid expenses and other current assets;
(c) a $24,610 decrease in loans to the Company from officers and directors;
(d) a $12,140 decrease in Customer deposits;
(e) a $140,517 decrease in accrued officer payroll;
(f) a $285,278 decrease in accounts payable; offset by:
(a) a $26,276 reduction in accounts receivable;
(b) a $16,792 increase in accrued expenses and other current liabilities
(c) a $13,063 reduction in Inventory
At December 31, 2007, the Company had $736,381 in current assets, consisting of $713,145 in cash and $10,173 of prepaid assets.
The Company's current liabilities at December 31, 2007 totaled $542,240, consisting of $335,297 of accounts payable and accrued expenses, $26,907 due to officers and directors and $180,036 in
accrued payroll. Of the $542,240 of current liabilities at December 31, 2007, - $206,943 or 38% represents amounts which are due to officers and/or directors.
The $1,058,678 of funds used by operating activities during 2007 were used primarily to fund the net loss of $1,043,190 [less the non-cash charges totaling $43,273] plus the increases in prepaid expenses and other current assets($9,642);accrued officers' payroll($140,517); decreases in customer deposits ($12,140); accrued interest payable ($875); and cancellation of common stock issued for consulting services($10,951). Operating funds were primarily provided by decreases in accounts receivable ($26,276); decrease in Inventory ($13,063); increases in accounts payable ($56,752); accrued expenses and other current liabilities ($16,791) and issuance of Common Stock for consulting services ($750).
Funds totaling $25,650 were invested during 2007 in computer and office equipment.
Funds totaling $1,769,512 were provided by financing activities during 2007 from proceeds realized from the sale of Common Stock ($755,000); proceeds from the exercise of Common Stock warrants ($1,039,125) offset by a decrease of loans and advances to the Company from officers and directors ($24,610) and purchase of Common Stock ($3).
As a result of the foregoing, the Company had a cash balance at December 31, 2007 of $713,145 as compared to a cash balance of $27,961 at December 31, 2006.
The Company will rely upon the business of its JOL subsidiary for revenue growth.
The continuation of JOL's efforts to organize Omagine SAOC, sign the Development Agreement and develop the Omagine Project is also contingent upon the receipt by Omagine and/or JOL of the necessary financing to fund JOL's operations.
There can be no assurance given at this time that the Company will be able to raise or secure the significant amounts of financing necessary for it to execute its presently conceived business plan. The Company's inability to secure or arrange
additional funding to implement JOL's business plan will significantly affect JOL's - and the Company's - ability to continue operations.
In March 2004 Contact entered into a one-year agreement (the "Factoring Agreement") with a company ("Factor") specializing in factoring accounts receivable. The Factoring Agreement was deemed renewed from year to year following the initial term unless terminated with notice by either party. In March 2006 Contact gave such notice of termination to the Factor and subsequently the Factor and Contact agreed to continue the Factoring Agreement after March 2006 on a month-to-month basis. The Factoring Agreement continued in effect until March 15, 2007 when it was terminated in accordance with its terms by Contact.
Prior to the date hereof, the Company has to a great extent relied on the net proceeds from private placement sales of its Debentures and equity securities to fund its operations. No assurances can be given that such sales will be able to be made in the future.
As of December 31, 2007, Omagine had no warrants outstanding. All unexercised common stock purchase warrants held by the holders of Series B Preferred Stock expired on July 31, 2007. During July 2007, 1,380,167 of such Warrants were exercised by the holders thereof prior to the expiration date and the Company received proceeds therefrom of $1,035,125. The 2,720,333 remaining Warrants expired unexercised on July 31, 2007.
In July 2007, the Company issued 79,161 shares of its Common Stock to the holder of the Debenture Warrant upon the "cashless exercise" thereof by such holder. (See Note 3). In December 2007, the Company issued 20,000 shares of the Company's Common Stock to the holder of a Warrant and the Company received $4,000 from the exercise of such Warrant. (See: Notes to Financial Statements - Note 5)
The general level of inflation both in the U.S and Oman has been relatively low during the last several fiscal years and has not had a significant impact on the Company.
As discussed just prior to Item 1, "Description of Business", certain statements made in this report on Form 10-KSB 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 JOL's ongoing efforts relative to its signing of 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 the success or failure of Omagine's continuing efforts to secure additional financing.
The response to this item is submitted as a separate section to this report commencing on Page F-1.
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure
------- -------------------------------------------------
None
Item 8A. Controls and Procedures
------- -----------------------
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Within the 90 days prior to the date of the filing of this Form 10-KSB, 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 of the design and operation of the Company's disclosure controls and procedures pursuant to Securities Exchange Act of 1934 Rule 13a-14(c) and 15d-14(c). Based upon that evaluation, the Company's chief executive and financial officer concluded that the Company's disclosure controls and procedures are effective in timely alerting him to material information relating to the Company required to be included in the Company's periodic SEC filings. There have been no significant changes in the Company's internal controls or other factors which could significantly affect internal controls subsequent to the date of the evaluation.
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.
The Company adopted a web-based software solution to automate and streamline its Sarbanes-Oxley compliance program. The Company formally contracted with an unaffiliated third party software supplier in a software end user license agreement ("End User Agreement") which was signed December 4, 2007. The End User Agreement remained in force until January 31, 2008 for the purpose of establishing Software access and set up, and to receive training in the use of the software. Commencing February 1, 2008, the End User Agreement automatically renewed for subsequent one year periods, unless the Company notifies the software supplier of its intention not to renew the End User Agreement after which the software supplier provides the Company an opportunity to extend the End User Agreement until the end of the Company's then-current fiscal year or for ninety (90) days,
whichever is longer. The product enables the Company to document and assess the design of controls, track the testing of their effectiveness and easily locate and remedy any deficiencies. The Company pays an annual fee for unlimited access to the web-based platform. The software is fully operational and was successfully implemented for the filing of this Report on form 10-KSB
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 of the effectiveness of the small business issuer's internal control over financial reporting is as of the year ended December 31, 2007. We believe that internal control over financial reporting is effective. We have not identified any (i) current material weaknesses considering the nature and extent of our current operations,
or (ii) any risks or errors in financial reporting under
current operations.
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 that permits us to provide
only management's report in this annual report.
None
The present Directors and Executive Officers of the Company are as follows:
Name Age Position
---- --- --------
Frank J. Drohan 63 Chairman of the Board of
Directors, President, Chief
Executive & Financial Officer
Charles P. Kuczynski 54 Vice-President, Secretary and
Director
Salvatore J. Bucchere 64 Director
Kevin O'C. Green 60 Director
Louis J. Lombardo 63 Director
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Frank J. Drohan has served as a Director, Chairman of the Board,
President and CEO of Omagine since 1991. 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") and Renaissance Development
Holdings, Inc.("RDH"), both of which are privately held
companies 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 served as a Director and Secretary of Omagine, between 1988 and 1993. He was also President of Ty-Breakers Corp. and Vice President of Contact Sports, Inc. until both Contact and Ty-Breakers were merged into Omagine in March 2008. Mr. Kuczynski is a Director and the Secretary of JOL. He also serves as the Secretary of TRT and RDH.
Salvatore J. Bucchere has served as an outside 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 Co. From 1982 until its bankruptcy filing in 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.
Kevin O'C. Green graduated from St. Peter's Preparatory School, Jersey City, New Jersey in 1966 and 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 has extended to several different states. He has represented many business clients over the years, including the Minneapolis Star and Tribune. 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 Omagine director since 2001.
Louis J. Lombardo became an Omagine Director on 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, 2007, the Board of Directors of Omagine consisted of two inside 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 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 financial expert. See: ("Item 9 - Salvatore J. Bucchere"). The three independent outside members of the Board of Directors, Mr. Lombardo, Mr. Bucchere and Mr. Green comprise the compensation committee. Mr. Lombardo is the Chairman of the Compensation 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 also attached to this Report as Exhibit 3.1.
JOL's primary strategic consultant, Mr. Sam Hamdan ("Hamdan"), President and Chief Strategist of the Michigan based Global Leadership Team, is 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 and 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 JOL. On March 19, 2007 Omagine and Hamdan signed a the Hamdan Agreement (see: "Employees & Consultants") The Hamdan Agreement does not obligate Omagine to
pay any cash compensation to Hamdan for his services thereunder but does grant Hamdan options to purchase up to 800,000 shares of Omagine's Common Stock at a purchase price of $0.25 per share, exercisable ratably over five (5) years from the date of the Hamdan Agreement (the "Hamdan Options"). In addition the Hamdan Agreement contemplates that, subsequent to the Financial Closing Date, Hamdan will 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.
Section 16(a) Beneficial Ownership Reporting Compliance
NONE
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 2007 $ 52,083 0 62,500 $ 0 $114,583
2006 $ 26,042 0 98,958 $ 7,500 $132,500
2005 $ 0 0 125,000 0 $125,000
(1) Amounts included under Column (c) represent cash salary
payments and amounts included under Column (e) represent
unpaid salary which has been accrued on Registrant's books.
(2) Column (f) represents the dollar amount recognized as
compensation expense for financial statement reporting
purposes for the year indicated under SFAS No. 123(R),
and not an amount paid to or realized by the named
Executive Officer. The amount shown represents awards
granted prior to 2006. There can be no assurance that the
amounts determined by SFAS No. 123(R) will ever be
realized. Assumptions used in the calculation of these
amounts are included in Note 1- STOCK-BASED COMPENSATION
- to the Company's audited financial statements for the
fiscal year ended December 31, 2007.
Management has concluded that the aggregate amount of personal
benefits does not exceed 10% of the total compensation reported
in column (g) of the foregoing table as to any person
specifically named in such table.
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The following table shows the number of shares covered by exercisable and unexercisable options held by the Company's Chief Executive Officer on December 31, 2007.
OMAGINE, INC.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
DECEMBER 31, 2007
(b) (c)
Number of Number of
Securities Securities
Underlying Underlying (d)
Unexercised Unexercised Option Exercise (e)
(a) Options (#) Options (#) Price Option Expiration
Name Exercisable Unexercisable ($) Date
---- ---------- ------------- ------------- -----------------
Frank J. Drohan 500,000 0 $0.25 August 31, 2011
There were no shares of the Company's Common Stock acquired
during 2007 upon the exercise of options.
No stock options were granted in 2007 to the Company's Chief
Executive Officer or any other Officer. There can be no
assurance that the Grant Date Fair Value of Stock Option
Awards will ever be realized.
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The following table summarizes information as of the close of business on December 31, 2007 about (i) the options under the Alfa International Corp. 2003 Stock Option Plan (the "Alfa Plan") which was approved by the Company's stockholders and (ii) options issued outside of the Alfa Plan.
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, warrants in column (a)
warrants and rights and rights
(a) (b) (c)
--------------- ----------------- --------------------
Alfa Plan 1,040,000 $0.38 1,460,000
-----------------------------------------------------------------------------------------
Non-Alfa Plan 860,000 $0.24 0
-----------------------------------------------------------------------------------------
TOTAL 1,900,000 $0.32 1,460,000
-----------------------------------------------------------------------------------------
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Our current stock option plan (the "Alfa Plan") is explained below under the heading "Stock Options" and in Note 6 to the accompanying consolidated financial statements.
The following chart summarizes the annual compensation for the Company's non-employee directors during 2007.
