As filed with the Securities and Exchange Commission on September 12 , 2012

Registration No. 333-175168

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

____________________________

 

POST EFFECTIVE AMENDMENT NO. 2

TO FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

_____________________________

 

350 Fifth Avenue, Suite 4815-17

New York, New York 10118

(212) 563-4141

 

(Address, including zip code, and telephone number including area code, of Registrant’s principal executive offices)

 

Frank J. Drohan, Chief Executive Officer and Chief Financial Officer

Omagine, Inc.

350 Fifth Avenue, Suite 4815-17

New York, New York 10118

(212) 563-4141

 

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

Michael Ference, Esq.

David Manno, Esq.

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32nd Floor

New York, New York 10006

(212) 930-9700

(212) 930-9725 (fax)

 

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

From time to time after this Registration Statement becomes effective.

 

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”) check the following box: [x]

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [   ]

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [   ]

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”):

 

 

 

 

* Previously paid

 

(1)

Represents shares offered by the Selling Stockholder. Includes an indeterminable number of additional shares of Common Stock, pursuant to Rule 416 under the Securities Act, that may be issued to prevent dilution from stock splits, stock dividends or similar transaction that could affect the shares to be offered by Selling Stockholder.

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become effective on such date as the Securities & Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

The information in this prospectus (“Prospectus”) is not complete and may be changed. The Selling Stockholder may not sell these securities until the Registration Statement filed with the United States Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED September 12, 2012

 

 

OMAGINE, INC.

 

3,244,216 Shares of Common Stock

 

This Prospectus relates to the public offering of up to 3,244,216 shares of Omagine, Inc.’s $0.001 par value per share common stock (the "Common Stock" or “Common Shares”) by YA Global Master SPV Ltd (“YA Master”) or any of YA Master’s pledgees, assignees or successors-in-interest (each a “Selling Stockholder”). The Securities and Exchange Commission (“SEC”) may take the view that, under certain circumstances, any broker-dealers or agents that participate with the Selling Stockholder in the distribution of the shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”). Commissions, discounts or concessions received by any such broker-dealer or agent may be deemed to be underwriting commissions under the Securities Act. YA Master has informed us that it is an “underwriter” within the meaning of the Securities Act. The Selling Stockholder may sell Common Stock from time to time in the principal market on which the Registrant’s Common Stock is quoted and traded at the prevailing market price or in negotiated transactions. We will not receive any of the proceeds from the sale of those shares being sold by the Selling Stockholder. We will pay the expenses of registering these shares.

 

The Common Stock is quoted on the over-the-counter market on the OTCQB and trades under the symbol “OMAG”.  The last reported sale price of the Common Stock on the OTCQB on September 11 , 2012 was $2.55 per share.

 

The Selling Stockholder is offering these shares of Common Stock. The Selling Stockholder may sell all or a portion of these shares from time to time in market transactions through any market on which the Common Stock is then traded, in negotiated transactions or otherwise, and at prices and on terms that will be determined by the then prevailing market price or at negotiated prices directly or through a broker or brokers, who may act as agent or as principal or by a combination of such methods of sale. The Selling Stockholder will receive all proceeds from such sales of the Common Stock. For additional information on the methods of sale, you should refer to the section entitled "Plan of Distribution."

 

Investing in these securities involves significant risks. See "Risk Factors" beginning on page 3.

 

We may amend or supplement this Prospectus from time to time by filing amendments or supplements as required. You should read the entire Prospectus and any amendments or supplements carefully before you make your investment decision.

 

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this Prospectus is September    , 2012 .

 

 

 

 

 

 

 

ABOUT THIS PROSPECTUS

 

 

You should rely only on the information contained in this Prospectus. We have not authorized any dealer, salesperson or other person to provide you with information concerning us, except for the information contained in this Prospectus. The information contained in this Prospectus is complete and accurate only as of the date on the front cover page of this Prospectus, regardless of when the time of delivery of this Prospectus or the sale of any Common Stock occurs. The Selling Stockholders may not sell the securities until the registration statement filed with the Securities and Exchange Commission (“Registration Statement”) is effective. This Prospectus is not an offer to sell, nor is it a solicitation of an offer to buy, the Common Stock in any jurisdiction in which the offer or sale is not permitted.

 

 

 

 

 

PROSPECTUS SUMMARY

 

The following summary highlights selected information contained in this Prospectus. This summary does not contain all the information you should consider before investing in the Common Stock. Before making an investment decision, you should read the entire Prospectus carefully, including the "RISK FACTORS" section, the financial statements and the notes to the financial statements. As used throughout this Registration Statement and Prospectus, the term "Registrant" refers to Omagine, Inc. and the terms "Company", "we," "us," or "our" refer to Omagine, Inc. and its consolidated subsidiaries unless the context otherwise requires.

 

General

 

Omagine, Inc. (the “Company” or, the “Registrant”) is a holding company which was incorporated in Delaware in October 2004. The Registrant conducts substantially all of its operations through its 60% owned subsidiary Omagine LLC and its wholly-owned subsidiary Journey of Light, Inc., a New York corporation (“JOL”). In November 2009, Omagine, Inc. and JOL formed Omagine LLC, an Omani limited liability company in the Sultanate of Oman ("Oman"). Omagine LLC is engaged in the business of real estate development in Oman and was organized to design, develop, own and operate a mixed-use real-estate and tourism project named the “Omagine Project”. In May 2011, Omagine LLC sold newly issued shares of its capital stock to Omagine Inc. and three investors thereby reducing the Omagine, Inc. ownership of Omagine LLC from 100% to 60%.

 

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 and marina area; retail shops and restaurants; entertainment venues; boat slips and docking facilities; a five-star resort hotel; a four-star resort hotel; and possibly an additional three or four-star hotel; shopping and retail establishments integrated with the hotels; commercial office buildings; and more than two thousand residences to be developed for sale.

 

The contract between the Government and Omagine LLC which will govern the design, development, construction, management and ownership of the Omagine Project and the Government’s and Omagine LLC’s rights and obligations with respect to the Omagine Project, is the “Development Agreement” (the “DA”). The Development Agreement has been approved by all the required Ministries of the Government of Oman but has not yet been signed.

 

In May 2011, the Company and three (3) investors (the “New Shareholders”) signed a shareholders’ agreement with respect to Omagine LLC (the “Shareholder Agreement”). Pursuant to the provisions of the Shareholder Agreement, Omagine, Inc. reduced its 100% ownership of Omagine LLC to 60% and Omagine LLC sold newly issued shares of its capital stock to the New Shareholders and to Omagine, Inc. for an aggregate cash investment amount of approximately $70.1 million (the “Cash Investment”) plus an as yet undetermined non-cash “payment-in-kind” amount representing the value of the land constituting the Omagine Site. Pursuant to the terms of the Shareholder Agreement, the Cash Investment will be invested in three stages. The initial portion of the Cash Investment equal to approximately $390,000 has been received by Omagine LLC from the New Shareholders and Omagine, Inc. as of the date hereof. Subsequent to the signing of the DA but prior to the Financing Agreement Date (as hereinafter defined), Omagine, Inc. will invest an additional 210,000 Omani Rials which is equal to approximately $546,000 (the “OMAG Final Equity Investment”) into Omagine LLC. On or immediately subsequent to the Financing Agreement Date, the New Shareholders will invest the final portion of the Cash Investment equal to approximately $69,233,125 into Omagine LLC. The value of the non-cash “payment-in-kind” investment will be added to Omagine LLC’s capital after such value is determined subsequent to the signing of the Development Agreement. (See: “Description of Business - The Shareholder Agreement”, and Exhibit 10.4).

 

Between February 24, 2012 and March 30, 2012, the Company conducted a “Rights Offering” exclusively for the benefit of its shareholders and at the same time the Company distributed a total of 6,363,674 Common Stock purchase warrants (“Warrants) to its shareholders. A total of 1,014,032 Common Shares were subscribed for in the Rights Offering at a subscription price of $1.25 per Common Share. Total proceeds to the Company from the Rights Offering was $1,267,540 of which $731,639 was paid in cash and $535,901 was paid via the satisfaction of debt owed by the Company to shareholders exercising such Rights. (See: “Description of Business - The Rights Offering and Warrant Distribution”).

 

Our website address is www.omagine.com. Our website and the information contained on our website are not incorporated into this Prospectus or the Registration Statement of which this Prospectus forms a part. Further, our references to the URL for our website are intended to be inactive textual references only.

 

Our principal executive offices are located at 350 Fifth Avenue, Suite 4815-17, New York, N.Y. 10118. Our telephone number is (212) 563-4141.

 

 

The Standby Equity Distribution Agreement

 

In December 2008, Omagine, Inc. entered into a Standby Equity Distribution Agreement (the "First SEDA"). The First SEDA expired on April 30, 2011. On May 4, 2011, the Company entered into a new Standby Equity Distribution Agreement (the "May SEDA") with YA Master and on June 21, 2011, the Company and YA Master entered into an agreement amending the May SEDA (the “Amendment Agreement”). The May SEDA and the Amendment Agreement are collectively referred to herein as the “Second SEDA”. From April 24, 2012 to May 17, 2012, the Company was in breach of one of the covenants it made in the Second SEDA but that breach was waived by YA Master and the breach was cured on May 17, 2012. (See: Exhibit 10.11 hereto). Pursuant to the Second SEDA the Company, at its sole discretion and upon giving written notice to YA Master (an “Advance Notice”), may periodically sell shares of its Common Stock to YA Master (Share Sales”). For each share of Common Stock purchased under the Second SEDA, YA Master will pay to the Company ninety-five percent (95%) of the lowest daily volume weighted average price of the Common Stock as quoted by Bloomberg, LP, during the five (5) consecutive Trading Days (as such term is defined in the Second SEDA) immediately subsequent to the date of the relevant Advance Notice (the “Purchase Price”). The Company is not obligated to sell any shares of Common Stock to YA Master but may, over the term of the Second SEDA and in its sole discretion, sell to YA Master that number of shares of Common Stock valued at the Purchase Price from time to time in effect that equals up to ten million dollars ($10,000,000) in the aggregate. YA Master's obligation to purchase shares of Common Stock under the Second SEDA is subject to certain conditions, including (i) the Company obtaining an effective registration statement for the shares of Common Stock sold under the Second SEDA (“Registration Statement”) and (ii) periodic Share Sales to YA Master must be separated by a time period equal to five Trading Days, and (iii) the amount of any individual periodic Share Sale designated by the Company in any Advance Notice shall not exceed the greater of (i) two hundred thousand dollars ($200,000), or (ii) the average of the “Daily Value Traded” for each of the five (5) Trading Days prior to the relevant Advance Notice where Daily Value Traded is the product obtained by multiplying the daily trading volume of the Common Stock for such Trading Day by the closing bid price of the Common Stock for such Trading Day. In May and June of 2011 the Company issued YA Master 244,216 shares of Common Stock in satisfaction of the $300,000 commitment fee due in connection with the Second SEDA. The Registration Statement filed by the Company in connection with the Second SEDA was declared effective by the SEC as of August 24, 2011 (Commission File No. 333-175168). Between August 24, 2011 and the date hereof, YA Master has purchased 179,655 shares of Common Stock from the Company under the Second SEDA for an aggregate Purchase Price of $320,000.

 

The 3,244,216 shares of Common Stock included in this Prospectus represent the 244,216 commitment fee shares owned by the Selling Stockholder prior to any sales being made under the Second SEDA, the 179,655 shares purchased by the Selling Stockholder under the Second SEDA after August 24, 2011 and prior to the date hereof and the 2,820,345 shares remaining issuable under the Second SEDA as of the date hereof (collectively, the “Resale Shares”). The Second SEDA expires automatically on September 1, 2013.

 

About This Offering

 

This Prospectus relates to a total of up to 3,244,216 shares of Common Stock of Omagine, Inc. offered by the Selling Stockholder. The Selling Stockholder owned 244,216 of these shares prior to any sales being made under the Second SEDA. As of the date hereof, the Selling Stockholder has purchased 179,655 shares pursuant to the Second SEDA for aggregate proceeds to the Company of $320,000. Up to an additional 2,820,345 shares may be purchased by and issued to the Selling Stockholder under the terms of the Second SEDA.

 

Number of Shares Outstanding After This Offering

 

As of September 11 , 2012 , we had 14,369,041 shares of our Common Stock issued and outstanding. The number of shares of Common stock outstanding after this offering will be 17,189,386.

 

 

 

RISK FACTORS

 

An investment in our Common Shares is subject to risks inherent in our business. The material risks and uncertainties that management believes affect us are described below. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included in this Prospectus including information in the section of this document entitled “Information Regarding Forward Looking Statements”.

 

The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may become important factors that affect us. If one or a combination of these risks occurs, our business, financial condition or results of operations could be materially and adversely affected. This Prospectus is qualified in its entirety by these risk factors.

 

If any of the following risks actually occurs, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of our Common Stock could decline significantly and you could lose all or part of your investment.

 

Risk Factors Related to Our Company and Our Business

 

We have no history of profitability from the development of real estate and we have incurred significant losses and cannot assure you that we will be profitable in the near term or at all.

 

We have dedicated the vast majority of our financial resources over the past many years toward the effort to conclude the Development Agreement (“DA”) with the Government of Oman with respect to the Omagine Project. We have encountered numerous delays and as of the date hereof the DA has not yet been signed. As a result we have incurred significant losses over the past many years, including net losses of $1,804,451 for our fiscal year ended 2011; $1,277,001 for the fiscal year ended December 31, 2010 and $1,114,409 for the fiscal year ended December 31, 2009, primarily due to expenses associated with the design, development and promotion of the Omagine Project. For the six months ended June 30, 2012, we incurred a net loss of $1,444,497. We expect to continue to incur such expenses over the near term, which would adversely impact our overall financial performance and results of operations. The Omagine Project may never come to fruition, and if it does it still may never result in a profit to the Company. Sales of our proposed real estate development properties, and income, if any, from the Omagine Project may never generate sufficient revenues to fund our continuing operations. We cannot assure you that we will be profitable in the near term or at all.

 

Because of our limited history and the potential for competition, an investment in our Company is inherently risky.

 

Because we are a company with a limited history, our operations are subject to numerous risks similar to those of a start-up company. We expect the real estate development business to be highly competitive because many developers have access to the same market. Substantially all of them have greater financial resources and longer operating histories than we have and can be expected to compete within the business in which we engage and intend to engage. We cannot assure you that we will have the necessary resources to be competitive.

 

Our ability to use net operating loss carryovers to reduce future tax payments may be limited or restricted.

 

We have generated significant net operating losses (“NOL”s) as a result of our recent losses. We generally are able to carry NOLs forward to reduce taxable income in future years. However, our ability to utilize the NOLs is subject to the rules of Section 382 of the Internal Revenue Code. Section 382 generally restricts the use of NOLs after an “ownership change.” An ownership change occurs if, among other things, the shareholders (or specified groups of shareholders) who own or have owned, directly or indirectly, 5% or more of a corporation’s common stock or are otherwise treated as 5% shareholders under Section 382 and the Treasury regulations promulgated thereunder increase their aggregate percentage ownership of that corporation’s stock by more than 50 percentage points over the lowest percentage of the stock owned by these shareholders over a three-year rolling period. In the event of an ownership change, Section 382 imposes an annual limitation on the amount of taxable income a corporation may offset with NOL carry forwards. This annual limitation is generally equal to the product of the value of the corporation’s stock on the date of the ownership, multiplied by the long-term tax-exempt rate published monthly by the Internal Revenue Service. Any unused annual limitation may be carried over to later years until the applicable expiration date for the respective NOL carry forwards.

 

We do not anticipate that this offering will cause an “ownership change” within the meaning of Section 382. However, we cannot ensure that our ability to use our NOLs to offset income will not become limited in the future. As a result, we could pay taxes earlier and in larger amounts than would be the case if our NOLs were available to reduce our federal income taxes without restriction. At June 30, 2012, the Company had federal NOLs of approximately $13,146,000, expiring in various amounts from fiscal year 2012 to fiscal year 2032. Current United States income tax law limits the amount of loss available to offset against future taxable income when a substantial change in ownership occurs.

 

 

We may not be able to conduct successful operations in the future.

 

The results of our operations will depend, among other things, upon our ability to develop and market the Omagine Project. Furthermore, our proposed operations may not generate income sufficient to meet operating expenses or may generate income and capital appreciation, if any, at rates lower than those anticipated or necessary to sustain ourselves. Our operations may be affected by many factors, some known by us, some unknown, and some which are beyond our control. Any of these problems, or a combination thereof, could have a materially adverse effect on our viability as an ongoing enterprise and might cause the investment of our shareholders to be impaired or lost.

 

We have experienced extraordinary delays in getting the Development Agreement with the Government of Oman signed.

 

As of the date hereof, the Development Agreement which is the contract governing the development and ownership of the Omagine Project has not yet been signed by our 60% owned subsidiary and the Government of Oman. We have been negotiating this DA with the Government for many years now and have experienced many delays in the process. To the best of our knowledge and belief, both parties now agree that all matters have been resolved with respect to the DA but we have been at similar points with the Government in the past and in several of those instances the Government raised new and often pointless issues at the last minute. In May 2012, Omagine LLC received a letter from His Excellency Ahmed Al-Mahrizi, the Minister of Tourism (the “Minister’s Letter”) requesting us to provide certain information to MOT. The Minister’s Letter, which requested documentation on four items, is attached hereto as Exhibit 99.5. Representatives of the shareholders of Omagine LLC (the Company, Royal Court Affairs, and Consolidated Contractors) met with His Excellency Ahmed Al-Mahrizi on July 1, 2012 and delivered our written response to the Minister’s Letter. The meeting concluded with the Minister confirming that he is in agreement with and enthusiastic about the development of the Omagine Project and that he is agreeable to sign the DA as soon as possible. The Shareholder Agreement has been signed and management continues to be cautiously optimistic that the DA will be signed in 2012 and although there have been extraordinary delays to date by the Government, the Company believes, based on continued assurances from the Government, that the Government remains eager to conclude and sign the DA. No assurance, however, that the DA will actually be signed can be given at this time. (See: “Description of Business - Products, Services, Marketing and Distribution - The Omagine Project - The Development Agreement”).

 

While our 2011 audited financial statements assume we will continue our operations on a going concern basis, the opinion of our independent auditors on those financial statements contained an explanatory paragraph that there is substantial doubt about our ability to continue as a going concern.

 

The opinion of our independent auditors on our 2011 audited financial statements contained an explanatory paragraph that there is substantial doubt about our ability to continue as a going concern. Our audited financial statements were prepared under the assumption that we will continue our operations on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business. Our financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Although we have entered into the Second SEDA and have recently raised additional capital via the Rights Offering, if we sustain unanticipated losses and we cannot continue as a going concern, our shareholders may lose all of their investment in the Company.

 

To fully develop our business plan we will need additional financing.

 

We expect to continue to rely principally upon the financing received as a result of sales of Common Stock made pursuant to the Second SEDA and the Rights Offering and Warrant Distribution (See: “Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources - Rights Offering” and “Description of Capital Stock and Warrants”). Since the second quarter of our 2009 fiscal year we have relied principally upon financing from sales of Common Stock made pursuant to the First SEDA and the Second SEDA. We have also raised limited private placement funds during the past several years and may be required to do so in the future. We cannot guarantee the success of this plan. We will have to obtain additional financing in order to conduct our business in a manner consistent with our proposed operations. There is no guaranty that additional funds will be available when, and if, needed. If we are unable to obtain financing, or if its terms are too costly, we may be forced to curtail expansion of operations until such time as alternative financing may be arranged, which could have a materially adverse impact on our operations and our shareholders' investment. It is impossible to predict if any Warrants will ever be exercised because the market price of a Common Share as of the date hereof is lower than either of the Warrant Exercise Prices. Although we cannot be absolutely certain, the Company believes that there is virtually no probability that any Warrants will be exercised unless the market price for a share of the Company’s Common Stock trades materially above the relevant Warrant Exercise Price prior to the Warrant Expiration Date or Redemption Date. (See: “Description of Capital Stock and Warrants”).

 

 

We anticipate that we will be subject to intense competition.

 

We will face intense competition in the development of real estate in Oman. Other developers have started developing real estate in nearby areas with similar residential developments.

 

Even after the Rights Offering and entering into the Second SEDA, we lack capital.

 

Even after the conclusion of the recent Rights Offering and our entry into the Second SEDA, we will require additional  funds to sustain our operations as presently contemplated. There can be no guaranty that such additional funds will be available in the future. If we are unable to obtain additional financing as required, or if its terms are too costly, we may be forced to curtail the expansion of our operations until such time as alternative financing may be arranged which could have a materially adverse impact on our operations and our shareholders' investments.

 

Our ultimate success will be dependent upon management.

 

Our success is dependent upon the decision making ability of our directors and executive officers, who are Frank J. Drohan, Charles P. Kuczynski, Louis J. Lombardo, William R. Hanley and Sam Hamdan. The loss of any or all of these individuals could have a material adverse impact on our operations. We do not presently have a written employment agreement with any of our officers or directors (See: Executive Compensation – Employment Agreements). We have not obtained key man life insurance on the lives of any of these individuals. Our success depends in large part on our ability to attract and retain key people and consultants. If we are not able to retain and recruit qualified personnel, which we require now and will require to conduct our operations after the DA is signed, our business and our ability to successfully implement our business plan could be adversely affected.

 

We will rely on dividends from our subsidiaries for most of our revenue.

 

Because we are a holding company with no significant operations other than our 60% owned subsidiary, Omagine LLC, we will depend upon dividends from Omagine LLC for a substantial portion of our revenues. We do not anticipate that Omagine LLC will be in a position to pay dividends until after the development of the Omagine Project is well underway, an event that, as of the date hereof, is uncertain to occur.

 

We are subject to risks associated with investments in real estate.

 

The value of our proposed properties and our projected income therefrom may decline due to developments that adversely affect real estate generally and those that are specific to our proposed properties. General factors that may adversely affect our proposed real estate holdings include:

 

●	increases in interest rates;
●	adverse changes in foreign exchange rates;
●	a decline in prevailing rental rates for the properties we intend to own and lease;
●	a general tightening of the availability of credit and project financing facilities;
●	a decline in economic conditions in Oman;
●	an increase in competition for customers or a decrease in demand by customers for the residential and commercial properties we plan to develop and offer for sale;
●	a decline in prevailing sales prices for the properties we intend to develop and offer for sale;
●	an increase in supply in Oman of property types similar to those proposed to be developed by us;
●	declines in consumer spending during an economic recession or recovery from an economic recession that adversely affect our revenue; and
●	the adoption by the relevant government authorities in Oman of more restrictive laws and governmental regulations, including more restrictive zoning, land use, building or environmental regulations or increased real estate taxes.

 

Additional factors may adversely affect the value of our proposed properties and our projected income therefrom, including:

 

●	failure to sign a development agreement with the Government of Oman;
●	adverse changes in the perceptions of prospective purchasers or users of the attractiveness of the properties proposed to be developed by us;
●	opposition from local community or political groups with respect to development or construction at a particular site;
●	a change in existing comprehensive zoning plans or zoning or environmental regulations that impose additional restrictions on use or requirements with respect to the properties proposed to be developed by us;
●	our inability to provide adequate management and maintenance or to obtain adequate insurance for the properties proposed to be developed by us;
●	an increase in operating costs;
●	new development of a competitor's property in close proximity to the Omagine Project;
●	earthquakes, floods or underinsured or uninsured natural disasters; and
●	terrorism, political instability or civil unrest in Oman or the Middle East & North Africa (the “MENA Region”).

 

The occurrence of one or more of the events described in one or more of the above risks could result in significant delays or unexpected expenses. If any of these occur, we may not achieve our projected returns on the Omagine Project and we could lose some or all of our investment in Omagine LLC and the Omagine Project.

 

 

We are subject to risks associated with real estate development.

 

The Omagine Project is subject to significant risks relating to Omagine LLC’s ability to complete it on time and within budget. Factors that may result in the Omagine Project or any other development project we may undertake in Oman exceeding budget or being prevented from completion include:

 

●	an inability to obtain or delays in obtaining zoning, environmental, occupancy or other required Oman governmental permits, approvals and authorizations;
●	an inability to secure sufficient financing on favorable terms, including an inability to obtain or refinance construction loans;
●	a general tightening of the availability of credit and project financing facilities;
●	the negative effects presently remaining in the marketplace from the worldwide economic slowdown and banking crisis of 2008 and the ongoing sovereign debt and banking difficulties presently being experienced in the Eurozone, including: the tighter lending standards instituted by banks and financial institutions in the MENA Region, the reduced availability of credit facilities and project finance facilities from banks in the MENA Region, the reduction in the prices of housing and commercial properties in Oman, and the fall of consumer and/or business confidence; any one or all of which could affect Omagine LLC’s ability to construct and/or sell homes and to construct, sell and/or lease commercial properties and/or to secure financing;
●	construction delays or cost overruns, either of which may increase project development costs;
●	an increase in commodity costs; and
●	an inability to obtain zoning, environmental, occupancy or other required Oman governmental permits, approvals and authorizations.

 

If any of the forgoing occurs, we may not achieve our projected returns on the Omagine Project and we could lose some or all of our investment in Omagine LLC and the Omagine Project, or in other properties we may then have under development.

 

We are vulnerable to concentration risks because our proposed operations are presently exclusively in Oman and our future operations are planned to be exclusively in Oman and the MENA Region market. Our real estate activities are presently concentrated exclusively on the Omagine Project to be located in Oman. Because of such geographic and project specific concentration, our operations are more vulnerable to local and MENA Region economic downturns and adverse project-specific events than those of larger, more diversified companies.

 

The performance of Oman’s economy will greatly affect the values of the properties proposed to be developed by us and consequently our prospects for sales and revenue growth. The Oman economy is heavily influenced by the prices of crude oil and natural gas which are Oman’s main export products and sources of revenue. Fluctuations in the international price of crude oil directly affects Oman’s revenue and budget considerations and a decrease in government supported projects and employment because of budget cuts or otherwise, could adversely affect the economy in Oman.

 

Our results of operations and financial condition are greatly affected by the performance of the real estate industry.

 

Our real estate activities are subject to numerous factors beyond our control, including local real estate market conditions in Oman and in areas where our potential customers reside, substantial existing and potential competition, general economic conditions in Oman, the MENA Region and internationally, fluctuations in interest rates and mortgage availability and changes in demographic conditions. Real estate markets have historically been subject to strong periodic cycles driven by numerous factors beyond the control of market participants.

 

Real estate investments often cannot easily be converted into cash and market values may be adversely affected by economic or political circumstances, market fundamentals, competition and demographic conditions. Because of the effect these factors have on real estate values, the sales prices that will be realized for our individual proposed assets or the level of our future sales revenue that will be realized from the operation, sales and/or leasing of our various proposed properties is impossible to predict with certainty and difficult to predict with accuracy.

 

Our real estate operations will also be dependent upon the availability and cost of mortgage financing for our potential customers to the extent they finance the purchase from us of the residences or commercial properties we intend to develop and offer for sale.

 

The real estate business is very competitive and many of our competitors are larger and financially stronger than we are.

 

The real estate business is highly competitive. We compete with a large number of companies and individuals, and many of them have significantly greater financial, managerial and other resources than we have. Our competitors include local developers who are committed primarily to the Oman market and also international developers who acquire properties throughout the MENA Region. Because we are a company with a limited history, our operations are subject to numerous risks similar to those of a start-up company. We cannot assure that we will have the necessary resources to be competitive.

 

Our operations are subject to natural and political risks.

 

Our performance may be adversely affected by weather conditions that delay development or damage property. The recent civil and political unrest in the MENA Region, the U.S. and NATO military intervention in Iraq, Afghanistan and Libya, the terrorist attacks in the U.S., Europe and the MENA Region, and the potential for additional future terrorist acts and civil and/or political unrest have created economic, political and social uncertainties that could materially and adversely affect our business. Further acts of civil and/or political unrest or terrorism could be directed against Oman or the U.S. domestically or abroad. These acts of terrorism or civil unrest could be directed against properties and personnel of American companies that work abroad, particularly companies such as ours that operate in the MENA Region. Civil and/or political unrest, terrorism, war and/or military developments may materially and adversely affect our business and profitability and the prices of our Common Stock in ways that we cannot predict at this time.

 

 

Risk Factors Related to Our Common Stock

 

Our stock price may be volatile and you may not be able to resell your shares at or above your purchase price.

 

There has been and continues to be a limited public market for our Common Stock. Although our Common Stock trades on the OTCQB, an active trading market for our shares has not developed and may never develop or be sustained. If you purchase shares of our Common Stock, you may not be able to resell those shares at or above the price you paid. The market price of our Common Stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, including the following:

 

●	the exercise of Warrants;
●	actual or anticipated fluctuations in our operating results;
●	changes in financial estimates by securities analysts or our failure to perform in line with such estimates;
●	changes in market valuations of other real estate companies, particularly those that sell products similar to ours;
●	announcements by us or our competitors of significant innovations, acquisitions, strategic investors or partnerships, joint ventures or capital commitments; or
●	departure of key personnel.

Much of our Common Stock is currently restricted. As restrictions on resale end, the market price of our Common Stock could drop significantly if the holders of restricted shares sell them or are perceived by the market as intending to sell them. This could cause the market price of our Common Stock to drop significantly, even if our business is doing well.

 

Our Common Stock has a limited public trading market.

 

While our Common Stock currently trades on the OTCQB, the market for our Common Stock is limited and sporadic. We cannot assure that such market will improve in the future, even if our Common Stock is ever listed on a national stock exchange. We cannot assure that an investor will be able to liquidate his investment without considerable delay, if at all. If a more active market for our Common Stock does develop, the price may be highly volatile. The factors which we have discussed in this document may have a significant impact on the market price of our Common Stock. The relatively low price of our Common Stock may keep many brokerage firms from engaging in transactions in our Common Stock.

 

The over-the-counter market for stock such as ours has had extreme price and volume fluctuations.

 

The securities of companies such as ours have historically experienced extreme price and volume fluctuations during certain periods. These broad market fluctuations and other factors, such as new product developments and trends in our industry and in the investment markets generally, as well as economic conditions and annual variations in our operational results may have a negative effect on the market price of our Common Stock.