Director Compensation
---------------------
(b) (c) (e)
Fees Stock (d) All Other (f)
(a) Earned Awards Option Awards Compensation Total
Name ($) ($) ($) (1) ($) ($)
------------------------ ----- ------- ------------- ------------ -----
Salvatore Bucchere $1,000 0 1,000 0 2,000
Kevin Green $1,000 0 1,000 0 2,000
Louis Lombardo 0 0 4,112 0 5,111
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(1) Column (d) represents the dollar amount recognized as
compensation expense for financial statement reporting
purposes for the year indicated under SFAS No. 123(R),
and not an amount paid to or realized by the named
Director. The amount shown represents awards
granted prior to 2007. There can be no assurance that the
amounts determined by SFAS No. 123(R) will ever be
realized. Assumptions used in the calculation of these
amounts are included in Note 1- STOCK-BASED COMPENSATION
- to the Company's audited financial statements for the
fiscal year ended December 31, 2007. Directors who are not
Company employees are compensated for their service as a
director as shown in the chart below:
Schedule of Director Fees December 31, 2007
Compensation Item Amount ($) -------------------------------------------- ---------- 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 30,000 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, 10,000 options (or such other number of shares 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).
On the date of appointment to the Board, new non-employee outside Directors are entitled to a one-time grant of 30,000 non-qualified stock options (or such other number of shares determined by the Board in its discretion) effective on the date of appointment. The price of the option is the closing bid price on the date of grant and the option vest over three years provided the Board member continues to hold office. On November 14, 2004, the Company awarded options to purchase 30,000 shares of its Common Stock to each of its then two outside Directors - Mr. Green and Mr. Bucchere, at an exercise price of $0.17 per share. The options expire five years after the date of grant. Effective January 1, 2004, 2005 and 2006 10,000 of such options vested to each of Messrs. Bucchere and Green. On July 1, 2005, the Company awarded options to purchase 30,000 shares of its Common Stock to Mr. Louis J. Lombardo, an outside Director, at an exercise price of $1.00 per share. The options expire five years after the date of the grant. Effective July 1, 2005, 2006, and 2007, 10,000 of such options vested to Mr. Lombardo. Non-employee outside Board members that have served on the Board for at least 3 years will be granted 10,000 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 30,000 shares of its Common Stock to each of Messrs. Bucchere and Green at an exercise price $0.90 per share. The options expire five years after the date of grant. 10,000 of such options vested on October 30, 2007, and an additional 10,000 of such options vested on January 1, 2008 to each of Messrs. Bucchere and Green. Effective January 1, 2009 an additional 10,000 of such options shall vest to each of Messrs. Bucchere and Green provided they are still a director of the Company on such date. On January 1, 2008, 30,000 options were granted to Mr. Lombardo at an exercise price of $0.80. 10,000 of such options vested on the grant date. Provided Mr. Lombardo is a director of the Company on such dates, 10,000 options shall vest on January 1, 2009, and an additional 10,000 options shall vest on January 1, 2010.
Directors of the Company, who are employees of the Company do not receive additional compensation for their services as Directors.
There was no repricing of any options during fiscal year 2007. The Company has never issued any stock appreciation rights.
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 100,000 shares of Common Stock at $0.25 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, effective October 1, 2004, the Drohan Agreement was modified and, except for a six week period in 2006, the Company suspended salary payments to Mr. Drohan. Beginning November 1, 2004 and continuing through August 1, 2007, Mr. Drohan provided services to the Company pursuant to the Drohan Agreement and the Company has accrued Mr. Drohan's unpaid salary. 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.
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 was terminable by the Company as of December 31, 2003 provided that the Company's net sales for 2003 were not at least $1,000,000. Mr. Kuczynski's employment agreement provided for an option to purchase 50,000 shares of Common Stock at $0.25 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 and the Company discontinued making salary payments to Mr. Kuczynski. The Company has accrued $37,982 of unpaid salary due to Mr. Kuczynski and has agreed to pay such unpaid and accrued salary to Mr. Kuczynski without interest when, and if, the Company has the financial resources to do so. Beginning November 1, 2004 and continuing through August 1, 2007, the Company has engaged the services of Mr. Kuczynski as a consultant and an employee and has agreed to keep the Kuczynski Options in effect until Mr. Kuczynski ceases to be either a consultant or employee of the Company. The Company has made payments to him for such consulting services which comprised services similar to those he provided as an Omagine employee plus services associated with Contact and JOL. Effective August 1, 2007 the Company re-employed this individual at an annual salary of $85,000. 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.
Pursuant to a written employment agreement effective September 1, 2001 (the "Giscombe Agreement"), Contact was obligated through December 31, 2006 to pay its President and Chief Operating Officer, Mr. Kye Giscombe, an annual base salary of $75,000, plus an additional bonus based on a combination of Contact's net sales and earnings before taxes. The Giscombe Agreement was terminable by the Company as of December 31, 2003 provided that the Company's net sales for 2003 were not at least $1,000,000. Mr. Giscombe's employment agreement provided for an option to purchase 50,000 shares of Alfa's Common Stock at $0.25 per share during each of the first 5 years of the employment term (the "Giscombe Options"). By mutual agreement between the Company and Mr. Giscombe, effective October 1, 2004, the Giscombe Agreement was cancelled and the Company discontinued making salary payments to Mr. Giscombe. Beginning November 1, 2004 and continuing through April 30, 2006, the Company had
engaged the services of Mr. Giscombe as a consultant and the Company had made payments to him for consulting services which comprised services essentially identical to those he provided to Contact as a Contact employee. Pursuant to a May 1, 2006 letter agreement Mr. Giscombe was rehired by Contact as an "at will" employee without any employment agreement. Pursuant to the Alfa Plan, the Company had agreed to keep the Giscombe Options in effect until Mr. Giscombe ceased to be either a consultant or employee of Contact. Provided Contact was successful in its "branded-product" business, the Company intended to enter into a new employment agreement with Mr. Giscombe. Contact was not successful in its "branded-product" business and in July 2006 Mr. Giscombe ceased to be either an employee or consultant of Contact or the Company. The Giscombe Options expired unexercised in 2006 in accordance with their terms.
In February 2004, Contact hired Edward Baker ("Baker") as its Vice President of Sales. Contact and Baker entered into an interim employment agreement covering the period February 9, 2004 to June 30, 2004 and providing for customary fringe benefits (the "Interim Agreement"). At June 30, 2004, Contact and Baker agreed to extend the Interim Agreement. In accordance with a Letter Agreement (the "January Letter Agreement") dated January 15, 2005, Baker ceased to be an employee of Contact or the Company effective January 15, 2005. Effective January 16, 2005, the individual became a consultant to Contact, providing services similar to those performed by him as a Contact employee. Pursuant to the January Letter Agreement, Omagine also granted Baker an option to purchase up to 50,000 shares of its common stock at a purchase price of $.10 per share (the "Baker Option"), such option valid until January 30, 2007 but exercisable only if Baker is employed by, or engaged as a consultant to, Contact at the time of such exercise. Pursuant to a May 4, 2006 letter agreement (the "May Letter Agreement") Mr. Baker was re-engaged by Contact as a consultant and the Company agreed to keep the Baker Option in effect until Mr. Baker ceased to be either a consultant or employee of Contact. Provided Contact met its sales goals in its "private-label" business, the Company intended to enter into a new employment agreement with Mr. Baker. Contact did not attain its sales goals for 2006 in its "private-label" business and in December 2006 Mr. Baker ceased to be either an employee or consultant of Contact. In December 2006, the Baker Option expired unexercised in
accordance with its terms.
The Company is or was a party to the following consulting agreements with different parties as follows:
A. Consulting Agreement:
Effective December 20, 2004 the Company entered into a two-year agreement whereby the consultant would assist the Company in its financial public relations, marketing, promotional and capital raising activities. This agreement expired in accordance with its terms on December 19, 2006. Pursuant to the agreement Omagine issued 100,000 shares of its unregistered and restricted Common Stock to the consultant and issued the consultant a warrant for 20,000 shares of Common Stock at an exercise price of $0.20 per share. The warrant was exercised on December 14, 2007 prior to the expiration date.
B. Consulting Agreement:
Effective March 19, 2007 Omagine entered into a consulting
agreement with Mr. Sam Hamdan (See: "Employees and
Consultants"). On December 31, 2007, the expiration date of the
Hamdan Agreement, Mr. Hamdan and Omagine entered into an amended
agreement ("Amended Agreement") changing the expiration date to
December 31, 2008. All other terms and conditions of the Hamdan
Agreement remain in full force and effect, whereby (i) 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 800,000 shares of
Omagine's Common Stock at $0.25 per share (the "Hamdan Option"),
exercisable ratably at 160,000 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.
Stock Options
The Company instituted the "Alfa International Corp. 2003 Stock Option Plan" (the "Alfa Plan"). The Alfa Plan provides for the granting of Incentive Stock Options and Non-qualified Stock Options to all employees and others who perform key services, to purchase up to 2,500,000 shares of Common Stock 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 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 Alfa Plan was approved by the Company's shareholders and expires on February 28, 2014.
On March 19, 2007, in accordance with the Hamdan Agreement, Omagine issued Hamdan options to purchase up to 800,000 shares of Omagine's Common Stock at $0.25 per share exercisable ratably at 160,000 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. 320,000 of such options are currently exercisable. 160,000 Hamdan Options are scheduled to vest each on April 1, 2009, 2010, and 2011 provided Mr. Hamdan is an Omagine employee on such dates.
Pursuant to an agreement dated August 27, 2007, Omagine issued Agora 200,000 shares of Common Stock (the "Agoracom Shares") as compensation for services rendered through December 31, 2006, and continued its option ("Agoracom Options") for 200,000 shares of Common Stock at a purchase price of $0.82 per share in effect.
Agora acknowledged and agreed that (a) the Agoracom Shares are, and (b) the Common Stock issuable upon exercise of the Agora Options will be, "restricted securities" within the meaning of
the Securities Act of 1933, as amended. The Agoracom 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 30,000 non-qualified stock options to Mr. Louis J. Lombardo, an outside director. The options are exercisable at a price of $1.00 per share and expire five years after the date of the grant. As of the date of this Report, all 30,000 of Mr. Lombardo's options are vested.
In January 2008, the Company issued 30,000 non-qualified stock options to Mr. Louis J. Lombardo, an outside director. The options are exercisable at a price of $0.80 per share and expire five years after the date of grant. As of the date of this Report, 10,000 of Mr. Lombardo's options are vested. Effective January 1, 2009, 10,000 of such options shall vest, and an additional 10,000 of such options shall vest to Mr. Lombardo on January 1, 2010 provided he is still a director of the Company on such dates.
In November 2004, the Company issued 30,000 non-qualified stock options to Mr. Salvatore J. Bucchere, an outside director and 30,000 non-qualified stock options to Mr. Kevin O'C. Green an outside director. The options are exercisable at a price of $0.17 per share and expire five years after the date of grant. All such options are currently exercisable.
In October 2007, the Company issued 30,000 non-qualified stock options to Mr. Salvatore J. Bucchere, an outside director, and 30,000 non-qualified stock options to Mr. Kevin O'C. Green, an outside director. The options are exercisable at a price of $0.90 per share and expire five years after the date of grant. 10,000 of such options vested on October 30, 2007, and an additional 10,000 of such options vested on January 1, 2008 to each of Messrs. Bucchere and Green. Effective January 1, 2009, an additional 10,000 of such options shall vest to each of Messrs. Bucchere and Green provided they are still a director of the Company on such date.
In September 2001 in connection with their employment agreements, the Company issued non-qualified stock options to
Messrs. Drohan, Giscombe and Kuczynski to purchase a total of 1,000,000 shares of the Company's Common Stock. The options are exercisable at a price of $0.25 per share, vest ratably over five years and expire ten years after the date of grant. Mr. Giscombe's 250,000 options expired unexercised in 2006. The 500,000 options held by Mr. Drohan and the 250,000 options held by Mr. Kuczynski are currently exercisable.