 

Additional stock offerings may dilute current stockholders.

 

Given our plans and our expectation that we may need additional capital and personnel, we may need to issue additional shares of capital stock or securities convertible into or exercisable for shares of capital stock, including preferred stock, options or warrants. The issuance of additional shares of capital stock for any of these reasons or pursuant to the exercise of Warrants may dilute the ownership of our current stockholders.

 

Our management collectively beneficially owns approximately 17.1% of our presently outstanding Common Stock and this concentration of ownership may have the effect of preventing a change in control.

 

Collectively our officers and directors beneficially own approximately seventeen and one-tenth percent (17.1%) of our currently outstanding shares of Common Stock. As a result, if our officers and directors act in concert, they will have the ability by virtue of their voting power to exercise substantial influence over our business with respect to the election of directors and all other matters requiring action by stockholders. Such concentration of share ownership may have the effect of discouraging, delaying or preventing a change in control of the Company.

 

Our ability to issue preferred stock may adversely affect the rights of holders of our Common Stock and may make takeovers more difficult, possibly preventing you from obtaining the optimal share price.

 

Our Certificate of Incorporation authorizes the issuance of shares of "blank check" preferred stock, which would have the designations, rights and preferences as may be determined from time to time by the Board of Directors. Accordingly, the Board of Directors is empowered, without shareholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of the Common Stock. The issuance of preferred stock could be used, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company.

 

 

Our Common Stock is subject to the “penny stock” rules of the SEC, which may make it more difficult for you to sell our Common Stock.

 

The SEC has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that:

 

●	the broker or dealer approve a person's account for transactions in penny stocks; and
●	the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

 

●	obtain the financial information and investment experience objectives of the person; and
●	make a reasonable determination that (a) transactions in penny stocks are suitable for that person, and (b) the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:

 

●	sets forth the basis on which the broker or dealer made the suitability determination; and
●	states that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The regulations applicable to penny stocks may severely affect the market liquidity for the shares of our Common Stock owned by you and could limit your ability to sell such securities in the secondary market.

 

As an issuer of “penny stock”, the protection provided by the federal securities laws relating to forward looking statements does not apply to us.

 

Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.

 

Other than the distribution of the Rights and Warrants in our recent Rights Offering and Warrant Distribution and the possible distribution of Warrants to the California Stockholders, we have not paid dividends in the past and do not expect to pay dividends in the future unless and until dividends are paid to Omagine, Inc. by Omagine LLC. Any return on your investment may therefore be limited to the value of our Common Stock.

 

We have never paid cash dividends on our Common Stock and do not anticipate paying cash dividends in the foreseeable future. Up until this time the Company has utilized all cash reserves for the operation of its business and the Company plans to continue this policy for the foreseeable future. Any future payment of dividends on our Common Stock will depend on the payment of dividends to Omagine, Inc. by Omagine LLC and, as the Board of Directors may consider relevant, our earnings, financial condition and other business and economic factors at such time. If we do not pay cash dividends, our Common Stock may be less valuable because a return on your investment will only occur if the price of our Common Stock appreciates above the price you paid for it.

 

There are substantial risks associated with the Second SEDA with YA Master which could contribute to the decline of the price of our Common Stock and have a dilutive impact on our existing stockholders

 

In order to obtain needed capital, we entered into the Second SEDA with YA Master. The sale of our Common Shares pursuant to the Second SEDA will have a dilutive impact on our stockholders. We believe YA Master intends to promptly re-sell the shares that we sell to it under the Second SEDA. Such re-sales could cause the market price of our Common Stock to decline significantly. Any subsequent sales by us to YA Master under the Second SEDA may, to the extent of any such decline, require us to issue a greater number of shares of Common Stock to YA Master in exchange for each dollar of such subsequent sale.  Under these circumstances our existing stockholders would experience greater dilution. The sale of our Common Stock under the Second SEDA could encourage short sales by third parties which could contribute to the further decline of the price of our Common Stock.

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Some of the statements contained in this Prospectus that are not statements of historical facts constitute "forward-looking statements" notwithstanding that such statements are not specifically identified as such. Examples of forward-looking statements include but are not limited to: (i) projections of revenues, expenses, income or loss, cash flow, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of Omagine, Inc. or its management or Board of Directors, including those relating to business plans, products, services or to Omagine LLC and the probability of Omagine LLC signing the DA with the Government; (iii) statements of future economic or financial performance; and (iv) statements of assumptions underlying such statements. Words such as "estimates", "projects", "plans", "believes", "expects", "anticipates", "intends", "targeted", "continue", "remain", "will", "should", "may" and other similar expressions, or the negative or other variations thereof, as well as discussions of strategy that involve risks and uncertainties, are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. We urge you to be cautious of the forward-looking statements and other similar forecasts and statements of expectations which are contained in this Prospectus since such statements reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations and growth strategy. No assurances can be given regarding the achievement of future results, as our actual results may differ materially from our projected future results as a result of the risks we face, and actual future events may differ from anticipated events because of the assumptions underlying the forward-looking statements that have been made regarding such anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

 

●	the uncertainty associated with whether or not the Government of the Sultanate of Oman will honor its commitment with respect to the agreed Final DA and its intention to sign the Development Agreement with Omagine LLC;
●	the uncertainty associated with political events in the MENA Region in general;
●	the success or failure of the Company’s efforts to secure additional financing, including project financing for the Omagine Project;
●	oversupply of residential and commercial property inventory and adverse conditions in the Oman real estate markets;
●	the impact of local, national, and international economies and future events (including natural disasters) on the local Oman and international economies, on the Company’s business and operations, on tourism, on the oil and natural gas businesses and on other major industries operating within the Omani market;
●	deterioration or malaise in economic conditions, including the continued destabilizing factors in, and continued slow recovery of, the local, regional and international real estate markets, as well as the impact of continued stagnant levels of consumer and business confidence in the state of the Oman and international economies;
●	inflation, interest rates and movements in interest rates and securities market and monetary fluctuations;
●	acts of war, civil or political unrest, terrorism or political instability; or
●	the ability to attract and retain skilled employees.

 

Except as may be specifically otherwise indicated, forward-looking statements speak only as of the date on which such statements are made. Except as may be required under applicable securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such a statement is made, or to reflect the occurrence of unanticipated events.

 

SELLING STOCKHOLDER

 

The following table sets forth the name of each person who is offering the sale of Resale Shares by this Prospectus, the number of shares of Common Stock beneficially owned by each such person, the number of Resale Shares that may be sold in this offering and the number of shares of Common Stock each such person will own after this offering, assuming they sell all of the Resale Shares offered. Neither the Selling Stockholder nor any of its affiliates have held any position or office or had any other material relationship other than the First SEDA and the Second SEDA with us or any of our predecessors or affiliates within the past three years.

 

 

 

(1)

Applicable percentage ownership is based on 14,369,041 shares of Common Stock of the Company outstanding as of September 11 , 2012 and on Common Stock owned by the Selling Stockholder including Common Stock underlying Warrants or other securities owned by the Selling Stockholder that are exercisable for or convertible into shares of Common Stock within 60 days of September 11 , 2012 . Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of Common Stock underlying Warrants or other securities that are currently exercisable or convertible, or exercisable or convertible within 60 days of September 11 , 2012 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person.

 

(2)	Assumes all shares offered hereby are sold.

 

(3)

YA Master is the investor under the Second SEDA. All investment decisions and control of YA Master are made and held by its investment manager, Yorkville Advisors, LLC (“Yorkville Advisors”). Mr. Mark Angelo, the portfolio manager of Yorkville Advisors, makes the investment decisions on behalf of and controls Yorkville Advisors. YA Master has informed us that it is an “underwriter” within the meaning of the Securities Act, and to the best of our knowledge no other underwriter or person has been engaged to facilitate the sale of shares of our Common Stock in this offering.

 

(4)

The 3,244,216 shares of Common Stock included in this Prospectus represent the 244,216 commitment fee shares owned by the Selling Stockholder prior to any sales being made under the Second SEDA, the 179,655 shares purchased by the Selling Stockholder under the Second SEDA after August 24, 2011 and prior to the date hereof and the 2,820,345  shares remaining issuable under the Second SEDA as of the date hereof.

 

 

 

PLAN OF DISTRIBUTION

 

A Selling Stockholder may, from time to time, sell any or all of their Resale Shares on the OTCQB or any other stock exchange, market or trading facility on which the shares of Common Stock are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods when selling Resale Shares:

 

●	ordinary brokerage transactions and transactions in which a broker-dealer solicits purchasers;
●	block trades in which a broker-dealer will attempt to sell Resale Shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
●	purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
●	an exchange distribution in accordance with the rules of the applicable exchange;
●	privately negotiated transactions;
●	broker-dealers may agree with the Selling Stockholder to sell a specified number of such Resale Shares at a stipulated price per share;
●	through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
●	a combination of any such methods of sale; or
●	any other method permitted pursuant to applicable law.

A Selling Stockholder may also sell Resale Shares under Rule 144 under the Securities Act, if available, rather than under this Prospectus.

 

Broker-dealers engaged by a Selling Stockholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from a Selling Stockholder (or, if any broker-dealer acts as agent for the purchaser of Resale Shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with NASDR Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with NASDR IM-2440.

 

In connection with the sale of the Resale Shares or interests therein, a Selling Stockholder may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Common Stock in the course of hedging the positions they assume. A Selling Stockholder may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealers or other financial institutions of Resale Shares offered by this Prospectus, which Resale Shares such broker-dealer or other financial institution may resell pursuant to this Prospectus (as supplemented or amended to reflect such transaction).

 

YA Master is, and any other Selling Stockholder, broker-dealer or agent that is involved in selling the Resale Shares may be deemed to be, an “underwriter” within the meaning of the Securities Act in connection with such sales. Any commissions received by YA Master or such other Selling Stockholder, broker-dealer or agent, and any profit on the sale of the Resale Shares purchased by them, may be deemed to be underwriting commissions or discounts under the Securities Act. YA Master has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any other Selling Stockholder or person to distribute the Common Stock. YA Master has informed the Company that in no event shall any broker-dealer receive fees, commissions or markups which, in the aggregate, would exceed eight percent (8%) of the amount of the relevant sale.

 

The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the Resale Shares. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

 

Because YA Master is and any other Selling Stockholder may be deemed to be an “underwriter” within the meaning of the Securities Act, they will be subject to the Prospectus delivery requirements of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this Prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this Prospectus. YA Master has informed the Company that there is no underwriter or coordinating broker acting in connection with the proposed sale of the Resale Shares by the Selling Stockholders.

 

We agreed to keep this Prospectus effective until the earlier of (i) the date on which the Resale Shares may be resold by the Selling Stockholders without registration and without regard to any volume limitations by reason of Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the Resale Shares have been resold pursuant to this Prospectus or Rule 144 under the Securities Act or any other rule of similar effect. YA Master has informed the Company that the Resale Shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In certain states, the Resale Shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the Resale Shares may not simultaneously engage in market making activities with respect to the Common Stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the Common Stock by the Selling Stockholders or any other person.  We will make copies of this Prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this Prospectus to each purchaser of Resale Shares at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

 

USE OF PROCEEDS

 

We will not receive any of the proceeds resulting from the sale of the Resale Shares by the Selling Stockholder.

MARKET FOR COMMON SHARES AND DIVIDEND POLICY

 

Common Stock (1)

 

Our Common Stock is quoted and traded on the OTCQB under the symbol "OMAG". On December 30, 2009, the Company effected a 1-for-100 reverse split of its Common Stock followed immediately by a 20-for-1 forward split of its Common Stock (collectively, the “Stock Splits”). For the twenty (20) trading day period from February 10, 2010 to March 10, 2010, our stock ticker symbol was “OMAGD”, as a result of the Stock Splits. For the nineteen (19) trading day period from April 24, 2012 to May 18, 2012, our stock ticker symbol was “OMAGE”, as a result of our failure to timely file our audited financial statements for the fiscal year ended December 31, 2011. On May 17, 2011 we filed an amended annual report on Form 10-K/A which contained our audited financial statements for the fiscal year ended December 31, 2011and on May 21, 2012, our stock symbol reverted to “OMAG”.

 

The following table sets forth the range of the high and low prices for the Common Stock for the dates indicated. The table reflects inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.

 

 

(1)	All Common Share amounts mentioned herein give retroactive effect to the Stock Splits.

 

On September 11 , 2012 the last reported sale price of our Common Stock on the OTCQB was $2.55 .

 

Dividends and Dividend Policy

 

The holders of our Common Stock share proportionately, on a per share basis, in all dividends and other distributions declared by our Board of Directors. On January 12, 2012, our Board of Directors declared a dividend distribution of Rights and Warrants to our shareholders. Other than the foregoing dividend distribution, we have not declared any dividends on our Common Stock since inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for use in our business operations. Any future decisions as to payment of cash or other dividends will be at the discretion of the Board of Directors and will depend upon our earnings and financial position at such time and on such other factors as the Board of Directors may then deem relevant.

 

Holders

 

As of September 11 , 2012 there were 14,369,041 shares of our Common Stock and 6,363,674 Warrants issued and outstanding and there were approximately 1,122 holders of record of our Common Stock and of our Warrants.

 

As of September 11 , 2012 we had 35,630,959 shares of Common Stock reserved for issuance.

 

Transfer Agent

 

The transfer agent for our Common Stock and Warrants is Continental Stock Transfer and Trust Company, 17 Battery Place, New York, New York 10004.

 

DESCRIPTION OF CAPITAL STOCK AND WARRANTS

 

The following is a summary of the material provisions of our Common Stock, our preferred stock, par value $.001 per share (“Preferred Stock”), our Warrants, our restated certificate of incorporation and our bylaws, all as in effect as of the date of this Prospectus. You should also refer to our restated certificate of incorporation and bylaws which have been filed with the SEC as Exhibits 3(i) and 3(ii) to the Registration Statement of which this Prospectus forms a part.

 

Our total authorized capital stock is 50,850,000 shares of which 50,000,000 shares are Common Stock and 850,000 shares are Preferred Stock.

 

Common Stock

 

As of September 11 , 2012 there were 14,369,041 shares of Common Stock issued and outstanding.

 

The holders of our Common Stock are entitled to one vote per share on all matters to be voted on by our stockholders including the election of directors. Our stockholders are not entitled to cumulative voting rights and, accordingly the holders of a majority of the shares voting for the election of directors can elect the entire Board of Directors if they choose to do so and, in that event, the holders of the remaining shares will not be able to elect any person to our Board of Directors.

 

The holders of the Company’s Common Stock are entitled to receive ratably such dividends or distributions, if any, as may be declared from time to time by the Board of Directors in its discretion from funds or securities legally available therefor and subject to prior dividend rights of holders of any shares of our Preferred Stock which may be outstanding. Upon the Company’s liquidation, dissolution or winding up, subject to prior liquidation rights of the holders of our Preferred Stock if any, the holders of our Common Stock are entitled to receive on a pro rata basis our remaining assets available for distribution. Holders of the Company’s Common Stock have no preemptive or other subscription rights and there are no conversion rights or redemption or sinking fund provisions with respect to such shares. All outstanding shares of the Company’s Common Stock are, and all shares being offered by this Prospectus will be, fully paid and not liable to further calls or assessment by the Company.

 

Preferred Stock

 

As of September 11 , 2012 there were no shares of Preferred Stock issued or outstanding. Our Certificate of Incorporation authorizes the issuance of shares of Preferred Stock in one or more series. Our Board of Directors has the authority, without any vote or action by the shareholders, to create one or more series of Preferred Stock up to the limit of our authorized but unissued shares of Preferred Stock and to fix the number of shares constituting such series and the designation of such series, the voting powers (if any) of the shares of such series and the relative participating, option or other special rights (if any), and any qualifications, preferences, limitations or restrictions pertaining to such series which may be fixed by the Board of Directors pursuant to a resolution or resolutions adopted by the Board of Directors and providing for the issuance of such series of Preferred.

 

Warrants

 

As of September 11 , 2012 there were 6,363,674 Warrants issued and outstanding. Of the foregoing, 3,181,837 are $5 Warrants and 3,181,837  are $10 Warrants. Each $5 Warrant is exercisable for the purchase of one Common Share at an exercise price of $5.00 per share and each $10 Warrant is exercisable for the purchase of one Common Share at an exercise price of $10.00 per share. The Warrants are redeemable at a Redemption Price of $0.001 per Warrant upon 30 days written notice from the Company.

 

The Warrants are exercisable at the option of the Warrant Holder at any time up until 5 p.m. Eastern Time in the United States on the earlier of (a) December 31, 2013, or (b) the Redemption Date, provided that no person who on February 24, 2012 owned less than (a) 4.99% or (b) 9.99% of the Common Shares outstanding on February 24, 2012, may exercise a number of Warrants which would thereby cause such person to acquire, together with its affiliates, beneficial ownership of (a) 4.99% or more, or (b) 9.99% or more of the Common Shares outstanding immediately prior to the time of such exercise. A Warrant Holder may exercise the purchase rights represented by a Warrant, in whole or in part, by surrendering the properly executed Warrant Certificate(s) at the Warrant Agent’s office in New York City, New York or at the principal office of the Company in New York City, New York, and by paying the Company, by certified or cashier’s check, the Warrant Payment (which is equal to the aggregate Exercise Price for the shares of Common Stock proposed to be purchased).

 

 

Notwithstanding the foregoing, no Warrants will be exercisable and we will not be obligated to issue any Common Shares issuable upon the exercise of such Warrants unless (i) at the time the Warrant Holder thereof seeks to exercise such Warrant, we have a registration statement under the Securities Act in effect covering the Common Shares issuable upon the exercise of such Warrant and a current prospectus relating to our Common Stock, and (ii) the Common Shares issuable upon such exercise have been registered or qualified or deemed to be exempt from registration under the securities laws of the state of residence of such Warrant Holder. If a Warrant Holder who on February 24, 2012 owned less than (a) 4.99% or (b) 9.99% of the Common Shares outstanding on February 24, 2012 seeks to exercise Warrants, and such proposed exercise would cause such Warrant Holder to acquire, together with its affiliates, beneficial ownership of (a) 4.99% or more, or (b) 9.99% or more, respectively, of the Common Shares, outstanding immediately prior to the time of such exercise, then in such an event, such proposed exercise will be effected by the Company for the maximum number of Warrants resulting in the beneficial ownership of the maximum number of whole Common Shares by such Warrant Holder which fails to meet the above stated applicable limitation for such Warrant Holder and its affiliates, and any excess Warrant Payment will be returned to such Warrant Holder.

 

As promptly as reasonably possible after each exercise of the purchase rights represented by a Warrant, the Company shall deliver to the relevant Warrant Holder a certificate representing the shares of Common Stock so purchased (or such will be electronically delivered to the Warrant Holder if such Warrant is held in electronic form) and, unless such Warrant has been fully exercised, expired or redeemed, a new Warrant Certificate representing the balance of the shares of Common Stock subject to such Warrant. Warrant Holders do not have any voting or other rights as a stockholder of our Company by virtue of being a Warrant Holder. The person entitled to receive the shares of Common Stock issuable upon any exercise of the purchase rights represented by the Warrants, shall be treated for all purposes as the holder of such shares of record as of the close of business on the date of exercise.

 

The Warrants do not contain any anti-dilution provisions and may be exercised only for whole shares of Common Stock. The Warrant Exercise Price and the number of shares of Common Stock that the Company must issue upon exercise of the Warrants shall not be subject to adjustment for any reason, including but not limited to, any combinations or subdivisions of Common Stock or any dividend, reclassification, reorganization, merger or spin off.

 

The Warrants are transferrable and a Warrant Holder may transfer all or part of the Warrants (but no fractional Warrants) at any time on the books of the Company upon surrender of the Warrant Certificate(s), properly endorsed. Upon such surrender, the Company shall issue and deliver to the transferee a new Warrant Certificate representing the Warrants so transferred. Upon any partial transfer, the Company shall issue and deliver to the Warrant Holder a new Warrant Certificate representing the Warrants not so transferred.

 

The Company filed a registration statement with the SEC to register the Warrants other than the Certificated Warrants and the Common Stock underlying such Warrants and the SEC declared such registration statement effective as of February 13, 2012. The Company presently intends to maintain the effectiveness of such registration statement until the earlier of the Warrant Expiration Date or the Redemption Date. The Company filed a registration statement with the SEC to register the Certificated Warrants and the Common Stock underlying the Certificated Warrants and when and if such registration statement is declared effective by the SEC and the California Approval is received, the Company will issue and distribute the Certificated Warrants. Assuming the 58,450 Certificated Warrants are distributed to the California Certificate Shareholders, the Company will then have a total of 6,422,124 Warrants issued and outstanding of which 3,211,062 will be $5 Warrants and 3,211,062 will be $10 Warrants.

 

During the period within which the Warrants may be exercised, the Company shall at all times have authorized and reserved for issuance enough shares of its Common Stock for the full exercise of the purchase rights represented by the then unexercised Warrants. If the Company dissolves, liquidates or winds up its business before the exercise, expiration or redemption of the Warrants, any Warrant Holder shall be entitled, upon exercising its Warrants, to receive in lieu of the shares of Common Stock receivable upon such exercise, the same kind and amount of assets as would have been issued, distributed or paid to such Warrant Holder upon any such dissolution, liquidation or winding up with respect to such Common Shares, had such Warrant Holder been the holder of record on the record date for the determination of those entitled to receive any such liquidating distribution or, if no record is taken, upon the date of such liquidating distribution. The Company shall pay all issue and other taxes that may be payable in respect of any issue or delivery of shares of Common Stock upon the exercise of Warrants. The Warrants are governed by, and shall be construed and enforced in accordance with the laws of the State of New York.

 

 

LEGAL MATTERS

 

The validity of our Common Stock offered hereby will be passed upon by Sichenzia Ross Friedman Ference LLP, New York, New York.

 

EXPERTS

 

Our consolidated financial statements at December 31, 2011 and for the two years then ended appearing in this Prospectus have been audited by Michael T. Studer, CPA P.C., independent registered public accounting firm, as set forth in their report thereon appearing elsewhere in this Prospectus and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing.

DESCRIPTION OF BUSINESS

 

Omagine, Inc. is a holding company which was incorporated in Delaware in October 2004. The Company conducts substantially all of its operations through its sixty percent (60%) owned subsidiary Omagine LLC and its wholly-owned subsidiary JOL. In November 2009, Omagine, Inc. and JOL formed Omagine LLC, an Omani limited liability company in Oman.  Omagine LLC is engaged in the business of real estate development in Oman.

 

In May 2011, Omagine LLC sold newly issued shares of its capital stock to Omagine Inc. and three investors thereby reducing the Omagine, Inc. ownership of Omagine LLC from 100% to 60%.

 

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.

 

Products, Services, Marketing and Distribution

 

The Omagine Project

 

The Company has proposed to the Government of Oman (the “Government”) the development of a tourism and real estate project (the "Omagine Project") to be developed by Omagine LLC in Oman. Omagine LLC was formed in Oman for the purpose of designing, developing, owning and operating the Omagine Project.

 

We anticipate that the Omagine Project will be developed on one million square meters (equal to approximately 245 acres) of beachfront land facing the Gulf of Oman just west of the capital city of Muscat and approximately six miles from Muscat International Airport (the "Omagine Site"). It 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 and marina area; retail shops and restaurants, entertainment venues, boat slips and docking facilities; a five-star resort hotel, a four-star resort hotel and possibly an additional three or four-star hotel; shopping and retail establishments integrated with the hotels; commercial office buildings; and more than two thousand residences to be developed for sale.

 

Significant commercial, retail, entertainment and hospitality elements are included in the Omagine Project which is expected to take more than 5 years to complete. The Company plans, over time, to also be in the property management, hospitality and entertainment businesses.

 

Non-Omani persons (such as expatriates living and working in Oman) are not permitted by Omani law to purchase land or residences in Oman outside of an Integrated Tourism Complex (“ITC”). Pursuant to the Development Agreement as presently agreed, the Government will issue a license to Omagine LLC designating the Omagine Project as an ITC and as such, Omagine LLC will be permitted to sell the freehold title to land and properties which are developed on the Omagine Site to any person, including any non-Omani person.

 

 

The Development Agreement :

 

The contract between the Government and Omagine LLC which will govern the design, development, construction, management and ownership of the Omagine Project and the Government’s and Omagine LLC’s rights and obligations with respect to the Omagine Project, is the “Development Agreement” (the “DA”). The Development Agreement has been approved by all the required Ministries of the Government of Oman.

 

The Omagine Project and the Omagine DA have received multiple Government approvals over the past several years including at least three (3) written approvals of the project from the Government. In July 2011, after many drafts and several years of negotiations, the Omagine Development Agreement was agreed by Omagine LLC and all required ministries of the Government (the “Final DA”). In September 2011, as requested by the Ministry of Tourism (“MOT”), Omagine LLC registered its new shareholders (see “Shareholder Agreement” below) with the Ministry of Commerce & Industry and, to the best knowledge and belief of the Company and its attorneys, no further barrier to signing the Final DA now exists.

 

A new Minister of Tourism, His Excellency Ahmed Al-Mahrizi, was appointed on March 1, 2012.

 

In mid-May Omagine LLC received a letter from His Excellency Ahmed Al-Mahrizi (the “Minister’s Letter”) requesting Omagine LLC to provide certain information to MOT. The Minister’s Letter, which requested documentation on four items, is attached hereto as Exhibit 99.5.

 

Representatives of the shareholders of Omagine LLC (the Company, Royal Court Affairs, and Consolidated Contractors) met for several hours on July 1, 2012 with His Excellency Ahmed Al-Mahrizi and a lawyer for MOT.

 

Having been recently appointed in March 2012, the Minister, reasonably enough, was not completely familiar with the concept and scope of the Omagine Project and requested that we update him on the project. The Omagine LLC shareholders described the project in detail and showed His Excellency a video presentation of the project, several drawings, sketches, architectural renderings, site plans and the overall conceptual master plan. A detailed discussion of the genesis and background of the project including the history of our prior negotiations with the MOT then ensued. The Minister was quite pleased with the description and discussion as he was unaware of many of the details until our meeting.

 

We then presented to His Excellency our written response to the Minister’s Letter along with attachments containing the requested information – including, among other things, six “comfort letters” in support of the Omagine Project from some of the largest banks in the MENA Region – including three banks in Oman. A detailed, open, frank and friendly discussion was then held regarding the Minister’s Letter, our response thereto and the Development Agreement. The Minister was especially pleased to learn that certain matters about which he had concerns as well as all of the matters detailed in the Minister’s Letter were already covered and agreed in the Final DA.

 

The MOT lawyer in attendance mentioned that we (Omagine) had not yet responded to a list of Ministry of Legal Affairs (“MOLA”) comments sent to us by MOT in early 2011. This was incorrect since, as previously disclosed, we had delivered our response to such MOLA comments by Federal Express to MOT on March 14, 2011. We explained to the Minister and the MOT lawyer that our response to such MOLA comments was indeed delivered to MOT and that such MOLA comments and our responses thereto were subsequently approved by MOT and incorporated into the agreed DA. The Minister was pleased to learn this and asked that we send a copy of our response to the MOLA comments along with a copy of the agreed DA to Her Excellency Maitha Al Mahrouqi, the Under-Secretary of Tourism, to whom he has specifically assigned responsibility for the Omagine Project.

 

The meeting concluded with the Minister confirming that he is in agreement with and enthusiastic about the development of the Omagine Project. He also stated that he was entirely satisfied with our project presentation, that he agreed it will be a wonderful project for Oman, that he was completely satisfied with our response to his May 9 th Minister’s Letter and that he is agreeable to sign the DA as soon as possible.

 

His Excellency Al Mehrzi stated: "Her Excellency Maitha is on leave for the next few weeks but on her return, please get the paperwork organized with her and I am ready to sign the DA during Ramadan".

 

All of the Omagine attendees at the meeting unanimously agreed that the meeting results were excellent and all agreed that His Excellency Ahmad Al Mehrzi is very clearly a talented, intelligent, direct, and very personable man who wants to get things done.

 

In a prior communication during June, Her Excellency Maitha Al Mahrouqi indicated to us that she would return to work on July 26, 2012. A copy of our March 14, 2011 response to the MOLA comments was sent to Her Excellency Maitha’s office on July 7, 2012 along with a request for a meeting to discuss the Final DA. We expect to hear from Her Excellency during August 2012 regarding the date for such meeting.

 

The Holy Month of Ramadan extends from approximately July 20 to August 20 and is immediately followed by the EID holiday celebration (which in Oman is expected to extend through August 31). Her Excellency Maitha returns on July 26. It is management’s expectation that while we may sign the DA in August, given the occurrence of Ramadan and the EID holiday, the DA signing could be postponed into September or even October 2012. Management is optimistic that the Government will soon memorialize its agreement to the Final DA in a signed written document.

 

Notwithstanding the foregoing however, we nevertheless caution investors that we are unable at this time to give any assurances whatsoever that the DA will actually be concluded or signed by the parties until the parties actually sign the DA. Indeed, past experience indicates that caution should be exercised in making any such assumptions until the DA is actually signed by the parties.

 

 

The Shareholder Agreement :

 

In May 2011, Omagine, Inc., JOL and three (3) investors (the “New Shareholders”) signed a shareholders’ agreement dated as of April 20, 2011 with respect to Omagine LLC (the “Shareholder Agreement”). The Shareholder Agreement is Exhibit 10.4 hereto.

 

Prior to the signing of the Shareholder Agreement Omagine LLC was wholly owned by Omagine, Inc. and JOL. Pursuant to the provisions of the Shareholder Agreement, Omagine, Inc. reduced its 100% ownership of Omagine LLC to sixty percent (60%) and Omagine LLC sold newly issued shares of its capital stock to the New Shareholders and to Omagine, Inc. for a cash investment amount of approximately $70.1 million (the “Cash Investment”) plus an as yet undetermined non-cash “payment-in-kind” amount representing the value of the land constituting the Omagine Site. Pursuant to the terms of the Shareholder Agreement, the Cash Investment will be invested in three stages.