As of December 31, 2007, there were no incentive stock options outstanding under the Alfa Plan, and there were 1,900,000 non- qualified options issued and outstanding as follows:
Name No. of options Option Price Date of Grant --------------- -------------- ------------ ----------- Frank Drohan 500,000 $0.25 9/l/2001 Charles Kuczynski 250,000 $0.25 9/l/2001 Salvatore Bucchere 30,000 $0.17 11/1/2004 Kevin Green 30,000 $0.17 11/1/2004 Louis Lombardo 30,000 $1.00 7/1/2005 Agora P.R. 200,000 $0.82 12/16/2005 Sam Hamdan 800,000 $0.25 3/31/2007 Salvatore Bucchere 30,000 $0.90 10/30/2007 Kevin Green 30,000 $0.90 10/30/2007 |
The following table sets forth as of December 31, 2007: (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.
Beneficial
Name and Address Ownership (7) Percent
---------------- -------------- -------
Frank J. Drohan (1)(3) 6,047,441 13.3%
Charles P. Kuczynski (l)(4) 759,482 1.7%
Salvatore S. Bucchere (1)(5)(8) 101,744 0.2%
Louis J. Lombardo (1)(6) 281,300 0.6%
Kevin O. Green (1)(5)(8) 79,766 0.2%
Muftah Benomran (2) 4,661,078 10.2%
Mohammed K. Al-Sada (2) 5,249,092 11.5%
Sam Hamdan (2)(9) 2,764,352 6.1%
All officers and Directors
As a Group of 5 Persons 7,269,733 16.0%
----------------------------------------------------------------
|
(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 500,000 currently exercisable stock options granted under his employment agreement. All such options are exercisable at $0.25 per share.
(4) Does not include Mr. Kuczynski's 250,000 currently exercisable stock options granted under his employment agreement. All such options are exercisable at $0.25 per share.
(5) Does not include the 60,000 currently exercisable stock options (30,000 held by Mr. Bucchere and 30,000 held by Mr. Green) granted to them upon their election as outside directors. All such options are exercisable at $0.17 per share.
(6) Does not include Mr. Lombardo's (1) 30,000 currently exercisable stock options granted to him upon his election as an outside director. All such options are exercisable at $1.00 per share, or (2) 10,000 currently exercisable stock options granted to him in January 2008 and exercisable at $0.80 per share.
(7) 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.
(8) Does not include the 40,000 currently exercisable stock options (20,000 held by Mr. Bucchere and 20,000 held by Mr. Green).Options are exercisable at $0.90 per share.
(9) Does not include Mr. Hamdan's 320,000 currently exercisable stock options granted under his consulting agreement. All such options are exercisable at $0.25 per share.
Mr. Sam Hamdan, who has a consulting agreement with Omagine and who, under certain circumstances, may become Omagine's 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 2,454,490 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.
At December 31, 2007, the Company has included $205,536 in its balance sheet as related party payables representing accrued and unpaid salary and unreimbursed expenses due to Mr. Drohan and Mr. Kuczynski.
(a) Exhibits numbered in accordance with Item 601(a) of Regulation S-B.
Exhibit Page
Numbers Description Number
------- ------------- -------
31 Sarbanes-Oxley certification 64
32 Sarbanes-Oxley certification 66
3.1 The Amendment to the Certificate
of Incorporation of the Company
99.1 The CCIC Agreement
99.2 The Hamdan Agreement Amendment
99.3 The Hamdan Agreement (as Exhibit A
to the Hamdan Agreement Amendment,
incorporated by reference to
Exhibit 99.2 as filed in Form 10-KSB
for the year ended December 31, 2006
on April 17, 2007.)
99.4 The Certificate of Ownership and Merger
14 The Code of Ethics
|
(b) Reports on Form 8-K
On December 10, 2007 the Company filed a Form 8-K disclosing a press release that JOL signed a Memorandum of Understanding with Bank Muscat SAOG.
On December 11, 2007 the Company filed a Form 8-K disclosing a press release naming Consolidated Contractors Company Oman LLC as the General Contractor for the proposed Omagine Project.
On December 18,2007 the Company filed a Form 8-K disclosing a
press release announcing Consolidated Contractors International Company S.A.(CCIC) as a minority equity partner for the proposed Omagine Project.
The registrant was billed by its independent registered public accounting firm $24,000 in 2006 and $25,000 in 2007 for all auditing and review services performed by him for the Registrant in connection with Registrant's regulatory filings during such fiscal years.
None
The Registrant was billed by its independent registered public accounting firm $5,000 in 2006 and $-0- in 2007 for all tax accounting work performed by them associated with the Registrant's tax return filings for such fiscal years.
On behalf 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.
SIGNATURES
Pursuant to the requirements of 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.
Omagine, Inc.
By: /s/ Frank J. Drohan
FRANK J. DROHAN, Chairman
of the Board of Directors,
President and Chief
Executive and Financial 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
Dated: April 14, 2008
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following person who is the Principal Executive Officer, the Principal Financial Officer and a Director on behalf of the Registrant and in the capacity and on the date indicated.
Name Title Date
---- ----- ----
Chairman of the Board,
/s/ Frank J. Drohan President and Chief April 14,2008
FRANK J. DROHAN Executive and Financial
Officer
|
CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14 AND 15d-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Frank J. Drohan, certify that:
1. I have reviewed this annual report for the period ended December 31, 2007 on Form 10-KSB of Omagine, Inc. (the "Registrant");
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and I have:
a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; and
b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.
5. I have disclosed, based on my most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's Board of Directors:
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls.
6. I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: April 14, 2008 /s/ Frank J. Drohan -------------------------- Frank J. Drohan Chief Executive Officer and Chief Financial Officer |
The originally executed copy of this Certification will be maintained at the Company's offices and will be made available for inspection upon request.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Omagine, Inc. on Form 10-KSB for the period ending December 31, 2007 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, the undersigned certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Omagine, Inc.
/s/Frank J. Drohan ------------------------- Frank J. Drohan Chief Executive and Financial Officer April 14, 2008 |
The originally executed copy of this Certification will be maintained at the Company's offices and will be made available for inspection upon request.
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, 2007 and 2006 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, 2007 and 2006 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, 2008 ------------------------------
Freeport, New York F-1
|
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 2007 2006
-------- -------
CURRENT ASSETS:
Cash $713,145 $ 27,961
Accounts receivable - 26,276
Inventories - 13,063
Prepaid expenses and other current assets 10,173 531
-------- --------
Total Current Assets 723,318 67,831
-------- --------
PROPERTY AND EQUIPMENT:
Office and computer equipment 129,941 104,292
General plant 17,800 17,799
Furniture and fixtures 15,951 15,951
Leasehold improvements 866 866
-------- --------
Total 164,558 138,908
Less: Accumulated depreciation and amortization (139,988) (123,273)
-------- --------
Property and Equipment 24,570 15,635
-------- --------
OTHER ASSETS:
Other assets 13,749 13,749
-------- --------
TOTAL ASSETS: $ 761,637 $ 97,215
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 298,630 $ 583,908
Customer Deposits - 12,140
Accrued officer payroll 180,036 320,553
Due officers and directors 26,907 51,517
Accrued expenses and other current liabilities 36,667 19,876
-------- --------
Total Current Liabilities 542,240 987,994
-------- --------
LONG-TERM LIABILITIES:
Convertible Debentures, net of Discounts - 77,922
Accrued Interest payable on
Convertible Debentures - 41,794
------- --------
Total Long-Term Liabilities - 119,716
------- --------
TOTAL LIABILITIES: 542,240 1,107,710
========= =========
COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock:
$0.001 par value
Authorized: 1,000,000 shares,
Undesignated preferred stock:
Authorized - 850,000 shares:
Issued and outstanding: - none - -
Series B preferred stock:
Authorized - 150,000 shares:
Issued and outstanding:
-0- shares in 2007 and
86,937 shares in 2006 87
Common stock:
$0.001 par value
Authorized: 75,000,000 shares
Issued and outstanding:
45,542,439 shares in 2007 and
32,112,964 shares in 2006 45,542 32,113
Capital in excess of par value 16,748,237 14,365,056
Retained earnings (deficit) (16,574,382) (15,407,751)
----------- -----------
Total Stockholders' Equity (Deficit) 219,397 (1,010,495)
----------- -----------
Total Liabilities and Stockholders'
Equity $ 761,637 $ 97,215
=========== ===========
See accompanying notes to consolidated financial statements.
|
OMAGINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
-----------------------
2007 2006
----------- -----------
REVENUES:
Net sales $ 29,590 $ 182,323
Settlement of dispute 1,000,000
---------- -----------
Total revenues 29,590 1,182,323
---------- -----------
COSTS AND EXPENSES:
Cost of sales 32,821 132,318
Selling, general and administrative 1,012,386 1,693,495
---------- -----------
Total Costs and Expenses 1,045,207 1,825,813
---------- -----------
OPERATING LOSS (1,015,617) ( 643,490)
Interest income 33 492
Interest expense (27,606) (124,953)
---------- -----------
NET LOSS (1,043,190) ( 767,951)
PREFERRED STOCK DIVIDENDS 123,441 21,042
---------- -----------
LOSS APPLICABLE TO COMMON STOCKHOLDERS $(1,166,631) $( 788,993)
============ ============
BASIC AND DILUTED LOSS PER SHARE $ (.03) $ (.03)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
BASIC AND DILUTED 40,812,103 29,774,011
=========== ============
See accompanying notes to consolidated financial statements.
|
OMAGINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Pref. Stock Capital in Retained
Par Par Excess of Earnings
Shares Value Shares Value Par Value Deficit)
--------------------------------------------------------
---------- ------ ------- --- ----------- ------------
BALANCES, DECEMBER 31, 2005 28,389,587 $28,390 107,100 $107 $13,977,789 $(14,618,758)
---------- ------ ------- --- ----------- ------------
Issuance of common stock
for cash 50,000 50 19,950
Issuance of common stock
upon conversion
of debentures 2,475,160 2,475 194,902
Conversion of preferred stock
for common stock 806,500 807 (20,163) (20) (787) -
Issuance of preferred stock
dividends in common stock 391,717 391 - - 63,633 -
Stock option expense - - - - 56,791 -
Beneficial conversion feature
of convertible debenture - - - - 52,778 -
Preferred stock dividends - - - - - (21,042)
Net loss - - - - - (767,951)
---------- ------ ------ --- ----------- -----------
Balances At December 31,2006 32,112,964 $32,113 86,937 $87 $14,365,056 $(15,407,751)
---------- ------ ------ --- ----------- -----------
Issuance of Common Stock for
consulting services 6,250 6 744
Issuance of Common Stock for
cash 2,850,000 2,850 752,150
Purchase of Common Stock for
cash (10) (3)
Issuance of Common Stock upon
conversion of debentures 2,737,629 2,738 124,206
Issuance of Common Stock in
payment of accounts payable 2,800,337 2,800 339,230
Cancellation of Common Stock
issued for consulting
services (45,000) (45) (10,906)
Issuance of Common Stock upon
exercise of warrants 1,479,328 1,479 1,037,646
Preferred Stock and dividends
converted to Common Stock 3,600,941 3,601 (86,937) (87) 119,927
Stock option expense 20,187
Preferred stock dividends (123,441)
Net Loss (1,043,190)
Balances at December 31,2007 45,542,439 45,542 - - 16,748,237 (16,574,382)
See accompanying notes to consolidated financial statements.