 

As of the date hereof the initial portion of the Cash Investment equal to approximately $390,000 has been received by Omagine LLC from the New Shareholders and Omagine, Inc.

 

Subsequent to the signing of the DA but prior to the Financing Agreement Date (as hereinafter defined), an additional portion of the Cash Investment equal to approximately $546,000 (the “OMAG Final Equity Investment”) will be received by Omagine LLC from Omagine, Inc.

 

On or immediately subsequent to the Financing Agreement Date, the final portion of the Cash Investment equal to approximately $69,233,125 will be received by Omagine LLC from the New Shareholders.

 

The value of the non-cash “payment-in-kind” investment by RCA will be added to Omagine LLC’s capital after such value is determined subsequent to the signing of the Development Agreement.

 

The Office of Royal Court Affairs ("RCA"), is an Omani organization representing the personal interests of His Majesty, Sultan Qaboos bin Said, the ruler of Oman. Consolidated Contractors International Company, SAL, (“CCIC”) is a 60 year old Lebanese multi-national company headquartered in Athens, Greece. CCIC has approximately five and one-half  (5.5) billion dollars in annual revenue and one hundred twenty thousand (120,000) employees worldwide. It has operating subsidiaries in, among other places, every country in the MENA Region. Consolidated Contracting Company S.A. (“CCC-Panama”) is a subsidiary of CCIC and is its investment arm. Consolidated Contractors (Oman) Company LLC, (“CCC-Oman”) is an Omani construction company with approximately 13,000 employees in Oman and is CCIC’s operating subsidiary in Oman.

 

The New Shareholders are (i) RCA, (ii) CCC-Panama and (iii) CCC-Oman. The parties to the Shareholder Agreement are Omagine, Inc., JOL and the New Shareholders.

 

The Shareholder Agreement defines the “Pre-Development Expense Amount” as the total amount of Omagine Project related expenses incurred by Omagine, Inc. and JOL prior to the signing of the DA. Such Pre-Development Expense Amount expenses were heretofore incurred by Omagine, Inc. and JOL and continue to be incurred by Omagine, Inc. with respect to the planning, concept design, re-design, engineering, financing, capital raising costs and promotion of the Omagine Project and the negotiation and conclusion of the Development Agreement with the Government.

 

The Shareholder Agreement (i) estimates that, as of the date of the Shareholder Agreement, the Pre-Development Expense Amount was approximately nine (9) million U.S. dollars, and (ii) defines the Success Fee as being equal to ten (10) million dollars.

 

As provided for in the Shareholder Agreement, Omagine, Inc. will receive payment in full from Omagine LLC of:

 

	(i)	the Pre-Development Expense Amount and,
	(ii)	the $10 million Success Fee.

 

The Shareholder Agreement defines the “Financing Agreement Date” as the day upon which Omagine LLC and an investment fund, lender or other person first execute and deliver a legally binding agreement pursuant to which such investment fund, lender or other person agrees to provide debt financing for the first phase or for any or all phases of the Omagine Project. The Shareholder Agreement also defines the date subsequent to the Financing Agreement Date when Omagine LLC draws down the first amount of debt financing as the “Draw Date”.

 

The ten (10) million dollar Success Fee will be paid to Omagine, Inc. in five annual two (2) million dollar installments beginning on or within ten (10) days after the Draw Date.

 

Fifty percent (50%) of the Pre-Development Expense Amount will be paid to Omagine, Inc. on or within ten (10) days after the Draw Date and the remaining fifty percent (50%) will be paid to Omagine, Inc. in five equal annual installments beginning on the first anniversary of the Draw Date.

 

 

Pursuant to the Shareholder Agreement:

 

1.	CCIC’s two subsidiaries will invest an aggregate of 19,010,000 Omani Rials in cash (equivalent to approximately $49,426,000) into Omagine LLC. CCC-Panama will invest 12,673,333 Omani Rials (equivalent to approximately $32,950,666) and CCC-Oman will invest 6,336,667 Omani Rials in cash (equivalent to approximately $16,475,334), as follows:
	(i)	As of the date hereof, CCC-Panama has invested 15,000 Omani Rials (equivalent to approximately $39,000) into Omagine LLC and CCC-Panama will invest an additional 12,658,333 Omani Rials (equivalent to approximately $32,911,666) on the Financing Agreement Date.
	(ii)	As of the date hereof, CCC-Oman has invested 7,500 Omani Rials (equivalent to approximately $19,500) into Omagine LLC and CCC-Oman will invest an additional 6,329,167 Omani Rials (equivalent to approximately $16,455,834) on the Financing Agreement Date.
	(iii)	The CCC-Panama and CCC-Oman initial combined cash investments of 22,500 Omani Rials (equivalent to approximately $58,500) have been received by Omagine LLC as of the date hereof and payment of the CCC-Panama and CCC-Oman combined cash investment balance of approximately $49,367,500 is contingent upon (i) the signing of a contract between Omagine LLC and CCC-Oman appointing CCC-Oman as the general contractor for the Omagine Project, and (ii) the occurrence of the Financing Agreement Date.
	(iv)	The result of the foregoing is that CCC-Panama presently owns ten percent (10%) of Omagine LLC and CCC-Oman presently owns five percent (5%) of Omagine LLC.
2.	RCA will invest an aggregate of 7,678,125 Omani Rials in cash (equivalent to approximately $19,963,125) plus RCA will also invest the value of the payment-in-kind (the “PIK”) into Omagine LLC as follows:
	(i)	As of the date hereof, RCA has invested 37,500 Omani Rials (equivalent to approximately $97,500) into Omagine LLC and RCA will invest an additional 7,640,625 Omani Rials (equivalent to approximately $19,865,625) on the Financing Agreement Date.
	(ii)	Concurrent with Omagine LLC acquiring its rights over the Omagine Site pursuant to the terms of the Development Agreement, the PIK will be valued and such value will be booked as an additional capital investment by RCA into Omagine LLC.
	(iii)	RCA’s initial cash investment of 37,500 Omani Rials (equivalent to approximately $97,500) has been received by Omagine LLC as of the date hereof and payment of the RCA cash investment balance of 7,640,625 Omani Rials (equivalent to approximately $19,865,625) is contingent only upon the occurrence of the Financing Agreement Date.
	(iv)	The result of the foregoing is that RCA presently owns twenty-five percent (25%) of Omagine LLC.
3.	Omagine, Inc. will invest an aggregate of 300,000 Omani Rials in cash (equivalent to approximately $780,000) into Omagine LLC as follows:
	(i)	As of the date hereof Omagine, Inc. has invested 90,000 Omani Rials (equivalent to approximately $234,000) into Omagine LLC.
	(ii)	Omagine Inc. will invest the OMAG Final Equity Investment of 210,000 Omani Rials (equivalent to approximately $546,000) into Omagine LLC after the DA is signed but before the Financing Agreement Date. Investment of the OMAG Final Equity Investment by Omagine, Inc. is not contingent upon the occurrence of the Financing Agreement Date.
	(iii)	The result of the foregoing is that Omagine, Inc. presently owns sixty percent (60%) of Omagine LLC.

The percentage ownership of Omagine LLC by each of its shareholders presently is:

 

Management presently intends to pursue the sale of a percentage of Omagine LLC’s equity to one or more investors as soon as reasonably possible subsequent to the signing of the DA and management presently believes it can maintain Omagine, Inc.’s majority control of Omagine LLC while successfully selling such Omagine LLC equity to new investors. Although present market conditions remain somewhat unsettled, management remains optimistic that subsequent to the signing of the DA, Omagine LLC will be able to sell a percentage of its equity to one or more investors for an amount in excess of the average cash investment amount paid by the New Shareholders.

 

As specified above, pursuant to the provisions of the Shareholder Agreement, the total amount of the Cash Investment into Omagine LLC by Omagine, Inc. and the New Shareholders will be 26,988,125 Omani Rials (equivalent to approximately $70,169,125) and although Omagine, Inc. and the New Shareholders will invest an aggregate of $936,000 of that $70,169,125 before the Financing Agreement Date, 98.7% of such $70,169,125 equal to $69,233,125 (the “Deferred Cash Investment”) will not be invested by the New Shareholders or received by Omagine LLC until the Financing Agreement Date.

 

The Financing Agreement Date is presently projected by management to occur within twelve months after the signing of the DA. If however the financial resources are available to Omagine, Inc., then Omagine, Inc. and Omagine LLC may at their option, choose to trigger the Financing Agreement Date earlier (and thereby trigger the $69,233,125 Deferred Cash Investment into Omagine LLC) by having Omagine, Inc. make a secured loan to Omagine LLC to finance the first phase of the development of the Omagine Project. The first phase of the development of the Omagine Project is expected to constitute primarily initial design work and its scope and budgeted cost will be decided upon by Omagine LLC shortly after the DA is signed. Pursuant to the provisions of the Shareholder Agreement, the date on which such a loan from Omagine, Inc. to Omagine LLC is made, if it is made, would constitute a Financing Agreement Date and would therefore trigger the injection into Omagine LLC of the $69,233,125 Deferred Cash Investment.

 

While it will have the financial capacity to undertake certain limited initial planning and design activities immediately after the DA is signed, if Omagine LLC wishes to immediately begin more extensive design and development activities it will have to accelerate the timing of the first Financing Agreement Date or sell additional equity or raise additional alternative financing (or a combination of some or all of the foregoing). Otherwise Omagine LLC will have to wait until the first Financing Agreement Date occurs and the debt financing and Deferred Cash Investment are received in order to perform such extensive design and development activities.

 

The Shareholder Agreement also memorializes the PIK capital contribution being made into Omagine LLC by RCA. The PIK represents a portion of RCA’s payment to Omagine LLC for its 25% ownership of Omagine LLC. The value of the PIK will equal the value to Omagine LLC that is ultimately assigned to the provision to Omagine LLC of the approximately 245 acres of beachfront land constituting the Omagine Site which His Majesty the Sultan owned and transferred to the MOT for the specific purpose of having Omagine LLC develop it into the Omagine Project. After the DA is signed, the value of the PIK will be determined by a professional valuation expert in accordance with Omani law and with the concurrence of Omagine LLC’s independent auditor, Deloitte & Touche, (M.E.) & Co. LLC.

 

 

Subsequent to the above Cash Investment into Omagine LLC being made by the New Shareholders and Omagine, Inc., the capital of Omagine LLC after the Financing Agreement Date will be 26,988,125 Omani Rials (equivalent to approximately $70,169,125). The capital of Omagine LLC will likely be increased further at a later date if and when the non-cash valuation of the PIK is recorded as a capital investment into Omagine LLC.

 

The excellent location of the Omagine Site is universally recognized by local market participants and the significance to the Company of the provision of the Omagine Site to Omagine LLC is enormous. Irrespective of its future PIK valuation as an Omagine LLC capital investment (which valuation management expects to be substantial), the provision of the Omagine Site to Omagine LLC via the DA will be a primary driver of future Company revenue. The benefits accruing to the Company from the Omagine Site will be significant.

 

Management believes that the PIK and the $70 million Cash Investment are the most important parts of Omagine LLC’s capital structure and that they were the most difficult to arrange since they are the highest risk portion of such equity capital structure. As of the date hereof, both the PIK and the Cash Investment are memorialized in the legally binding Shareholder Agreement.

 

All of the aforementioned investment amounts, ownership percentages and other terms and conditions of the Shareholder Agreement were negotiated by Omagine, Inc. management on behalf of Omagine LLC in arms-length transactions between Omagine LLC and the New Shareholders. Other than their present ownership positions in Omagine LLC, none of the New Shareholders are affiliates of the Company.

 

Among other things, the Shareholder Agreement also specifies the corporate governance and management policies of Omagine LLC and it provides for the Omagine LLC shares presently owned by JOL to be transferred to Omagine, Inc. subsequent to the signing of the DA. The foregoing summary of the terms of the Shareholder Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Shareholder Agreement. The Shareholder Agreement is Exhibit 10.4 hereto.

 

In December 2007 the Company signed a one year agreement (the "Bank Muscat MOU") with Bank Muscat SAOG ("BankMuscat" or the "Bank"). BankMuscat is the largest financial institution in Oman and is 30% owned by RCA. The Bank Muscat MOU memorialized the agreement between the Company and the Bank regarding, among other things, the Company appointing the Bank as its financial advisor immediately subsequent to the signing of the Development Agreement. The Bank Muscat MOU also contemplated that the Bank would negotiate with financial institutions and potential investors on behalf of Omagine LLC and act as placement agent for Omagine LLC’s future debt and capital requirements. The Oman Integrated Tourism Projects Fund (the “Fund”) is an investment fund managed by BankMuscat. The Bank Muscat MOU also memorialized the Fund’s proposed investment of up to twenty-five percent of the capital of Omagine LLC after the DA was signed. As of the date hereof the DA has not yet been signed and the BankMuscat MOU has expired.

 

The Company, the Fund, BankMuscat and Omagine LLC have held many discussions and meetings since 2007 and in August 2010 BankMuscat informed the Company that since the Fund’s authority to make investments would expire in November 2010, the Fund therefore required a guaranteed earlier exit date for its proposed equity investment. The other proposed Omagine LLC shareholders (Omagine, Inc., RCA and CCC) would not be guaranteed any such early exit date and the Company and the Fund never came to terms on this matter. In October 2010 the Fund informed us that it did not wish to be an equity investor in Omagine LLC but that it did wish to provide subordinate debt financing (“Mezzanine Financing”) to Omagine LLC after the DA was signed and subject to its usual due diligence at such time.

 

It is management’s understanding that the Fund’s authority to make investments was extended in November 2010 for an additional year until November 2011. As of November 2011 the DA had still not been signed and management is of the belief that, in view of the inordinate delays encountered in getting the DA signed, it is now unlikely that the Fund will be either an investor or a source of such Mezzanine Financing. Subsequent to the signing of the DA, it is our present intention to have Omagine LLC hire Bank Muscat as a non-exclusive financial advisor to provide Omagine LLC with financial advisory services with respect to its project financing requirements, including any requirements Omagine LLC may have for further equity investments and/or Mezzanine Financing.

 

Subject to the approval of its shareholders and to negotiating and agreeing to a contract, Omagine LLC presently intends to hire Michael Baker Corp. ("Baker") as its Program Manager and Project Manager. Baker is a publicly traded U.S. firm (AMEX: BKR) in the business of providing program management, engineering, design and construction management services to a wide variety of clients including the U.S. Department of Defense and many state governments and commercial clients. The Company has employed Baker through the feasibility and engineering study phases of the Omagine Project and presently anticipates that Omagine LLC will execute an agreement with Baker soon after the signing of the Development Agreement. Several Baker representatives and senior executives have made several trips to Oman to visit with management, examine the Omagine Site and plan for Baker’s future involvement with Omagine LLC. The President and CEO of Baker met with the Company’s president in Oman and indicated that Baker would open an office in Oman if it was awarded a contract for the Omagine Project. Baker is headquartered in Pittsburgh, PA, with offices throughout the U.S. and in Abu Dhabi in the United Arab Emirates and is experienced in all aspects of design, program management and construction management for large scale construction and development projects of the magnitude of the Omagine Project. Baker has significant program management and construction management contracts with the United States military worldwide - including in the MENA Region.