|
OMAGINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------
2007 2006
-----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,043,190) $( 767,951)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Depreciation and amortization 23,086 100,671
Stock based compensation related to stock options 20,187 56,791
Issuance of common stock for Consulting services 750 -
Cancellation of Common Stock issued for
Consulting services (10,951) -
Changes in operating assets and liabilities:
Accounts receivable 26,276 (23,646)
Inventories 13,063 (11,643)
Prepaid expenses and other current assets (9,642) 19,971
Other assets - (235)
Accounts payable 56,752 196,663
Customer Deposits (12,140) (16,028)
Accrued expenses and other current liabilities 16,791 (46,670)
Accrued officers payroll (140,517) 145,630
Accrued interest payable on convertible debentures 857 40,219
---------- ----------
Net cash flows used by operating activities (1,058,678) (306,228)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (25,650) (3,894)
---------- -----------
Net cash flows used by investing activities (25,650) (3,894)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans from officers and directors (24,610) 51,517
Proceeds from issuance of common stock 755,000 20,000
Proceeds from issuance of convertible debentures - 225,000
Proceeds from exercise of common stock warrants 1,039,125 -
Purchase of Common Stock (3) -
---------- ----------
Net cash flows from financing activities 1,769,512 296,517
---------- ----------
NET CHANGE IN CASH 685,184 (13,605)
CASH BEGINNING OF YEAR 27,961 41,566
----------- ----------
CASH END OF YEAR $ 713,145 $ 27,961
=========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ - $ -
=========== ==========
Interest paid $ 20,378 $ -
=========== ==========
NON-CASH FINANCING ACTIVITIES:
Preferred stock dividends paid in
common stock $ 123,441 $ 21,042
========== ==========
Issuance of Common Stock in payment of
accounts payable $ 342,030 $ -
=========== ==========
Issuance of Common Stock upon conversion of
Debentures and accrued interest $ 126,944 $ 197,377
========== ==========
See accompanying notes to consolidated financial statements.
|
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. to June, 2007) and its wholly-owned subsidiaries, Journey of Light, Inc. ("JOL"), Contact Sports, Inc. ("Contact") and Ty-Breakers Corp. ("Ty- Breakers"), collectively referred to as the "Company". All inter-company transactions have been eliminated in consolidation.
Nature of the Business - Omagine is a holding company which operates through its JOL, Contact and Ty-Breakers subsidiaries. JOL is in the real estate development business in Oman. Contact and Ty-Breakers' design, manufacture and distribute apparel products.
Financial Instruments - Financial instruments include cash, accounts receivable, accounts payable and accrued expenses, convertible debenture and accrued interest on convertible debenture. 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 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 is recognized upon shipment when goods are shipped to customers from the Company's outside warehouse. Products produced and sold by Contact and Ty-Breakers carry an implied warranty of merchantability and fitness for purpose only, and, except in the case of manufacturing defects, customers do not have the right to return products sold. Products sold on a "guaranteed sale" or "consignment" basis are maintained on Contact's records as inventory until they are paid for by the customer at which time the revenue is recognized. In the event that JOL, or a subsidiary of JOL, signs a development agreement with the Government of Oman, JOL, or such subsidiary of JOL, will recognize revenue ratably over the development period, measured by methods appropriate to the services or products provided.
Inventories - Inventories are stated at the lower of cost (first-in, first-out method) or market.
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 will establish 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.
Advertising and marketing costs - Advertising and marketing costs of approximately $1,698 in 2007 and $53,520 in 2006 were expensed as incurred.
STOCK-BASED COMPENSATION:
On January 1, 2006, we adopted Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS 123(R), that addresses the accounting for share-based payments transactions in which an enterprise receives employee services in exchange for either equity instruments of the enterprise or liabilities that are based on the fair value of the enterprise's equity instruments or that may be settled by the issuance of such equity instruments.
The statement eliminates the ability to account for share-based compensation transactions, using the intrinsic value method as prescribed by Accounting Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to Employees, and generally requires that such transactions be accounted for using a fair- value-based method and recognized as expenses in our consolidated statement of income.
We adopted SFAS 123 (R) using the modified prospective method which requires the application of the accounting standard as of January 1, 2006. Our accompanying consolidated financial statements for the years ended December 31,2007 and 2006 reflect the impact of adopting SFAS 123 (R). In accordance with the modified prospective method, the consolidated financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123 (R).
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. SFAS 123 (R) 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, 2007 and 2006 were $20,187 and $56,791, 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:
The Company has incurred significant operating losses raising 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 DEBENTURES:
On December 8, 2005, Omagine sold a convertible debenture ("First Debenture") in the face amount of $250,000 to an investor in exchange for $215,000, net of placement costs and fees. On January 24, 2006 Omagine sold a second convertible debenture ("Second Debenture") in the face amount of $250,000 to the same investor in exchange for $225,000, net of placement costs and fees. The First Debenture was payable on or before December 7, 2008 and the Second Debenture was payable on or before January 23, 2009. Both the First Debenture and the Second Debenture (collectively "Debentures") accrued interest at 10% per annum. The holder had the option, at any time, to convert the then outstanding balance of the Debenture together with accrued and unpaid interest thereon into shares of Omagine's Common Stock at a price per share equal to 90% of the lowest volume weighted average price of a share of Common Stock during the fifteen trading days immediately preceding the conversion date, subject to certain adjustments. As of March 21, 2007 the Debentures together with all accrued and unpaid interest thereon have been paid in full through such conversions into shares of Common Stock.
The warrant that was sold with the First Debenture (the "Debenture Warrant") gave the holder the right to purchase 257,732 shares of Common Stock at a purchase price of $0.97 per share and included an optional "cashless exercise" provision. In July 2007, the holder of the Debentures exercised the Debenture Warrant pursuant to the "cashless exercise" provision and was issued 79,161 shares of Common Stock pursuant thereto which represented the full exercise of
the Debenture Warrant. The Company received no proceeds from the "cashless exercise" and no portion of the Debenture Warrant remains outstanding or available for the purchase of any further shares of Common Stock.
NOTE 4 - SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Omagine had designated 150,000 shares of its $0.001 par value preferred stock as "Series B Preferred Stock". The face value of the Series B Preferred Stock was $40 per share and dividends accrued at 5.0% per annum. Each share of Series B Preferred Stock was convertible at the option of the holder, at any time, into 40 shares of Common Stock. Accrued dividends , at the Company's option, were paid in cash or in shares of Common Stock valued at $1.00 per share.
Pursuant to the Certificate of Designation, Preferences and Rights for Series B Preferred Stock and a resolution of the Board of Directors, on September 28, 2007 (the "Redemption" Date"), the Company redeemed all 76,437 Preferred Shares issued and outstanding on the Redemption Date.
The Company paid forty-one dollars and forty-eight cents ($41.48) per Preferred Share (the "Redemption Price") to the registered holders of the 76,437 Preferred Shares outstanding on the Redemption Date. The Redemption Price was calculated by adding the $40.00 face value of each Preferred Share to the $1.48 of dividends accrued thereon.
The Redemption Price was paid in shares of the Company's Common Stock valued at one dollar ($1.00) per share.
From and after the Redemption Date, all rights of the holders Of the Series B Preferred Shares (except for the right to receive the Redemption price without interest upon surrender of their Certificate or certificates) ceased with respect to such Preferred Shares. At December 31,2007,no Series B Preferred Shares or any other shares of Preferred Stock are issued or outstanding.
The Series B Preferred Stock has been excluded from the computation of diluted earnings per share for the fiscal years ended December 31, 2007 and December 31, 2006, as the conversion
would be anti-dilutive after adding back Preferred Stock dividends to the respective net losses for each of those years.
The 2,720,333 unexercised Common Stock purchase warrants held by the holders of Series B Preferred Stock (the $0.75 Warrants) expired on July 31, 2007. During July 2007, 1,380,167 of such $0.75 Warrants were exercised by the holders thereof and the Company received proceeds therefrom of $1,035,125.
NOTE 5 - COMMON STOCK
In February and March 2007, the Company sold a total of 2,300,000 shares of its Common Stock to three individuals (including 50,000 shares to a Company director) at a price of $0.10 per share and the Company received the total net proceeds of $230,000. In May 2007 the Company sold 50,000 shares of its Common Stock to an individual at a price of $0.50 per share and the Company received net proceeds of $25,000. In December of 2007 the Company sold 500,000 shares of its Common Stock to an individual at a price of $1.00 per share and the Company received the total net proceeds of $500,000.
In February and March 2007, the Company issued a total of 2,737,629 shares of its Common Stock to the holder of the Convertible Debentures in satisfaction of $175,000 of principal amount of the Debentures and $42,651 of accrued interest.
In March 2007, the Company issued a total of 2,600,303 shares of its Common Stock in satisfaction of $260,030 of accounts payable (including 145,813 shares to a Company Officer). In September 2007, the Company issued 200,000 shares of its Common Stock to an investor relations consultant in satisfaction of an $82,000 account payable due to the consultant.
In July and August 2007, the Company issued a total of 430,312 Shares of its Common Stock (including 10,312 shares in payment of dividends payable), to holders of 10,500 Preferred Shares upon conversion of such Preferred Shares by the holders thereof. In September 2007, the Company issued a total of 3,170,629 shares of Common Stock (including 113,129 shares in payment of
dividends payable)to holders of 76,437 Preferred Shares which the Company redeemed pursuant to the Redemption Notice (See Note 4).
In July 2007, the Company issued 1,380,167 shares of its Common Stock to holders of $0.75 Warrants upon the exercise thereof by such holders. The Company received $1,035,125 from the exercise of such $0.75 Warrants. In July 2007, the Company issued 79,161 shares of its Common Stock to the holder of the Debenture Warrant upon the "cashless exercise" thereof by such holder. (See Note 3).
In December 2007, the Company issued 20,000 shares of its Common Stock to a holder of $0.20 Warrants upon the exercise thereof by such holder. The Company received $4,000 from the exercise of such $0.20 Warrants.
Note 6 - STOCK OPTIONS AND WARRANTS:
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 ("Alfa 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 Alfa Plan. The adoption of the Alfa 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 90,000 non- qualified stock options to three individuals in connection with their continued service as independent outside directors. As of the date hereof 50,000 of such options are vested and the remaining 40,000 of such options are scheduled, in accordance with their terms, to vest 30,000 on January 1, 2009, and 10,000 on January 1, 2010. 60,000 of such options are exercisable at a price of $0.90 per share and 30,000 are exercisable at a price of $0.80 per share.
The Alfa 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.
A summary of stock option and warrant activity is as follows:
Year Ended December 31,
------------------------------------------------------
2007 2006
------------------------- ------------------------
Stock Options Warrants Stock Options Warrants
------------- -------- ------------- --------
Outstanding at January 1 1,165,000 4,450,467 1,465,000 6,112,467
Granted and Issued 860,000 - - -
Exercised - (1,657,899)
Forfeited/expired/cancelled (125,000) (2,792,568) (300,000) (1,662,000)
---------- --------- --------- ---------
Outstanding at December 31 1,900,000 - 1,165,000 4,450,467
---------- --------- --------- ---------
Exercisable at December 31 1,220,000 - 1,155,000 4,450,467
---------- --------- --------- --------- --------- ---------
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Stock options outstanding at December 31, 2007 (all non-qualified) consist of:
Year Number Number Exercise Expiration
Granted Outstanding Exercisable Price Date
------- ----------- ----------- -------- ----------
2001 750,000 750,000 $ .25 August 31, 2011
2004 60,000 60,000 $ .17 October 31, 2009
2005 30,000 30,000 $1.00 June 30, 2010
2005 200,000 200,000 $ .82 December 14, 2010
2007 (A) 800,000 160,000 $ .25 March 31, 2012
2007 (B) 60,000 20,000 $ .90 October 29, 2012
--------- ----------
Totals 1,900,000 1,220,000
========= ==========
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(A) The 640,000 unvested options relating to the 2007 grant are scheduled
to vest 160,000 on April 1, 2008 and 160,000 each April 1, thereafter
for three succeeding years.
(B) The 40,000 unvested options relating to the 2007 grant are scheduled
to vest 20,000 on January 1, 2008 and 20,000 on January 1, 2009.
As of December 31, 2007, there was $123,008 of total unrecognized compensation cost relating to unexpired stock options. That cost is expected to be recognized $36,840 in 2008, $32,498 in 2009, $30,210 in 2010, $18,768 in 2011, and $4,692 in 2012.
NOTE 7 - INCOME TAXES:
Deferred tax assets are comprised of the following:
December 31
----------------------
2007 2006
---------- ----------
Federal net operating loss
carry forwards $3,930,000 3,580,000
State net operating loss
carry forwards, net of
federal tax benefit 630,000 630,000
---------- ----------
4,560,000 4,210,000
Less: Valuation allowance 4,560,000 4,210,000
----------- -----------
Total $ - $ -
========== ==========
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The Company's effective tax rate differs from the expected federal income tax rate due to changes in the valuation allowance at December 31, 2007 and 2006.
Management has determined, based on the Company's current condition, that a full valuation allowance is appropriate at December 31, 2007.
At December 31, 2007, the Company had Federal net operating loss carry forwards of approximately $11,560,000, expiring in various amounts from fiscal year 2008 to fiscal year 2027. 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 8 - 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.
The real estate development business of the Company is conducted through its wholly owned subsidiary JOL which is past its initial stages of business development. JOL is presently concluded negotiations with the Government of Oman with respect to JOL's proposed development, in cooperation with the Government of Oman, of an approximately $1.6 billion tourism related project and is awaiting the signing of the Development Agreement.
The apparel business of the Company is conducted primarily through its wholly owned subsidiaries - Contact Sports, Inc. ("Contact") and Ty-Breakers Corp. ("Ty-Breakers").
Summarized financial information by business segment for the fiscal years ended December 31, 2007 and December 31, 2006 is as follows:
2007 2006
================================================================
Revenue:
Real Estate Development $ 0 $1,000,000
Apparel 29,590 182,323
------- -------
Total $ 29,590 $1,182,323
================================================================
Operating Expenses:
Real Estate Development $ 353,179 $ 1,002,378
Apparel 82,648 335,863
Corporate 609,380 487,572
--------- ---------
Total $ 1,045,207 $ 1,825,813
================================================================
Operating Loss:
Real Estate Development $ .(353,179) $ ( 2,378)
Apparel ( 53,058) (153,540)
Corporate ( .609,380) ( 487,572)
--------- ---------
Total $(1,015,617) $( 643,490)
--------- ---------
================================================================
F-16
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Identifiable Assets:
Real Estate Development $ 771 $ 1,880
Apparel 39,354 80,239
Corporate 721,512 15,096
------- -------
Total $ 761,637 $ 97,215
================================================================
Capital Expenditures:
Real Estate Development $ - $ -
Apparel - -
Corporate 25,650 3,894
------- -------
Total $ 25,650 $ 3,894
================================================================
Depreciation and Amortization:
Real Estate Development $ 936 $ 936
Apparel - -
Corporate 15,779 15,000
------- -------
Total $ 16,715 $ 15,936
================================================================
Geographic Information - net revenue:
United States $ 29,590 $ 182,323
Qatar - 1,000,000
------- ---------
$ 29,590 $ 1,182,323
================================================================
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Revenues of the real estate development business segment of $1,000,000 in 2006 represent the amount received relating to the settlement of a dispute between JOL and the State of Qatar.
Operating loss is total revenue less operating expenses, which include: cost of sales, selling, general and administrative expenses, and other corporate expenses.
In 2006,one customer of the real estate segment accounted for 100% of total segment revenues and two customers of the apparel segment accounted for 84% and 16% of total segment revenues respectively.
In 2007, one customer of the apparel segment accounted for 51% of total revenues and another customer accounted for 49% of total revenues.
NOTE 9 - 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 2007 and 2006 was $70,529 and $61,753 respectively. The Company also rents warehouse space in Jersey City, New Jersey under a month to month lease. Rent expense for the warehouse space for 2007 and 2006 was $12,100, and $12,000, respectively.
At December 31, 2007, the minimum lease payments under non- cancelable operating leases are as follows:
2008 $ 56,800
2009 $ 56,800
2010 $ 56,800
2011 $ 56,800
2012 $ 56,800
Thereafter $ 9,466
----------
Total $ 293,466
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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. As of August 1, 2007 this individual commenced receiving bi-monthly payroll checks for his annual salary of $125,000.
Omagine had been obligated to employ its Vice-President and Secretary under an employment agreement which was cancelled. Effective August 1, 2007 the Company re-employed this individual at an annual salary of $85,000. Provided the Company is successful in signing the Development Agreement with the Government of Oman for the Omagine Project, the Company will enter into a new employment agreement with this individual.
The Company had been obligated to employ Contact's President and Vice-President of Sales under separate agreements with these two individuals. These two agreements have been canceled and the individuals' service with the Company was terminated in 2006.
In March 2004 Contact entered into a one-year agreement (the "Factoring Agreement") with a company ("Factor") specializing in factoring accounts receivable. The Factoring Agreement was deemed renewed from year to year following the initial term unless terminated with notice by either party. In March 2006 Contact gave such notice of termination to the Factor and subsequently the Factor and Contact agreed to continue the Factoring Agreement after March 2006 on a month-to-month basis. The Factoring Agreement continued in effect until March 15, 2007 when it was terminated in accordance with its terms by Contact.
JOL is presently negotiating with the Government of Oman to sign a Development Agreement with respect to JOL's proposed development of the Omagine Project. As presently planned, the Omagine Project contemplates an integration of cultural, heritage, educational, entertainment and residential components, including a theme park and associated exhibition buildings, two hotels, commercial office buildings, shopping and retail establishments, restaurants and approximately 3,300 residential housing units, located on approximately 1,000,000 square meters of beachfront land facing the Gulf of Oman. The estimated cost of this Project is 1.6 billion U.S. Dollars and is estimated to take 4 to 5 years to complete.
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
The corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:
FIRST: That at a meeting of the Board of Directors of Omagine, Inc. resolutions were adopted setting forth a proposed amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the Article thereof numbered " FOURTH " so that, as amended, said Article shall be and read as follows:
The Corporation shall be authorized to issue two (2) classes of stock. One class shall be designated as Common Stock and shall be the voting stock of the corporation. The total number of Shares of Common Stock that the corporation is authorized to issue is seventy-five million (75,000,000) shares, with a par value of one-tenth of one cent ($0.001) each. The other class of stock corporation shall have authority to issue shall be designated as Preferred Stock, and shall be non-voting stock of the corporation. The total number of Shares of Preferred Stock that the corporation shall have authority to issue shall be eight hundred fifty thousand (850,000) Shares which shall have a par value of one-tenth of one cent ($0.001) each and which may be issued in series by the Board of Directors from time to time. The terms, conditions and character of the Shares of Preferred Stock shall be fixed by the Board of Directors of the corporation prior to the time of any such Preferred Stock Shares are issued by the corporation.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this certificate to be signed this 18th day of January, 2008.
By: /s/ Charles P. Kuczynski
------------------------
Title: Corporate Secretary
Name: Charles P. Kuczynski
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AGREEMENT
This agreement dated as of December 9, 2007 (the "Agreement") is among Journey of Light, Inc., a corporation organized and existing under the laws of the state of New York in the United States of America ("JOL") on the one hand, and Consolidated Contractors Company Oman LLC, a limited liability corporation organized and existing under the laws of the Sultanate of Oman ("CCC") and Consolidated Contractors International Company, S.A., a corporation organized and existing under the laws of the country of Panama ("CCIC") on the other hand. CCC and CCIC are sometimes collectively referred to herein as "Consolidated" and each of JOL, CCC and CCIC are sometimes referred to herein as a "Party" or collectively as the "Parties".
1. The Development Agreement. As of the date hereof, JOL is finalizing a development agreement ("Development Agreement") with the government ("Government") of the Sultanate of Oman ("Oman"). A copy of the final draft Development Agreement is attached hereto as Exhibit A. The Development Agreement describes the terms and conditions under which a real estate development project to be designated by the Government as an "Integrated Tourism Complex" (the "Omagine Project") will be developed in Oman by Omagine S.A.O.C. [under formation] (the "Project Company").
2. Definitions. All capitalized terms in this Agreement shall, unless otherwise indicated herein, have the meanings assigned to them in Exhibit A - the Development Agreement.
3. Relationship of the Parties.
3.1 As of the date hereof, JOL has signed a memorandum of understanding ("MOU") with BankMuscat SAOG (the "Bank"). The MOU (a copy of which is attached hereto as Exhibit B) contemplates, among other things, the Bank (i) becoming the Project Company's financial advisor, (ii) raising any additional equity requirements that the Project Company may require subsequent to the Effective Date, (iii) advising the Project Company with respect to its capital structure, and (iv) securing and placing the debt requirements necessary to secure the Construction Financing and the Financial Closing.
3.2 As of the date hereof, JOL (i) has finalized an agreement dated December 8, 2007 (the "MB Agreement") with Mohammed Barwani Investment Company LLC, an Omani limited liability company ("MB"). A copy of the MB Agreement is attached hereto as Exhibit C) and describes the terms and conditions under which MB will invest thirteen million four hundred sixty two thousand Omani Rials (OMR 13,462,000) in the Project Company (the "MB Investment") and become a Founder Shareholder of the Project Company.
3.3 The purpose of this Agreement is to memorialize the
terms and conditions upon which the Parties have agreed with
respect to (i) CCIC becoming a minority Founder Shareholder of
the Project Company, and (ii) the appointment of CCC as the
General Contractor for the Omagine Project. From and after the
date hereof, the Parties agree to cooperate for the purpose of
(i) concluding and signing a construction contract between CCC
and the Project Company pursuant to this Agreement covering 100%
of the Omagine Project (the "Construction Contract") (ii)
including CCIC as a Founder Shareholder in the Development
Agreement, (iii) the appointment of CCC as the General
Contractor for the Omagine Project, and (iv) arranging with the
relevant financial institutions ("Financial Institutions") the
necessary construction financing for the Project (the
"Construction Financing") and arriving at that date (the
"Financial Closing Date") on which the legally binding
documents providing the Construction Financing (the "Financing
Documents") are executed and delivered by the Project Company
and the Financial Institutions (the "Financial Closing").
4. Construction Contract. The Parties agree that, subject to the terms and conditions of this Agreement, CCC shall be appointed as the General Contractor for the Omagine Project by the Project Company and shall be awarded the Construction Contract. The value of the Construction Contract shall be equal to the negotiated total cost of construction (exclusive of program management, construction management and design fees) for the Omagine Project (the "Total Construction Costs"). CCC shall supply the Project Company with a competitive price for the Total Construction Costs in line with industry norms and shall cooperate with the Project Company and its project management, engineering and design consultants (collectively, the "Consultants") in this regard. CCC agrees that concurrent with the signing of the Construction Contract that it will execute and deliver the "Contractor's Completion Warranty" in the form attached hereto as Exhibit D.