 

 

The interpretive design, entertainment content, and visitor experience design candidates to be hired by Omagine LLC have been narrowed to a short list of professional companies. It is presently anticipated that subsequent to the signing of the DA, one or more of such companies ("Content Developers") will be engaged by Omagine LLC to transform the Company’s high level strategic vision for the content of the Pearl structures and surrounding areas into physical places offering emotional, intellectual and physical interactions. Each of the prospective Content Developers has serviced a diverse client base, including theme parks, museums, zoos, aquariums and other such complex entertainment centers around the world, including in the MENA Region, and each continues to regularly produce world class attractions globally of the size and scope of the Omagine Project.

 

In order to move into the actual design and development stage of the Omagine Project, Omagine LLC and the Government must first memorialize their agreement to the Final DA in a signed written document. Based on our past experience, it is not possible at this time to predict a precise DA signing date. All of management’s past estimates regarding the timing of the signing of the DA have been incorrect but management’s recent meeting on July 1, 2012 with the Minister of Tourism, His Excellency Al-Mahrizi, gives us a sense of confidence that the DA will be signed sometime between August and October of 2012. Notwithstanding the foregoing, and in view of the long and continuing history of delays by the Government, no assurance can be given at this time that the long since agreed to Final DA will be signed soon, or at all.

 

The financial results of Omagine LLC are included in the consolidated financial results of the Company in accordance with accounting principles generally accepted in the United States. The Company experienced a moderate increase in capital in the third quarter of 2011 as a result of the initial cash capital contributions of the New Shareholders to Omagine LLC. If and when the Financing Agreement Date occurs, the Company will experience another more substantial increase in capital of approximately $42 million which is 60% of the approximately $70 million of cash capital investments which will be recorded at such time as capital on Omagine LLC’s financial statements and reflected in the Company’s consolidated financial statements. At or about that same time the Company may experience an additional substantial, but as yet undetermined, increase in its capital, which increase will be equal to 60% of the valuation of the PIK, provided that the value of the PIK is recorded as capital on Omagine LLC’s financial statements.

 

The capital of Omagine LLC, proceeds from the sales, if any, by Omagine LLC of additional equity stakes, bank borrowings, Mezzanine Financing, if any, and the proceeds from sales of its residential and commercial properties, are expected to be utilized by Omagine LLC to develop the Omagine Project. Omagine LLC's ongoing financial results will be included in the consolidated financial statements of the Company as appropriate for as long as Omagine, Inc. remains a shareholder of Omagine LLC.

 

As presently contemplated, BankMuscat (which is 30% owned by RCA and is Oman's largest financial institution) will, along with other financial institutions, be engaged by Omagine LLC as a non-exclusive financial advisor to assist Omagine LLC in arranging the necessary construction financing for the Omagine Project ("Construction Financing") and other financing for Omagine LLC as may be required. We have had extensive discussions with a number of financial institutions with respect to such Construction Financing and we are presently in receipt of six “bank comfort letters” in support of the Omagine Project from some of the largest banks in the MENA Region – including three banks in Oman. These discussions however cannot be advanced further or concluded until the agreed DA is actually signed by the parties. Banks and financial institutions insist, reasonably enough, on having a signed contract document in place before moving further along or concluding these Construction Financing discussions. Management is cautiously optimistic with respect to Omagine LLC’s prospects for arranging the Construction Financing for the Omagine Project but recognizes that given present economic and market conditions, it is not a trivial task and will be challenging. The Final DA, which is presently agreed and approved (but not yet signed), recognizes and addresses this issue when it states, in relevant part:

 

“The Government recognises that the Project Company intends to raise limited recourse financing in relation to the Project and that Lenders may expect to be afforded certain rights in relation to it. Accordingly, the Project Company will by or before the completion of twelve (12) months from the Execution Date enter into a written term sheet with the Lenders for the financing of the first phase, any other phase or all of the Project (a “Term Sheet”). If the Project Company has not delivered a copy of such Term Sheet to the Government by or before the expiry of the twelve (12) month period referred to above, this Development Agreement then shall have no further effect.”

 

While the worldwide bank liquidity issues resulting from the 2008-2009 financial crisis have eased, the European sovereign debt crisis has come into full view and the project financing environment in Oman and the MENA Region remains more cautious and challenging than before these crises. Management is in contact on a regular basis with MENA Region banks and international financial institutions regarding the financing of the Omagine Project and remains cautiously optimistic that it will be able to arrange the necessary project financing for the Omagine Project. Management believes that there is currently a high degree of liquidity and a strong appetite among regional banks and financial institutions in the MENA Region for lending to, and investing in, sound projects. The banks and other financial institutions with which we have discussed the Omagine Project have been uniformly impressed with the strength and high caliber of our partners in Omagine LLC. Notwithstanding the foregoing, we continue to be of the opinion that the project finance market in Oman remains in the recovery phase due to the slowdowns and price decreases experienced in the local residential and commercial real estate markets during the last few years. The market intelligence garnered by management indicates that local bankers and market participants believe that price stabilization and a recovery in both transaction volume and pricing is now occurring. Should this recovery in fact be occurring, Omagine LLC should be well positioned to benefit from such a recovery since, from a timing perspective, Omagine LLC’s plans contemplate beginning a year or more of intensive design and planning activities once the DA is signed followed by the launch of residential and commercial sales at the Omagine Project. The Company presently expects that planned launch date for residential and commercial sales to occur in late 2013 or beyond. While management views most of the past delays by the Government as being adverse to the Company’s best interests, it recognizes that, at the present moment, the continued gradual recovery of the project finance and local real estate markets are positive indicators for the Company’s future prospects.

 

As the development program becomes more detailed and as the planning and design processes progress, the estimates of construction and development costs have and will become proportionately more accurate. The Company presently expects, based on the current assumptions underlying Omagine LLC’s updated development program that the development costs (including the costs for design, construction management, program management and construction) for the entire Omagine Project will be between $2.1 and $2.5 billion dollars. As noted below however, the costs of labor and materials as well as the selling prices and market absorption rates of new residential housing and commercial properties remain somewhat volatile and accurate projections for such future costs, selling prices or market absorption rates cannot be made at this time. The Company nevertheless presently expects, based on signing the DA in 2012 and on current assumptions and market activity, that although the selling prices of residential housing in Oman have fallen from their overheated 2007/2008 peaks, such residential prices during the Omagine Project’s planned multiple sales releases during 2013 and beyond will be at least equal to the prices that are presently budgeted in Omagine LLC’s financial model.

 

 

As noted herein, costs and selling prices remain somewhat volatile as the economy in Oman and the surrounding region recovers and improves, and undue reliance on present projections should be avoided. Management cautions that future events rarely develop exactly as forecast and the best estimates routinely require adjustment. Management fully expects that its revenue projections and cost estimates for the Omagine Project will require adjustment – possibly significant adjustment – as future events unfold.

 

Omagine LLC’s financial model is updated, modified and adjusted from time to time in order to capture what management believes are the then present market realities and projected trends. The financial model is organized to show best case, worst case and probable case scenarios. The most recently updated probable case scenario forecasts net positive cash flows for Omagine LLC of approximately $900 million dollars over the seven year period subsequent to the signing of the Development Agreement with a net present value of the Omagine Project of approximately $450 million dollars. Management believes this is a conservative forecast but cautions that it is an uncertain forecast that is based on 2011 data. Omagine LLC will update this model at regular intervals as material new facts and information emerge, as the development program and design process unfolds and as market conditions require. It is certain that as the project unfolds the various components of the financial model – and therefore the estimates of total cash flow and net present value – will change from time to time in line with market fluctuations.

 

The sale of residential and commercial properties are the main revenue drivers supporting Omagine LLC's financial projections. The increase over the last several years in the value of the land constituting the Omagine Site is expected to have a positive effect on revenue and on the valuation of the PIK.

 

Management cautions that investors should not place undue reliance on the aforementioned financial model projections or on estimates by market participants mentioned herein as all such projections, estimates and forecasts 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 or that the estimates or forecasts will prove to be accurate. Potential investors are cautioned not to place undue reliance on any such forward-looking statement or forecast, which, unless otherwise noted to the contrary, speaks only as of the date hereof.

 

Although the Oman economy has not been as severely affected by the 2008-2009 worldwide financial crisis as nearby Dubai or other countries, it did experience negative effects, slowdowns and volatility in both prices and market absorption rates. Raw material and labor prices initially dropped dramatically and have now recovered somewhat and stabilized. Recent sales prices for housing in other integrated tourism projects in the Muscat area of Oman appear to have stabilized below their 2007/2008 peaks but above the 2006 levels, and the inventory of unsold housing in the secondary (re-sale) market has diminished which some market observers see as an important indicator of pent-up future demand. Significant new housing inventory, especially apartments, have recently come onto the local Muscat area market. The market absorption rates (number of market transactions) for new residential housing remains weak but has picked up in recent months and some market observers and real estate agents expect a continued gradual resurgence as existing pent-up demand is unleashed and buyers become less fearful. The ongoing sovereign debt crisis in Europe however only adds to buyers’ unease and the outcome of that crisis and its effect on buyers’ behavior is unknown at this time. Omagine LLC is not expected to begin offering residential and/or commercial units for sale until at least one year after the DA is signed.

 

The Government’s delays in signing the DA from Q1 2006 through Q2 2008 inflicted a very large opportunity cost on the Company (i.e. the value of the lost revenue combined with the time value of money). The opportunity cost during the period from Q2 2008 to Q3 2010 however was significantly less.

 

The opportunity cost to the Company caused by the Government’s continued delays in signing the DA from Q3 2010 to the present time is less than it was in the 2006/2008 period but it is still quite large; and it is growing.

 

Management is of the opinion therefore that some of the Q2 2008 to Q3 2010 delays we have experienced have in some instances worked to the benefit of the Company. Had we been successful in signing the DA during that period, it now seems in hindsight that we may have been negatively affected by the then ongoing worldwide financial crisis. The prospects for the Company and its shareholders were severely injured by the Q1 2006 through Q2 2008 delays by the Government and are continuing to be severely injured by the ongoing Government delays from Q3 2010 to the present time. It seems probable however that some of the 2008/2010 delays may have prevented the Company from having to operate in a more challenging real estate and project finance environment than would otherwise have been the case either before or after that 2008/2010 period.

 

In early 2011 His Majesty, the Sultan made changes in various ministries in the Government, including appointing a new Minister of Tourism to fill the vacancy caused by the passing in early 2011 after a long illness of the first Minister of Tourism. That second Minister of Tourism was replaced by a third Minister of Tourism two months later in May 2011 and that third Minister of Tourism was replaced by a fourth Minister of Tourism - the present Minister - in March 2012. Since the Final DA was approved by all parties in mid-2011, management is presently of the opinion that these multiple ministerial changes at the Ministry of Tourism undoubtedly had a delaying impact on the signing of the DA. After meeting with the new Minister of Tourism, His Excellency Al-Mahrizi on July 1, 2012, management is now hopeful that the DA will be signed in the second half of 2012.

 

 

Subsequent to the signing of the Development Agreement, the Omagine Site's value will be definitively determined by a qualified independent real-estate appraiser and such appraisal will be utilized to determine the value of the PIK and by Omagine LLC’s financial advisors in their discussions with banks and other financial institutions in order to arrange the Construction Financing. Omagine LLC's requirement for such financing is expected to be reduced by its ability to pre-sell residence and commercial units by entering into sales contracts with third party purchasers and receiving deposits and progress payments during the construction of such units. Trends in the local market subsequent to the recent financial crises mentioned above however have indicated a much reduced presence of speculative buyers and a reduced consumer appetite for pre-sales of residence units as many more buyers are now demanding a finished product before entering into sales contracts with developers.

 

The Final DA as presently contemplated and agreed (but not yet signed) allows for sales and pre-sales of any of the residential or commercial buildings that will be developed and built on the Omagine Site. The land within the Omagine Site underlying such residences or commercial properties may be sold to the buyer of such residences or commercial properties and the freehold title to such land and properties may be transferred to such buyers at the closing of such sales transactions. As mentioned above, the value of the land constituting the Omagine Site is expected to have a positive effect on Omagine LLC’s revenue. Pursuant to the Final DA, Omagine LLC will pay the Government 25 Omani Rials (approximately $65) per square meter for the land it sells to third parties. Such payment is only made to the Government by Omagine LLC after the closing of the sale of such land and the receipt of payment by Omagine LLC from such third parties. At the present time, the average selling price for land at the Omagine Site is conservatively estimated by local real estate agents to be at least 250 Omani Rials (approximately $650) per square meter.

 

Rights Offering and Warrant Distribution

 

The Company conducted a “Rights Offering and Warrant Distribution” between February 24, 2012 and March 30, 2012 for the sole benefit of its shareholders of record as of February 24, 2012 (the “Record Shareholders”). Record Shareholders who are residents of the State of California are the “California Record Shareholders”. Pursuant to the terms of the Rights Offering and Warrant Distribution the California Record Shareholders were not permitted to participate in the Rights Offering and Warrant Distribution until the registration and/or qualification in California of the rights, warrants and the common stock underlying the rights and warrants was approved by the California Department of Corporations (the “California Approval”).

 

Some California Record Shareholders (the “California Nominee Shareholders”) are nominees or brokers who hold Common Shares in electronic form for the account of California residents. Other California Record Shareholders (the “California Certificate Shareholders”) hold their Common Shares in certificate form. There are 21 California Certificate Shareholders and an indeterminate number of California Nominee Shareholders. The Company withheld the issuance of the certificates for rights and warrants (the “Certificated Warrants”) to the 21 California Certificate Shareholders. The California Nominee Shareholders received electronically through Depository Trust Company (“DTC”) an indeterminate number of rights (the “California Rights”) and an indeterminate number of  warrants (the “Nominee Warrants”) attributable to California residents and such California Nominee Shareholders were contemporaneously instructed by DTC that such California Rights and Nominee Warrants were not exercisable until the California Approval was received by the Company. As of the date hereof the California Approval has not yet been received by the Company.

 

In the Rights Offering and Warrant Distribution, Record Shareholders other than the California Certificate Shareholders received 3,181,837 rights (“Rights”) and 6,363,674 common stock purchase warrants (“Warrants”). The Rights Offering and all unexercised Rights expired on March 30, 2012.

 

A total of 1,014,032 Common Shares were subscribed for in the Rights Offering at a subscription price of $1.25 per Common Share. Total proceeds to the Company from the Rights Offering was $1,267,540 of which $731,639 was paid in cash and $535,901 was paid via the satisfaction of debt owed by the Company to Record Shareholders exercising such Rights. Of the 1,014,032 new shares issued pursuant to the Rights Offering, 585,311 of such shares were issued in exchange for the aforementioned $731,639 in cash and 428,721 of such shares were issued in exchange for the aforementioned satisfaction of $535,901 of Company debt constituting promissory notes for loans to the Company and accrued but unpaid salaries and expenses. Of the $535,901 of Company debt which was satisfied in the Rights Offering, $506,750 of such debt represented unpaid salaries, expenses and loans to the Company which were due and owing by the Company to officers and directors of the Company.

 

Of the  6,363,674 Warrants distributed, 3,181,837 Warrants are exercisable into common stock at an exercise price of $5.00 per share and 3,181,837 Warrants are exercisable into common stock at an exercise price of $10.00 per share. The Warrants expire on December 31, 2013 unless, upon a 30 day prior notice to the Warrant holders, they are redeemed earlier by the Company.