5. Term. This Agreement will terminate only upon the earlier of (i) the mutual written consent of the Parties, (ii) on April 30, 2008 if the Execution Date has not occurred on or before April 30, 2008, (iii) on the "Closing Date" (as hereinafter defined) if the Execution Date occurs on or before April 30, 2008, or (iv) upon receipt by the Project Company or JOL of a Withdrawal Notice pursuant to the provisions of Clause 8 (vi) hereof.
6. Expenses. The Parties hereby agree that each Party
shall be solely responsible for its own costs and expenses
incurred as a result of this Agreement or the transactions
contemplated hereby. "Development Expenses" are hereby defined
as the sum of all reasonable and substantiated direct and
indirect costs and expenses incurred by JOL prior to the
Financial Closing Date and associated with the negotiation of
the Development Agreement or the preparation, planning, design,
re-design and promotion of the Omagine Project. The "Success
Fee" is hereby defined as a management fee payable to JOL in the
amount of one-half of one percent (0.5%) of the Total
Construction Costs. The Parties hereby agree that at the
Financial Closing, subject to the agreement of the Lenders
providing the Financing, that the Project Company shall (i)
reimburse JOL in full for its Development Expenses, and
(ii) pay JOL the Success Fee. The Parties agree that the
Development Expenses from the date hereof up to and including
the Financial Closing Date shall be financed either (i) from the
MB Investment or (ii) by JOL. For the avoidance of doubt, the
Parties agree that no such Development Expenses shall be
financed by Consolidated nor shall Consolidated have any
liability with respect thereto.
7. The Stock Purchase Agreement and the Shareholders' Agreement. On a date (the "Closing Date") which shall be on or prior to the corporate formation date of the Project Company (the "Formation Date") and within sixty (60) days after the Execution Date, CCIC, MB and JOL shall execute a shareholders' agreement ("Shareholders' Agreement") with respect to the Project Company. On or before the Formation Date CCIC and the Project Company shall execute a stock purchase agreement (the "CCIC Stock Purchase Agreement"). The Shareholders' Agreement and CCIC Stock Purchase Agreement shall, among other things, memorialize the following agreed to terms and conditions as appropriate to each such agreement:
(i) the principles agreed upon in this Agreement and in the MB Agreement,
(ii) the formation of Omagine S.A.O.C. with one million authorized shares of capital stock (the "Shares") and 500,000 of such Shares subscribed for and issued on the Formation Date at one Omani Rial per Share in the aggregate amount of five hundred thousand Omani Rials (OMR 500,000) ,
(iii) a resolution of the Board of Directors of JOL (the "First JOL Resolution") authorizing and directing JOL to subscribe for 480,000 Shares (the "JOL Shares") at one Omani Rial per Share, in the aggregate amount of 480,000 Omani Rials (the "JOL Capital Contribution") together with a subscription agreement signed by JOL subscribing for the JOL Shares,
(iv) such resolutions of the Boards of Directors of MB and JOL together with such subscription agreements signed by MB and JOL as are contemplated and required by this Agreement and the MB Agreement; it being understood by the Parties that the MB Agreement calls for MB to invest (i) ten thousand Omani Rials (OMR 10,000) on the Formation Date in exchange for 10,000 Shares, and (ii) thirteen million four hundred fifty two thousand Omani Rials (OMR 13,452,000) on the Effective Date in exchange for 80,000 Shares.
(v) a resolution of the Board of Directors of CCIC (the "First CCIC Resolution") authorizing and directing CCIC to subscribe for 10,000 Shares (the "Initial CCIC Shares") at one Omani Rial per Share in the aggregate amount of 10,000 Omani Rials (the "CCIC Initial Capital Contribution") together with a subscription agreement signed by CCIC subscribing for the Initial CCIC Shares (the "First CCIC Subscription"),
(vi) a resolution of the Board of Directors of CCIC dated subsequent to the First CCIC Resolution (the "Second CCIC Resolution") authorizing and directing CCIC to subscribe for 50,000 Shares (the "Deferred Capital Shares") at three hundred eighty (380) Omani Rials per Share, in the aggregate amount of nineteen million Omani Rials [OMR 19,000,000] (the "Deferred Capital Contribution") together with a subscription agreement signed by CCIC, dated subsequent to the First CCIC Subscription and subscribing for the Deferred Capital Shares (the "Second CCIC Subscription"),
(vii) resolutions of the Boards of Directors of the Project Company and of JOL (the "Redemption Resolutions"), which Redemption Resolutions shall be dated subsequent to (a) the First JOL Resolution, and (b) receipt by the Project Company of the Deferred Capital Contribution. The Redemption Resolutions shall authorize and direct the sale by JOL to the Project Company of 50,000 of the JOL Shares at one Omani Rial per Share, in the aggregate amount of 50,000 Omani Rials (a "JOL Redemption") together with such other agreement signed by the Project Company and by JOL as may be required to effect the foregoing and to return such 50,000 JOL Shares to the Project Company's "authorized but un-issued" status,
(viii) payment by JOL and CCIC to the Project Company on the Formation Date of the JOL Capital Contribution and the CCIC Initial Capital Contribution respectively and the contemporaneous issuance to JOL of the JOL Shares and to CCIC of the Initial CCIC Shares,
(ix) agreement among the Parties that, for the period beginning on the Formation Date and ending on the Financial Closing Date, the Project Company intends to expend its funds for marketing, design, public relations and organization expenses and for the construction related activities of CCC mentioned in Section 8 (iii) hereof;
(x) JOL and CCIC shall agree in the Shareholders' Agreement that:
A. The Project Company's corporate governance and capital
raising activities will be managed by the Board of
Directors who shall be elected by the shareholders of the
Project Company, and
B. CCIC shall have representation (either directly or through
its nominee) on the Board of Directors proportionate to
the CCIC Percentage, provided only that CCIC shall have
at least one (1) director of its choice on the Board of
Directors, and
C. The Project Company shall have a professional
management team to develop and implement the Project
which shall be appointed by and be responsible to the
Board of Directors.
(xi) a "pre-emptive right" with respect to sales of Shares by any Founder Shareholder ("Founder Shares") whereby, except in the event of (i) any JOL Redemption, or (ii) an MSM Listing; each Founder Shareholder is required to offer its Founder Shares to the other Founder Shareholders before selling such Founder Shares to a third party.
(xii) such other terms and conditions (including those
mentioned in Sections 8(i) through Section 8(vi) hereof) as
agreed by the Parties and as are usual and customary in such
agreements.
(xiii) resolutions of the Boards of Directors of JOL, CCC,
CCIC and MB approving the execution and delivery of this
Agreement, the terms and conditions of this Agreement and the
transactions contemplated by this Agreement.
8. Negotiated Capital Structure. In addition to the preliminary financial model included in Schedule 17 to the Development Agreement, a variety of other business considerations were taken into effect by the Parties in arriving at this Agreement (the "Business Considerations"). Some of such Business Considerations were (i) the value of the Construction Contract being awarded to CCC, (ii) JOL's desire to have a single point of responsibility (a "General Contractor") for the construction activities related to the Omagine Project, (iii) JOL's desire to engage a reputable General Contractor presently mobilized in Oman, (iv) CCC's desire to be appointed the General Contractor and be awarded the Construction Contract, (v) the present value of the Existing Land, and (vi) recent sale prices for residential real estate in Integrated Tourism Complexes in Oman. The Business Considerations were the basis for arriving at the negotiated decision to issue sixty thousand (60,000) Shares (the "CCIC Shares") to CCIC in exchange for the CCIC Initial Capital Contribution and the Deferred Capital Contribution. The CCIC Shares shall represent twelve percent (12%) of the number of Shares of the Project Company issued and outstanding at the date of the JOL Redemption (the "CCIC Percentage") and JOL hereby represents and warrants to CCIC that it and the Project Company will, if and when necessary and in the manner specified as a JOL Redemption in Section 7(vii) hereof, redeem such further number of JOL Shares as may be necessary to assure that the CCIC Percentage will be equal to twelve percent (12%) on the Financial Closing Date. Among other Business Considerations, the Parties have relied in a general way upon the present estimate of the Total Construction Costs, Consolidated's market reputation, the value of the Existing Land and their best business judgment to arrive at the herein agreed amounts for the CCIC Shares and the CCIC Percentage. The weight given by the Parties to the various Business Considerations cannot be adequately measured mathematically and the Parties agree, especially as a result of the award of the Construction Contract to CCC, that the number of CCIC Shares and the amount of the CCIC Percentage and the Deferred Capital Contribution represent a fair and commercially reasonable negotiated agreement.
The Parties hereby agree that the Business Considerations include but are not limited to their mutual agreement on the following:
i. The award of the Construction Contract to CCC in the full amount of the Total Construction Costs and the occurrence of the Financial Closing are conditions precedent to CCIC's obligation to invest the Deferred Capital Contribution.
ii. The Parties agree that, subject only to the provisions
that (i) the Construction Contract between the Project Company
and CCC is signed on or before the Financial Closing Date, and
(ii) the Financial Closing occurs without a requirement for a
Recourse Provision (as hereinafter defined), CCIC is obligated
to invest the Deferred Capital Contribution on or before the
Financial Closing Date in exchange for the contemporaneous
issuance to CCIC of the Deferred Capital Shares.
iii. The Parties agree that the ability of CCC to mobilize and begin construction activities quickly after the Effective Date is an important consideration to JOL's entering into this Agreement and CCC therefore agrees that, provided suitable payment arrangements acceptable to CCC are in place with the Project Company, CCC will use its best efforts to begin those initial construction activities that do not require final design completion (e.g.: mobilization, site leveling, fencing, surveying, etc.) on the Existing Land as soon as reasonably possible after the Effective Date and prior to the signing of the Construction Contract.
iv. CCC agrees to use its best professional efforts and to cooperate fully with the Project Company and the Consultants in all "value engineering" and "constructability" studies undertaken during the process of finalizing the designs for the Masterplan and all Buildings and structures in the Project Area.
v. The Parties acknowledge that many "financial investors" (i.e. Bank Muscat OITPF Fund, institutional investors, and investors who are neither developers nor contractors) have expressed interest in investing in the Omagine Project and it is the Parties intention to cooperate with each other and with the Bank to mutually examine and carefully consider these potential investment options subsequent to the Execution Date and to maintain maximum flexibility in order to attain the optimum financial structure for the Omagine Project and the Project Company.
vi. Notwithstanding the above provisions of this Clause 8 or
any other provision of this Agreement, CCIC shall not be
obligated to invest the Deferred Capital Contribution as
specified in this Agreement if the Financing Documents
required by the Lenders to achieve the Financial Closing include
a provision providing for "recourse" to the Project Company's
shareholders for any reason whatsoever including but not limited
to an event of default under such Financing Documents (a
"Recourse Provision"). In the event of a Recourse Provision
occurring, CCIC may, at its sole option, choose to (i) go
forward with and comply with the terms and conditions of this
Agreement, or (ii) decline to go forward with and comply with
the terms and conditions of this Agreement (a "Withdrawal"). In
order for CCIC to exercise its right of Withdrawal, CCIC must
(a) be notified in writing by the Lenders that a Recourse
Provision will be required in the Financing Documents (a "CCIC
Notice"), and (b) give the Project Company (or if the Formation
Date has not yet occurred, JOL) written notice pursuant to the
provisions of Clause 11.5 hereof of its intention to exercise
its right of Withdrawal (a "Withdrawal Notice"). A Withdrawal
Notice must be given prior to the Financial Closing Date and
within ten (10) Days after receipt by CCIC of a CCIC Notice.
CCIC's right of Withdrawal shall terminate on the Financial
Closing Date. A Withdrawal Notice shall be irrevocable and upon
receipt of a Withdrawal Notice by the Project Company or JOL,
this Agreement shall immediately thereupon terminate and the
provisions of the next following sentence shall apply. Within
ten (10) Days after receipt by the Project Company of a
Withdrawal Notice and assuming the Formation Date has occurred,
the Project Company shall pay CCIC an amount equal to the CCIC
Initial Capital Contribution and CCIC shall surrender the
certificates representing the CCIC Initial Shares for
cancellation by the Project Company. From and after a
Withdrawal Notice being received by the Project Company or JOL,
CCIC shall have no rights as a shareholder of the Project
Company and the Project Company, JOL and Consolidated shall have
no obligations whatsoever to each other pursuant to this
Agreement save the obligation, if relevant, with respect to the
cancellation of the CCIC Initial Shares described in the
immediately preceding sentence.
9. Representations and Warranties
9.1 JOL Representations.
JOL hereby represents and warrants to Consolidated that:
(i) JOL is a corporation organized and in good standing under the laws of the State of New York in the United States of America, and
(ii) On the Formation Date and on the Financial Closing Date, the Project Company will be a closed joint stock company organized and in good standing under the laws of the Sultanate of Oman, and
(iii) Frank J. Drohan has been duly authorized by the Board of Directors of JOL to execute and deliver this Agreement on behalf of JOL and when so executed and delivered it shall be binding on JOL and on JOL's successors and permitted assigns, and
(iv) the execution and delivery of this Agreement by JOL will not violate any of the provisions of JOL's Certificate of Incorporation or By-Laws nor violate any provision of any contract or other agreement by which JOL is bound.
9.2 CCC Representations.
CCC hereby represents and warrants to JOL that:
(i) CCC is a limited liability corporation organized and in good standing under the laws of the Sultanate of Oman and
(ii) Mr. Fathi Alaaiddin ("Alaaiddin") has been duly authorized by the Board of Directors of CCC to execute and deliver this Agreement on behalf of CCC and when so executed and delivered it shall be binding on CCC and on CCC's successors and permitted assigns, and
(iii) the execution and delivery of this Agreement by CCC will not violate any of the provisions of CCC's Articles of Association or By-Laws nor violate any provision of any contract or other agreement by which CCC is bound.
9.3 CCIC Representations.
CCIC hereby represents and warrants to JOL that:
(i) CCIC is a corporation organized and in good standing under the laws of the country of Panama and is an integral part of Consolidated Contractors Group, S.A.L. which is the parent company of CCC, and
(ii) Alaaiddin has been duly authorized by the Board of Directors of CCIC to act as CCIC's attorney-in-fact and to execute and deliver this Agreement and the Development Agreement on behalf of CCIC and when so executed and delivered by Alaaiddin they shall be binding on CCIC and on CCIC's successors and permitted assigns, and
(iii) The power of attorney signed by CCIC and attached hereto as Exhibit E authorizing Alaaiddin to sign, execute and deliver this Agreement and the Development Agreement on behalf of CCIC is a true and valid instrument of CCIC which has not been modified or revoked as of the date hereof and will not be modified or revoked as of the Execution Date and the person signing such power of attorney on behalf of CCIC has the full power and authority and is duly authorized by CCIC's Board of Directors to so authorize Alaaiddin to execute and deliver this Agreement and the Development Agreement on behalf of CCIC , and
(iv) the execution and delivery of this Agreement by CCIC will not violate any of the provisions of CCIC's Articles of Association or By-Laws nor violate any provision of any contract or other agreement by which CCIC is bound.
10. Governing Law; Jurisdiction; Venue. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the country of Switzerland. Any disputes arising out of or in connection with this Agreement shall be finally settled by arbitration under the ICC Rules. The venue for any such arbitration shall be Geneva, Switzerland. The arbitration shall be conducted by three (3) arbitrators who shall be proficient in the English language and shall be appointed by the Secretary General of the International Court of Arbitration of the ICC in accordance with the ICC Rules. The language of the proceedings, documentation and award shall be English. The expense of the arbitration shall be borne by the Parties in such manner as the arbitrators may determine. No arbitrator appointed pursuant to this clause 10 shall be an employee, agent, consultant or former employee, agent or consultant of any Party. The Parties undertake not to engage in any unlawful activity or business as defined under the OECD convention of December 17, 1997 on combating bribery of public consultants in international business transactions.
11. Miscellaneous
11.1 Intellectual Property. The Parties agree that the Omagine Project as presented to the Government and to Consolidated, including the architectural, engineering and technical drawings, Feasibility Study, and marketing studies (collectively, the "Intellectual Property") are all the property of JOL. Consolidated hereby covenants with JOL that, without the prior written approval and consent of JOL, Consolidated will not use, publish or exploit the Intellectual Property, or any part of it, in any manner whatsoever.
11.2 Confidential Information. For the purposes of this Clause 11.2 "Confidential Information" means this Agreement and any and all information, data, or material provided by a Party to any other Party, including but not limited to (a) patent and patent applications, (b) trade secrets, and (c) proprietary information, ideas, techniques, sketches, drawings, work of authorship, models, inventions, know-how, processes, apparatuses, equipment, software programs, and including, without limitation, the Parties' respective information concerning research, experimental work, development, design details and specifications, engineering, financial information, procurement requirements, purchasing, manufacturing, customer lists, investors, employees, business and contractual relationships (actual or prospective), business forecasts, sales and merchandising, marketing plans and information that the disclosing Party provides regarding third parties. Any information that is not readily available to the public shall be considered as Confidential Information and, therefore, within the scope of this Agreement. Each Party shall at all times and notwithstanding any termination or expiration of this Agreement hold in strict confidence and not, except as approved in writing by the other Parties, disclose Confidential Information to any third party, save to the extent such Confidential Information may be required by a Party or the Government or their consultants or representatives for the purposes of the performance of their duties hereunder, or as may be required by judicial decision, requirements of applicable law or governmental regulation of any jurisdiction to which a Party may be subject, the rules and regulations of any applicable stock exchange or securities law or administrative process, or to comply with any such laws, rules or regulations, and will use the Confidential Information for no purpose other than for the purposes contemplated in this Agreement. Each Party shall only permit access to Confidential Information to those of its employees or authorized representatives having a need to know such Confidential Information.
11.3 Amendments. This Agreement may not be amended or modified except by a written instrument signed by the Parties affected by such amendment or modification. Any such written instrument signed by either CCC or CCIC shall be deemed to have been approved by Consolidated.
11.4 Entire Agreement. The Parties agree that this Agreement (together with Exhibits A, B, C, D and E attached hereto) constitutes the entire agreement among the Parties and supersedes any prior agreements whether written or oral among the Parties.
11.5 Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered to the addresses of the Parties as indicated below (or to such other address as any Party shall designate by notice given as herein provided):
if to JOL, to:
Journey of Light, Inc.
The Empire State Building
350 Fifth Avenue
New York, N.Y. 10118
Attn: Mr. Frank J. Drohan Tel: +1-212-563-4141 Fax: +1-212-563-3355 |
if to CCC, to:
Consolidated Contractors Company Oman LLC
P. O. Box 614
Muscat - PC 100
Sultanate of Oman
Attn: Mr. Fathi Alaaiddin Tel: +968 24700080 Fax: +968 24774773 |
if to CCIC, to:
Consolidated Contractors International, S.A.
c/o Consolidated Contractors International Company, S.A.L.
62B Kifissias Ave.
P.O. Box 61092
Amaroussion 151 10
Athens, Greece
Att: Mr. Walid Noureddin Tel: +30 210 6182 000 Fax: +30 210 6199 224 |
Such notices or communications shall be delivered either: (i) by
hand; (ii) by pre-paid, recorded courier or postal delivery; or
(iii) by telefax (with a copy thereof promptly delivered
thereafter by hand or by pre-paid courier or postal delivery).
Any notice served by hand, post or telefax shall be deemed to
have been delivered (a) in the case of telefax, at the time when
transmission is completed and an electronic answerback is
received by the sending Party indicating successful receipt
by the receiving Party; and (b) in the case of delivery by hand
or pre-paid, recorded courier or postal delivery, when actually
delivered; provided, however, that in each case where the
application of this Clause 11.5 (b) would otherwise result in
delivery on a Day which is not a Business Day or at a time after
5:00 PM on a Day which is a Business Day, then delivery shall be
deemed to have occurred at 9:00 AM on the next following
Business Day. All references to time and date in this Clause
11.5 are to the local time and date in the location of delivery.
11.6 Headings. The headings in this Agreement are for reference only, and shall not affect the interpretation of this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first above written.
Consolidated Contractors Company Journey of Light, Inc. Oman LLC
By: /s/ Fathi Alaaiddin By: /s/ Frank J. Drohan
------------------- --------------------
Fathi Alaaiddin Frank J. Drohan
Vice-President President
|
Consolidated Contractors International S.A.
By: /s/Fathi Alaaiddin, P.O.A.
--------------------------
Fathi Alaaiddin, P.O.A.
As attorney-in-fact
|
This amendment agreement dated as of December 31, 2007 (the "Amendment Agreement") is between Omagine, Inc. (formerly Alfa International Holdings Corp.), a Delaware corporation (the "Company") and Sam Hamdan, an individual ("Hamdan").
This Amendment Agreement is an amendment to that certain consulting agreement dated March 19, 2007 to which the Company and Hamdan are Parties (the "March Agreement") and is made pursuant to Section 12 thereof. All capitalized terms in this Amendment Agreement shall, unless otherwise indicated herein, have the meanings assigned to them in the March Agreement (a copy of which is attached hereto as Exhibit A.
The Parties hereby agree as follows:
1. The words in Section 2(ii) of the March Agreement are hereby deleted in their entirety and replaced by the following words: "December 31, 2008, or"
2. All other terms and conditions of the March Agreement remain in full force and effect.
IN WITNESS WHEREOF, the Parties have executed this Amendment Agreement as of December 31, 2007.
Sam Hamdan Omagine, Inc. a Delaware corporation
By: /s/ Sam Hamdan By: /s/ Frank J. Drohan
------------------ ----------------------
Sam Hamdan Frank J. Drohan
President
|
State of Delaware
Secretary of State
Division of Corporations
Delivered 11:45 AM 03/26/2008
FILED 11:45 AM 03/26/2008
SRV 080357303 - 3863714 FILE
CERTIFICATE OF OWNERSHIP AND MERGER
OF
CONTACT SPORTS, INC.
AND
TY-BREAKERS CORP.
WITH AND INTO
OMAGINE, INC.
Pursuant to Section 253 of the General Corporation Law of the State of Delaware, the undersigned, the duly elected and acting Secretary of Omagine, Inc., a Delaware corporation ("Omagine" or the "Company"), hereby certifies to the following information relating to the merger (the "Merger") of Contact Sports, Inc., and Ty-Breakers Corp., both being New York corporations (the "Subsidiaries"), with and into the Company:
FIRST: The Company was incorporated in the State of Delaware on October 8, 2004.
SECOND: The Company lawfully owns all of the issued and outstanding shares of the capital stock of Contact Sports, Inc., and Ty-Breakers Corp., Subsidiaries, which were both incorporated in the State of New York on August 23, 2001 and December 18, 1996, respectively.
THIRD: The laws of the jurisdiction of organization of Subsidiaries permit the merger of a business corporation incorporated in that jurisdiction with a business corporation incorporated in another jurisdiction.
FOURTH: Subsidiaries are hereby merged with and into the Company. FIFTH: The Board of Directors of the Company duly adopted |
the resolutions attached hereto as Exhibit A in connection with the Merger, with the Company to be the surviving corporation (the "Surviving Corporation").