 

The Rights, Warrants and Common Shares underlying the Rights and Warrants were registered in a registration statement filed by the Company on Form S-1 (Commission File No. 333-179040), which was declared effective by the Securities and Exchange Commission (“SEC”) on February 13, 2012 (the “Original Registration”).   Subsequently the Company filed Post-Effective Amendment No. 2 to the Original Registration (declared effective by the SEC on May 7, 2012) and Post-Effective Amendment No. 3 to the Original Registration (declared effective by the SEC on June 12, 2012) to remove from registration the securities which were registered pursuant to the Original Registration but not sold or distributed to Record Shareholders. The registration pursuant to the Original Registration of 6,363,674 Warrants and 7,377,706 Common Shares remains effective.

 

The Company plans to file a registration statement with the SEC to register the 58,450 Certificated Warrants (29,225 $5 Warrants and 29,225 $10 Warrants) and the 58,450 Common Shares underlying the Certificated Warrants. Subject to such registration statement being declared effective by the SEC and to the receipt by the Company of the California Approval, the Company will distribute an additional 58,450 Warrants to the California Shareholders.

 

The Company continues the preparation for its anticipated future business activities in various ways including but not limited to: (i) recruiting various executive level personnel that will be required to ramp up organizationally for the Omagine Project, (ii) examining various methods of raising additional capital for Omagine LLC; (iii) negotiating the outlines of initial contracts with the major vendors, contractors, consultants, employees and financial institutions proposed to be involved in the Omagine Project, (iv) arranging the appropriate and required legal, accounting, tax and other professional services both in Oman and the U.S., (v) examining various tax structures, (vi) reviewing and complying (to the extent we are presently able) with the listing requirements of various stock exchanges so we may be prepared to apply for such listing(s) as soon as we are eligible, (vii) examining various other matters we believe will enhance shareholder value, and (viii) examining other potential Company revenue streams which are ancillary to, and derivative of, the Omagine Project.

 

 

The present nature of the Company's business is such that it is not expected to generate revenue until after the occurrence of an event - the signing of the Development Agreement for the Omagine Project - which, as of the date hereof, has not yet occurred. Moreover, revenue from real estate development associated with the Omagine Project is not expected to occur until subsequent to the Financing Agreement Date. Pursuant to the terms of the Shareholder Agreement, Omagine, Inc. will derive revenue on and subsequent to the Financing Agreement Date from (i) the payment to it by Omagine LLC of the $10 million Success Fee, and (ii) the reimbursement to it by Omagine LLC of the Pre-Development Expense Amount. The Company is presently planning to enter businesses other than real estate development - and ancillary to and derivative of the Omagine Project - subsequent to signing the Development Agreement and the Company presently expects to generate ongoing revenue streams from such businesses, but no projections of the amount of such revenue, if any, can be made at this time.

 

Several Omagine, Inc. shareholders had previously expressed their concern that the political tension and civil unrest in the MENA Region in 2011 and 2012, both external and internal to Oman, had a negative effect on the Omagine Project or had caused a delay in the closing process for the Omagine DA. Management was and is of the opinion that at least up until mid to late 2011 this had not been the case. During the period of Middle East headline news about the Arab Spring and unrest in the MENA Region, Omagine LLC was fully engaged in (i) revising, concluding and signing the Shareholder Agreement with the New Shareholders, and (ii) concluding the Final DA and the Registration. As noted above, the several ministerial changes at MOT as well as recent tension surrounding Syria, Iran, Israel and the U.S. have probably distracted the Government and contributed to the recent delays in the signing process for the DA.

 

Other Arab countries in the MENA Region have experienced and are experiencing demonstrations of discontent with the rule of their heads of state and in some cases these demonstrations are being met with violent pushback by some MENA Region governments but this was not and is not the case in politically and economically stable Oman. Notwithstanding the foregoing, in the first half of 2011 Oman experienced several low-key, low-turnout, low-intensity demonstrations with respect to job opportunities and wages for Omanis (a very few of which involved violent behavior) and these have been met by His Majesty and the Government with pro-active positive measures and economic and political initiatives (including widely acclaimed elections) to address the expressed concerns of the citizens of Oman. Short term (often 1 day) work stoppages and strikes with respect to labor matters  accompanied by non-violent demonstrations now occur from time to time in Oman but these events and several newly organized and legally allowed labor unions are now regarded as a normal part of the emerging democratic fabric of the Omani society.

 

Notwithstanding the foregoing "forward looking statements", no assurances can be given at this time that the Development Agreement will actually be signed or that the Financing Agreement Date or the anticipated revenues from the Omagine Project will actually occur.

 

All "forward looking statements" contained herein are subject to, known and unknown risks, uncertainties and other factors which could cause Omagine LLC's and therefore the Company's actual results, financial or operating performance or achievements to differ from management's projections for them as expressed or implied by such forward-looking statements. Projections and assumptions contained and expressed herein are based on information available to the Company at the time so furnished and, unless otherwise indicated to the contrary, such projections and assumptions are as of the date hereof and are, in the opinion of management, reasonable. All such projections and assumptions are subject to significant uncertainties and contingencies, many of which are beyond the Company's control, and no assurances can be given that the projections will be realized or that the assumptions are correct. Potential investors are cautioned not to place undue reliance on any such forward-looking statements, which unless otherwise indicated to the contrary, speak only as of the date hereof.

 

Competition :

 

The real-estate development business in Oman is a competitive business populated by companies with substantially greater financial, managerial and personnel resources than the Company presently possesses. Management believes that the Company's ability to assemble and coordinate a team of experienced American, European and Middle Eastern consultants in a wide variety of specialized fields was crucial to its success to date in advancing the Omagine Project to its present status. Each of these consultants, some of whom, depending upon future events may become employees of Omagine, Inc. and/or Omagine LLC, are 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; city planning; 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 design; recreational operations planning and management; investment banking; structured finance; motion based ride technology; film technology; and 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 MENA Region. Mr. Sam Hamdan, who is the Company’s primary strategic consultant and the Deputy Managing Director of Omagine LLC has over 25 years of experience in the MENA Region. Mr. Hamdan is fluent in Arabic and English and, depending on future circumstances, may become Omagine, Inc.'s President subsequent to the Financing Agreement Date.

 

Although several of Omagine LLC's competitors have well established businesses and brand reputations, management believes that Omagine LLC's advantages are (i) the uniqueness of the Omagine Project is particularly attractive to the Government, (ii) the Company's and Omagine LLC's senior management have established strong and trusting relationships with the relevant Government officials, and (iii) the Shareholder Agreement strongly demonstrates the serious investors and professionals that have been recruited to assist in the development of the Omagine Project. Company management believes Omagine LLC can successfully compete in this marketplace through a combination of unique development concepts, effective relationship management and the utilization of highly professional, competent and experienced sub-contractors and consultants who are well known to the Government.

 

 

Engineering, Design and Construction :

 

The Company does not presently own or directly operate any engineering, design or construction companies or facilities but the Company or Omagine LLC may, depending upon events, set up its own in-house design supervision team and/or enter into joint ventures with firms providing the aforesaid services. To date, the Company has generally conceived the development concepts and defined the "scope of work" and then, as required, contracted with various designers, architects, contractors and consultants in the United States, Europe and the Middle East to perform those tasks. There are many such designers, architects, contractors and consultants available with competitive pricing and the Company does not believe that the loss or inability to perform of any such designer, architect, contractor or consultant would have a material, adverse impact on its business or operations. The Company believes it maintains a good working business relationship with its designers, architects, contractors and consultants. As presently planned, all copyrights to all material documents, designs and drawings executed by such independent designers, architects, contractors and consultants are or will be the property of either Omagine, LLC or Omagine, Inc. (See: "Patents, Copyrights and Trademarks").

 

Marketing :

 

The Company has engaged in significant marketing, design, promotional and other activities with respect to the Omagine Project and has to date incurred a significant amount of costs associated with these and other general and administrative activities (collectively, the "Pre-Development Expense Amount"). The Pre-Development Expense Amount is associated with, among other things, travel, consulting and professional fees, planning and feasibility studies, design, engineering and with similar such activities including preparing and making presentations to the Government of Oman. Pursuant to the provisions of the Shareholder Agreement the Pre-Development Expense Amount (estimated to be approximately nine million U.S. dollars as of the date of the Shareholder Agreement) will be reimbursed to Omagine, Inc. by Omagine LLC.

 

Manufacturing and Production :

 

The Company does not engage in any manufacturing activities and as such does not maintain any inventory. In the future, Omagine LLC may maintain an inventory of residential and/or commercial properties held for sale to third parties.

 

Patents, Copyrights and Trademarks :

 

Either Omagine, LLC or Omagine, Inc. owns or will own (either outright or by assignment) the copyrights to all the material documents, designs and drawings produced and/or executed in relation to the Omagine Project by its employees and/or independent designers, architects and consultants.

 

Omagine, Inc. has filed trademark applications with the United States Patent and Trademark Office ("USPTO") for the mark OMAGINE and six related marks (collectively, the "Marks"). Omagine, Inc. has also filed trademark applications for the Marks in Oman and Kuwait within the applicable time periods required.

 

The mark OMAGINE and three of the six related Marks have each been issued a Certificate of Registration from the USPTO and are now officially registered Marks in the United States.

 

The USPTO has issued a "Notice of Allowance" with respect to each of the remaining three related Marks (the “Expired Marks”) and the applications for such Expired Marks could have been approved for registration upon the filing of a valid "Statement of Use" attesting that each such Expired Mark was in commercial use. Due to the delays encountered by the Company in signing the DA, the Expired Marks were not put into commercial use by the “Final Statement of Use Deadline” and all three applications for the Expired Marks have expired. The Expired Marks remain of interest to the Company and, depending upon future circumstances, we may file new trademark applications for the Expired Marks with the USPTO.

 

Trademark applications for the OMAGINE Mark and eight related Marks were filed in Oman and all have now been issued Certificates of Registration in Oman. The Mark OMAGINE has been issued a Registration Certificate from the Patent and Trademark Department of the Ministry of Commerce & Industry in Kuwait.

 

Governmental Regulation :

 

The Company expects that Omagine LLC will require several Omani governmental licenses, permits and approvals for its services and products during the development, construction and operation of the Omagine Project (collectively, “Licenses and Permits”). The obligation of the Government of Oman to issue all such Licenses and Permits as may be required is specifically detailed in the Final DA. The Company does not anticipate any negative effects on its or Omagine LLC's business from any existing or probable Omani governmental laws or regulations. Omagine LLC will incur certain costs and sustain certain effects on its operations as a consequence of its compliance with Omani laws, including environmental laws, and regulations and all such costs and effects are expected to occur as part of the normal course of its business. The Company does not require any U.S. governmental approval of its properties, services, products or activities in Oman nor does the Company anticipate any negative effects on its business from any existing or probable United States or Oman government laws or regulations. Both the government of the United States and the government of Oman have ratified the United States-Oman Free Trade Agreement.

 

Employees and Employment Benefits :

 

As of the date hereof, we have five employees and eleven consultants, eight of whom we presently plan to hire as full time employees of Omagine, Inc. or Omagine LLC subsequent to the signing of the DA. None of our employees are represented by a labor union for purposes of collective bargaining. We consider our relations with our employees and consultants to be good. In view of the extraordinary delays encountered in signing the DA and the fact that our employees and consultants have been significantly under-compensated for several years, the Board of Directors approved stock grants to six of our consultants in December 2011 and also approved the issuance on January 2, 2012 and April 13, 2012 of stock options (the “One Year Options”) to fourteen persons who are either employees or directors of the Company or consultants to the Company. The continued services of these persons to the Company was deemed by the Board of Directors to be of utmost importance and the stock grants and the One Year Options were approved in order to incentivize these persons to continue their efforts on behalf of the Company throughout 2012. (See: “Directors and Executive Officers” – “Equity Compensation Plan Information”). On January 2, 2012, pursuant to a resolution of the Board of Directors dated December 8, 2011, the Company granted a total of 1,994,000 One Year Options to 13 individuals. Such grants of One Year Options were all for services rendered and included the grant of: (i) an aggregate of 1,049,000 One Year Options to the Company’s three Officers; (ii) an aggregate of 150,000 One Year Options to the Company’s then three independent Directors; (iii) a grant of 750,000 One Year Options to the Deputy Managing Director of Omagine LLC who is also a consultant to Omagine and who also holds 160,000 stock options presently exercisable at $1.25 per share and expiring March 31, 2017 which were granted pursuant to a March 2007 consulting agreement expiring on December 31, 2012; (iv) a grant of 10,000 One Year Options to a consultant to whom the Company pays $2,000 per month consulting fees; and (v) a grant of 5,000 One Year Options to the son of the Company’s President for website design services rendered. On January 31, 2012, 50,000 One Year Options previously issued to an independent Director were cancelled in accordance with their terms upon such Director’s resignation. On April 9, 2012 an independent Director died and, pursuant to the Plan, all 50,000 One Year Options previously granted to him immediately vested and the expiration date of his One Year Options and all other options then held by him was fixed at April 8, 2013. On April 13, 2012, pursuant to a resolution of the Board of Directors, the Company granted a total of 21,000 One Year Options to 2 individuals (11,000 of which were granted to the Company’s president) for services rendered. Other than the One Year Options of the former independent director that died in April 2012, all other One Year Options expire on December 31, 2012. All One Year Options are fully vested, provide for a cashless exercise feature and are exercisable at an exercise price of $1.70 per share. Subsequent to the signing of the Development Agreement the Company intends to significantly increase the number of its full time employees. The Company provides and pays for group medical insurance for all full time employees choosing to participate in its plan and the Company sponsors a 401(k) Plan for all eligible full time employees. The Company presently has no employment agreements with any of its employees. Omagine, Inc. was obligated under employment agreements which have expired to employ and pay its President and Chief Executive Officer and its Vice-President and Secretary. The majority of salary payments due to these individuals for prior years and for the past two years was deferred and accrued. If the Development Agreement is signed Omagine, Inc. plans to enter into a new employment agreement with each of these two individuals although the terms of such employment agreements have not yet been determined. (See "Directors, Executive Officers and Corporate Governance" and "Executive Compensation").

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINACIAL CONDITION AND RESULTS OF OPERATIONS

 

 General Statement.  -  Factors that may affect future results :

 

Some of the statements contained in this Prospectus that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as: "estimates", "projects", "plans", "believes", "expects", "anticipates", "intends", "targeted", "continue", "remain", "will", "should", "may" and other similar expressions, or the negative or other variations thereof, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements and other similar forecasts and statements of expectations which are contained in this Prospectus, since such statements reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, proposed properties, services, and products. No assurances can be given regarding the achievement of future results, as actual results may differ materially from projected future results as a result of the risks we face and actual events may differ from anticipated events because of the assumptions underlying the statements that have been made regarding such anticipated events. Factors that may cause our actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

 

*	The inaccuracy of the assumptions we have made underlying such forward-looking statements.
*	Failure of the Government of Oman to keep its commitment regarding the agreed Final DA and its intention to sign the Development Agreement with Omagine LLC.
*	Failure of Omagine LLC to obtain the necessary Construction Financing required to design, build and operate the Omagine Project.
*	Inability of the Company to secure additional financing as and when required.
*	Unexpected economic or political changes or political instability or civil unrest in Oman or in the MENA Region.
*	The imposition of new restrictions or regulations by government agencies in the U.S. or the MENA Region that affect the Company's business activities.