SIXTH: That this Certificate of Merger shall be effective upon filing.
IN WITNESS WHEREOF, Omagine, Inc. has caused this Certificate of Ownership and Merger to be executed and acknowledged in accordance with Section 103 of the General Corporation law of the State of Delaware on this 13th day of March, 2008.
Omagine, Inc.
/s/ Charles P. Kuczynski ------------------------- Charles P. Kuczynski Corporate Secretary |
Omagine, Inc.
Resolution of the Board of Directors
The undersigned Directors of Omagine, Inc., a Delaware corporation (the "Corporation"), constituting all of the Corporation's Directors does hereby certify, as required by the General Corporation Law of the State of Delaware, that the following resolutions were unanimously adopted at a Special Meeting of the Corporation's Board of Directors held on March 12, 2008.
WHEREAS, the Corporation owns one hundred percent (100%) of the outstanding shares of the capital stock of Ty-Breakers Corp. ("Ty-Breakers") and Contact Sports, Inc. ("Contact"), subsidiaries of the Corporation ("Subsidiaries"); and
WHEREAS, the Board of Directors of the Corporation has deemed it advisable and in the best interests of the Corporation that the Subsidiaries be merged with and into the Corporation, which shall be the surviving corporation, pursuant to Section 253 of Delaware General Corporation Law; and
NOW, THEREFORE, BE IT RESOLVED that the Corporation merge into itself said Subsidiaries, Ty-Breakers and Contact, and assume all of the rights, benefits, liabilities and obligations of the Subsidiaries, and the identity and separate existence of Subsidiaries shall cease and all rights, benefits, privileges, powers, properties and assets of Ty-Breakers and Contact, Subsidiaries, shall be vested in this Corporation; and
FURTHER RESOLVED, that, the President and Secretary of the Corporation be, and each of them hereby is, authorized, in the name and on behalf of the Corporation, to execute and deliver such documents and take such other and further actions as they may deem necessary or advisable in order to carry out the purpose of the foregoing resolutions.
Dated as of March 13, 2008
/s/ Frank J. Drohan /s/ Salvatore J. Bucchere
------------------- -------------------------
Frank J. Drohan Salvatore J. Bucchere
Director Director
/s/ Kevin O'C. Green
------------------- ---------------------
Louis J. Lombardo Kevin O' C. Green
Director Director
/s/ Charles P. Kuczynski
------------------------
Charles P. Kuczynski
Director
|
The Code of Ethics and Business Conduct ("Code") of Omagine, Inc. ("Omagine" or the "Company") consists of the policies relating to the ethical and legal standards of conduct to be followed by all employees, officers and members of the Board of Directors of the Company in the conduct of its business. It is the Company's policy to manage and operate worldwide business activities in conformity with applicable laws and high ethical standards while preserving the Company's integrity and reputation.
The Company is organized under United States law and its securities are publicly traded. This means that the Company is primarily governed by United States law, and that United States law applies to some of Omagine's business outside the United States. If there is a conflict between the United States law and the law of one of the other countries in which the Company operates, the Company will resolve the conflict with the advice and guidance of its general counsel.
The Company believes that this Code exceeds the requirements of the definition of a "Code of Ethics" as set forth in the regulations of the United States Securities and Exchange Commission ("SEC") issued pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. However, for purposes of clarity and to ensure compliance with Section 406, this Code of Ethics and Business Conduct as it applies is designed to deter wrongdoing and promote:
1. honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships
2. full, fair, accurate, timely and understandable disclosure in the periodic reports and documents that the Company files with, or submits to, the SEC and in other public communications made by the Company
3. compliance with applicable governmental laws, rules and regulations
4. the prompt internal reporting of violations of the Code to
an appropriate person or persons identified in the Code; and
5. accountability for adherence to the Code
The Company is committed to conducting its business ethically and with integrity. The ethical conduct of the Company depends on the collective conduct of its employees, officers and Directors. The Company has adopted principles in the following areas to guide employees, officers, and, where applicable, Directors, on behaving with respect, honesty and decency towards everyone affected by our business:
A. Compliance with Laws and Regulations
The Company requires its employees, officers and Directors to comply with all applicable laws and regulations in countries where the Company does business. Violation of domestic or foreign laws and regulations may subject an individual, as well as the Company, to civil and/or criminal penalties. Employees have an obligation to comply with all laws and regulations and policies and procedures and to promptly alert management of any deviation from them. Questions concerning any legal responsibility should be referred to your immediate superior and/or the Company's president or CEO.
B. Employee relations
Each employee and officer should promote diversity, inclusiveness, and understanding in the workplace by valuing the individuality and creativity that every employee brings to the Company. The Company is committed to hiring, placing and promoting employees on the basis of ability and merit and evaluating employees on a fair and consistent basis.
C. Conflicts of interest
The Company expects all employees, officers and Directors to exercise good judgment and the highest ethical standards in private activities outside the Company that in any way can affect the Company. A conflict of interest occurs when an
individual's private interest interferes in any way with the interests of the Company as a whole. Conflicts of interest also arise when an employee, officer or Director, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Company. Also, employees, officers and Directors must avoid any investments, associations or other relationships that could conflict with their responsibility to make objective decisions in the Company's best interests. Any potential conflicts of interest must be reported immediately.
D. Appropriate use of Company assets
Each employee, officer and Director has a responsibility to properly use Company property, facilities and equipment. This responsibility includes protecting Company property from loss, theft, abuse and unauthorized use. All Company assets should be used for legitimate business purposes.
E. Corporate opportunities
Employees, officers and Directors owe a duty to the Company to advance the Company's business interests when the opportunity to do so arises. In general, a corporate opportunity is a business opportunity which the Company is financially able to undertake, and which, by its nature, falls into the line of the Company's business and is of practical advantage to it, or is an opportunity in which the corporation has an actual or expectant interest. In the first instance, corporate opportunities should be made available to the Company and should not be pursued by any employee, officer or Director until such time as the Company makes clear that it will not pursue the opportunity. More generally, employees, officers and Directors are prohibited from using corporate property, information or position for personal gain and from competing with the Company.
F. Fair Dealing
Each employee, officer and Director should endeavor to deal fairly with the Company's customers, suppliers, competitors and employees. None should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair-dealing practice.
G. Insider Information
Federal law and the Securities and Exchange Commission's regulations prohibit the use of "inside" (i.e., material nonpublic) information when trading in Omagine's securities. The Insider Trading and Securities Fraud Enforcement Act of 1988 imposes significant criminal and civil penalties for insider trading.
Examples of such information include possible acquisitions, mergers, stock splits, dividends, earnings, new contracts, major management changes, expansion plans, data which may be proprietary, or data which has not yet been disclosed to the investment public and other important corporate developments.
All employees, officers and Directors are required to refrain from disclosing to third parties any non-public material information relating to the business, operations, financial condition and dealings of Omagine. Each employee, officer and Director has a legal duty not to buy or sell Omagine securities based on inside information until the full and complete public disclosure of the inside information. This restriction extends to sharing or tipping others about such information, especially since the individuals receiving such information might utilize such information to trade in Omagine stock. The prohibition also applies to the securities of other companies if the employee, officer or Director learns of material non-public information about those other companies in the course of his or her duties to Omagine.
H. Accurate Company records
It is the policy of the Company to fully and fairly disclose the financial condition of the Company in compliance with the applicable accounting principles, laws, rules and regulations and to make full, fair, accurate, timely and understandable disclosure in our periodic reports filed with the SEC and in other communications to investors and members of the securities industry. Accurate and reliable recording and reporting of information is critical to our ability to make responsible business decisions. All employees have a responsibility to ensure that the Company's accounting records do not contain any false or intentionally misleading entries. We do not permit intentional misclassification of transactions as to accounts,
departments or accounting periods. Our system of disclosure controls and procedures, and internal controls for financial reporting are designed to provide this information, In particular we require that:
1. all Company accounting records, as well as reports produced from those records, are kept and presented in accordance with the laws of each applicable jurisdiction;
2. all records fairly and accurately reflect the transactions or occurrences to which they relate;
3. all records fairly and accurately reflect in reasonable detail the Company's assets, liabilities, revenues and expenses;
4. the Company's accounting records do not contain any intentionally false or misleading entries;
5. no transactions are misclassified as to accounts, departments or accounting periods;
6. all transactions are supported by accurate documentation in reasonable detail and recorded in the proper account and in the proper accounting period;
7. all Company accounting financial reports be prepared in accordance with generally accepted accounting principles; and
8. the Company's system of internal accounting controls, including compensation controls, to be followed at all times.
I. Confidential Company Information
Confidential information is any non-public information that, if disclosed, would be damaging to the best interests of the Company or might be of use to competitors. Confidential information also includes information concerning possible transactions with other companies or information about the Company's customers, suppliers or joint venture partners, which the Company is under an obligation to maintain as confidential. Each employee, officer and Director has a responsibility to hold all confidential information obtained from the Company or its
customers in confidence, except when disclosure is authorized or legally mandated. Confidential information should not be shared with the media, competitors or any other third parties.
J. Reporting and Non-Retaliation
Employees who have evidence of any violations of this code are encouraged and expected to report them to their supervisor or to a member of the Audit Committee, and in the case of officers and Directors, they should report evidence of any such violations to a member of the Audit Committee or to the Company's general counsel. Such reports will be investigated in reference to applicable laws and Company policy.
It is a violation of this policy for any Company employee, officer or Director to retaliate or discriminate, directly or indirectly, or encourage others to do so, against an individual who reports a suspected violation or provides information relevant to an investigation of any conduct which the individual reasonably believes to be a violation of applicable laws, regulations, or Company policies.
K. Enforcement of this Code
The Audit Committee (or a person or persons designated by the Audit Committee) shall investigate any violation or suspected violation of this Code and determine appropriate actions to be taken in the event of violations of this Code. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to the Code. In determining what action is appropriate in a particular case, the Audit Committee shall take into account all relevant information, including the nature and severity of the violation, whether the violation appears to have been intentional or inadvertent, and whether the individual in question had been advised as to the proper course of action prior to the violation. Disciplinary action may include termination, referral for criminal prosecution, and/or reimbursement to the Company for any losses or damages resulting from violations of the Code.
L. Amendments to and Waivers of the Code
Only the Board of Directors, or a duly authorized committee of the Board, may make any amendments to the provisions of this Code.
Where a waiver of this Code may be necessary or appropriate with respect to an employee or officer, such person shall first contact his or her immediate supervisor. If the supervisor agrees that an exception is appropriate, the approval of the Audit Committee must be obtained. Any waiver granted to an employee or officer of any provision of this Code may only be made by the Audit Committee after due deliberation and a determination by such committee that appropriate controls to protect the Company are in place. Any waiver of this Code for Directors may be made only by the Board of Directors of the Company. To the extent required by applicable law or the requirements of any national stock exchange , waivers for employees, officers or Directors, including implicit waivers, and amendments will be publicly disclosed and such waiver, implicit waiver or amendment of this Code may not become effective until such public disclosure is made. For this purpose, a "waiver" means the approval by the Audit Committee or the Board as the case may be, of a material departure from a provision of this Code and an "implicit waiver" means the failure of the Audit Committee or the Board as the case may be, to take action within a reasonable period of time regarding a material departure from a provision of this Code after any employee, officer or Director has become aware of such material departure.
If the Audit Committee or the Board as the case may be, decides to grant a waiver from this Code, it will ensure that, if the circumstances warrant, the waiver is accompanied by appropriate controls designed to protect the Company from the risks of the transaction with respect to which the waiver is granted. The disclosure controls or procedures in light of the waiver.
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