 

Overview

Omagine, Inc. is a holding company which was incorporated in Delaware in October 2004. Omagine, Inc. is the successor to Alfa International Corp. and it conducts substantially all of its operations through its 60% owned subsidiary Omagine LLC and its wholly-owned subsidiary JOL. In November 2009, Omagine, Inc. and JOL formed Omagine LLC, an Omani limited liability company in the Sultanate of Oman. In May 2011, Omagine LLC sold newly issued shares of its capital stock to Omagine Inc. and three investors (the “New Shareholders”) for an aggregate investment amount of approximately $70.1 million (see Exhibit 10.4 hereto) thereby reducing Omagine, Inc.’s 100% ownership of Omagine LLC to 60%. (See: “Description of Business – The Shareholder Agreement”). 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 MENA Region. The Company presently concentrates the majority of its efforts on the tourism and real estate development business of Omagine LLC in Oman.

 

Results of Operations :

 

THREE MONTHS ENDED JUNE 30, 2012 vs.

THREE MONTHS ENDED JUNE 30, 2011

 

The Company did not generate any revenue or incur any cost of sales during the second quarter of 2012 or 2011.

 

Selling, general and administrative (“SG&A”) expenses were $704,564 in the second quarter of 2012 compared to $593,149 in the second quarter of 2011. This increase of $111,415 (19%) was primarily attributable to a $419,491 non-cash charge for increased stock option expense associated with the issuance of One Year Options awarded in January 2012 net of decreases of $300,000 in commitment fees and $8,076 in SG&A expenses.

 

Net loss attributable to Omagine, Inc. was $705,441 and $607,209 for the three months ended June 30, 2012 and 2011, respectively. This $98,232 (16%) increase in the Company’s loss is primarily attributable to the $419,491 non-cash charge for increased stock option expense net of the $300,000 decrease in commitment fees and the $8,076 decrease in SG&A expenses referred to above, and a $5,303 decrease in interest expense and a $7,880 increase in Minority Interest loss.

 

 

SIX MONTHS ENDED JUNE 30, 2012 VS.

SIX MONTHS ENDED JUNE 30, 2011

 

The Company had no revenue during the six month periods ended June 30, 2012 or June 30, 2011.

 

SG&A expenses were $1,421,686 during the first six months of 2012 compared to $925,464 for the first six months of 2011.This increase of $496,222 (54%) was primarily attributable to an $834,288 non-cash charge for increased stock option expense associated with the issuance of One Year Options awarded in January 2012 net of decreases of $300,000 in commitment fees and $38,066 in SG&A expenses.

 

Net loss attributable to Omagine, Inc. was $1,423,858 and $952,851 for the six months ended June 30, 2012 and 2011 respectively. This $471,007 (49%) increase in the Company’s loss is primarily attributable to the $834,288 non-cash charge for increased stock option expense net of the $300,000 decrease in commitment fees and the $38,066 decrease in SG&A expenses referred to above, and a $4,576 decrease in interest expense and a $20,639 increase in Minority Interest loss.

 

The $731,639 of subscriptions receivable representing the cash subscriptions from the Rights Offering was paid to the Company by the Subscription Agent in April 2012. (See: “Management's Discussion and Analysis of Financial Condition and Results of Operations  -  Rights Offering and Warrant Distribution”).

 

The Company will need to generate revenue in order to attain profitability. The present nature of the Company’s business is such that it is not expected to generate revenue until after the development of the Omagine Project is significantly underway, an event which, as of the date hereof, is not certain to occur. The Company will need to raise additional capital and/or secure additional financing in order to execute its presently conceived business plan with respect to the Omagine Project.

 

The Company incurred $5,538 of capital expenditures during the six months ended June 30, 2012. Assuming Omagine LLC signs the Development Agreement for the Omagine Project with the Government of Oman as expected, the Company expects to incur significant expenses related to capital expenditures during fiscal year 2012 and 2013.

 

Liquidity and Capital Resources :

 

The Company’s net loss for the six months ended June 30, 2012 was $1,423,858. During the six months ended June 30, 2012, the Company experienced an increase in cash of $166,086. At June 30, 2012, the Company had a working capital deficit of $527,606, compared to working capital deficit of $1,412,311 at December 31, 2011. Total proceeds received by the Company from its recent Rights Offering was $1,267,540 of which $731,639 was received in cash and $535,901 was paid via the satisfaction of debt owed by the Company to Record Shareholders exercising such Rights. The $884,705 decreased deficit in working capital is attributable primarily to the $731,639 of cash proceeds from the Rights Offering. Of the $932,073 of current liabilities at June 30, 2012, $420,312 (45%) represent amounts due to officers and directors. The failure of the Company to secure additional funding to implement its business plan or the failure of Omagine LLC to sign the Development Agreement for the Omagine Project will significantly affect the Company’s ability to continue operations. The Company will rely upon the future business of its majority owned subsidiary Omagine LLC for revenue growth.

 

Shortly after the Shareholder Agreement was signed in May 2011, Omagine LLC’s resources increased as a result of the nominal initial investments made pursuant to the terms of the Shareholder Agreement (see Exhibit 10.4). The initial portion of the Cash Investment equal to approximately $390,000 has been received by Omagine LLC. Omagine LLC’s resources will again increase when the OMAG Final Equity Investment of 210,000 Omani Rials (equivalent to approximately $546,000) is made by Omagine, Inc. after the DA is signed and prior to the Financing Agreement Date. Not until on or immediately subsequent to the Financing Agreement Date however, will the Deferred Cash Investment equal to approximately $69,233,125 be received by Omagine LLC from the New Shareholders. The value of the non-cash “payment-in-kind” investment by RCA will be added to Omagine LLC’s capital after such value is determined subsequent to the signing of the Development Agreement.

 

 

The continuation of Omagine LLC’s business and its efforts to sign the Development Agreement have to a large extent been financed to date by Omagine, Inc. and it is planned that such activities will, to a large extent, continue to be financed by Omagine, Inc. until the DA is signed. The continuation of the Company’s operations is dependent upon its ability to secure financing for its operations until such time as the DA is signed, the Financing Agreement Date occurs and Omagine LLC begins paying Omagine, Inc. the $10 million Success Fee and the approximately $9 million Pre-Development Expense Amount.

 

The Company has relied to a great extent on the Standby Equity Distribution Agreements discussed below and on the proceeds from its recent Rights Offering to provide financing for its previous and current activities. If the DA is signed, management is hopeful that the Warrants will provide a future source of additional financing. The failure of Omagine LLC and the Government to sign the Development Agreement or the failure of the Financing Agreement Date to occur will significantly affect the Company’s ability to continue operations. Omagine, Inc. may, if it has sufficient financial resources available to it, make a secured loan to Omagine LLC in order to trigger the first Financing Agreement Date and the Deferred Cash Investment.

 

On December 22, 2008, the Company signed a two year Standby Equity Distribution Agreement (the “First SEDA”) with YA Global Investments, L.P. (“YA”). The First SEDA expired on April 30, 2011. Pursuant to the First SEDA Omagine could, at its sole option and upon giving written notice to YA (a “Purchase Notice”), sell shares of its Common Stock (“Shares”) to YA (“Sales”) at the Purchase Price (as determined pursuant to the terms of the First SEDA). The Company was not obligated to sell any Shares to YA but could, in its sole discretion, sell that number of Shares valued at the Purchase Price from time to time in effect that equaled five million dollars ($5,000,000) in the aggregate. YA was obligated to purchase such Shares from the Company subject to certain conditions including (i) the Company filing a registration statement with the SEC to register the Shares, (ii) the SEC declaring such registration statement effective, (iii) periodic Sales had to be separated by a time period equal to five trading days, and (iv) the amount of any such individual Sale could not exceed two hundred thousand dollars ($200,000). The registration statement filed by the Company was declared effective by the SEC as of May 1, 2009 and its effective status expired on April 30, 2010. The Company filed a new registration statement with the SEC to continue to make Sales available to it pursuant to the First SEDA and the SEC declared such new registration statement to be effective as of June 7, 2010. The effective status of the registration statement has expired.

 

On May 4, 2011, the Company executed a new two year Standby Equity Distribution Agreement (the “May SEDA”) with YA Global Master SPV Ltd (“YA Master”) under substantially the same terms and conditions as the First SEDA executed between YA and the Company in December 2008. On June 21, 2011, the Company and YA Master entered into an agreement amending the May SEDA (the “Amendment Agreement”). The May SEDA and the Amendment Agreement are collectively referred to herein as the “Second SEDA”. Omagine, Inc. issued 244,216 restricted shares of Common Stock to YA Master in satisfaction of a $300,000 commitment fee due under the Second SEDA. Pursuant to the Second SEDA the Company, at its sole discretion and upon giving written notice to YA Master (an “Advance Notice”), may periodically sell shares of its Common Stock to YA Master (“Share Sales”). For each share of Common Stock purchased under the Second SEDA, YA Master will pay to the Company ninety-five percent (95%) of the lowest daily volume weighted average price of the Common Stock as quoted by Bloomberg, LP, during the five (5) consecutive Trading Days (as such term is defined in the Second SEDA) immediately subsequent to the date of the relevant Advance Notice (the “Purchase Price”). The Company is not obligated to sell any shares of Common Stock to YA Master but may, over the term of the Second SEDA and in its sole discretion, sell to YA Master that number of shares of Common Stock valued at the Purchase Price from time to time in effect that equals up to ten million dollars ($10,000,000) in the aggregate. YA Master's obligation to purchase shares of Common Stock under the Second SEDA is subject to certain conditions, including (i) the Company obtaining an effective registration statement for the shares of Common Stock sold under the Second SEDA, and (ii) periodic sales of shares of Common Stock to YA Master must be separated by a time period equal to five Trading Days, and (iii) the amount of any individual periodic sale designated by the Company in any Advance Notice shall not exceed the greater of (i) two hundred thousand dollars ($200,000), or (ii) the average of the “Daily Value Traded” for each of the five (5) Trading Days prior to the relevant Advance Notice where Daily Value Traded is the product obtained by multiplying the daily trading volume of the Common Stock for such Trading Day by the closing bid price of the Common Stock for such Trading Day. The registration statement filed by the Company in connection with the Second SEDA was declared effective by the SEC as of August 24, 2011 (Commission File No. 333-175168). As of the date hereof, the effective status of such registration statement has expired and the Company has filed this Registration Statement with the SEC in order to again make Share Sales available to it pursuant to the Second SEDA.

 

The Company has utilized the First SEDA, the Second SEDA and the proceeds from its recent Rights Offering to fund its operations to date and intends, subject to this Registration Statement being declared effective by the SEC, to continue to utilize the Second SEDA to fund its ongoing operations, as and if necessary. Management is hopeful that, when and if the Omagine Development Agreement is signed, that the Warrants will thereafter become “in the money” and will be exercised. Such an exercise of Warrants would provide the significant amount of capital necessary to fund the OMAG Final Equity Investment into Omagine LLC and, should it be desirable at the time, a secured loan to Omagine LLC as outlined above. There can be no assurance given that the Company will be able to successfully utilize the Warrants or the Second SEDA to secure the significant amounts of financing necessary for it to execute its business plan as presently conceived. The Company has relied on the net proceeds from sales of Omagine, Inc.'s equity securities made in private placements, the Rights Offering and pursuant to the First and Second SEDA, to fund its operations during the past three years through the date hereof.

 

 

Results of Operations :

 

FISCAL YEAR ENDED DECEMBER 31, 2011 vs.

FISCAL YEAR ENDED DECEMBER 31, 2010

 

The present nature of the Company's business is such that it is not expected to generate revenue until after the occurrence of an event - the development of the Omagine Project - which, as of the date hereof, is not certain to occur. (See: "Business - Products, Services - The Omagine Project").

 

The Company did not generate any revenue or incur any cost of sales for the years ending 2011 and 2010. The Company is focusing all of its efforts on Omagine LLC's real estate development and entertainment business. The Company is relying on Omagine LLC's future operations for the Company's future revenue generation. Management is presently examining other possible sources of revenue for its JOL subsidiary which, subject to the Development Agreement being executed by Omagine LLC and the Government of Oman, may be added to JOL's operations.

 

Selling and marketing expenses were $29,596 during 2011, compared to $34,014 in 2010. This decrease in 2011 of $4,418 (13%) was primarily due to the decreases in telephone expense of $4,500; entertainment expense of $1,680; dues and subscriptions of $398 and postage expense of $452 offset by an increase in automobile expense of $2,610. Assuming Omagine LLC signs the Development Agreement for the Omagine Project with the Government of Oman, the Company is expected to incur significant expenses related to marketing, public relations and promotional expenditures in the future.

 

General and administrative expenses of $1,739,332 in fiscal 2011 were $535,070 (44%) higher than the $1,204,262 incurred in fiscal 2010. This increase was primarily attributable to the increases in 2011 of Officers’ Compensation ($15,000); fringe benefit expense ($9,016); accounting fees ($15,990); consulting fees ($360,923); directors’ fees ($15,000) and commitment fees ($300,000), offset by decreases in legal fees ($56,084); stock option expense ($17,542); stockholder relations ($18,628); travel expense ($65,510) and the net of various other expenses ($23,095).

 

The Company sustained a net loss of $1,804,451 during 2011 as compared to a net loss of $1,277,001 during 2010. This increase of $527,450 in the Company's net loss was due primarily to the increased general and administrative expenses mentioned above ($535,070) and increased interest expense ($16,954), net of decreases in selling and marketing expenses ($4,418) and decrease due to minority interest share in LLC loss ($20,156).

 

The Company did not incur any capital expenditures during fiscal year 2011. Assuming Omagine LLC signs the Development Agreement for the Omagine Project with the Government of Oman as expected, the Company expects to incur significant expenses related to capital expenditures during fiscal year 2012.

 

Liquidity and Capital Resources :

 

In 2011 the Company experienced a $87,164 increase in cash. This resulted from its positive cash flows of $824,659 provided by financing activities, partially offset by the $737,495 negative cash flow used by operating activities. The Company's financing activities in 2011 consisted of $660,000 in proceeds from the sale by Omagine, Inc. of shares of its Common Stock; $156,000 in capital contributions from noncontrolling interests of Omagine LLC; and an $8,659 increase in loans to the Company from officers and directors. The Company incurred a net loss of $1,804,451 and $1,277,001 in fiscal years 2011 and 2010 respectively.

 

At December 31, 2011, the Company had a working capital deficit of $1,412,311 compared to working capital deficit of $1,367,603 at December 31, 2010. This $44,708 increase in the Company's working capital deficit is attributable to the following: (a) an $87,164 increase in cash and equivalents; (b) a $51,061 increase in convertible notes payable and accrued interest; (c) a $16,801 decrease in accounts payable; (d) a $19,676 increase in prepaid expenses and other current assets; (e) an $8,659 increase in loans to the Company from officers and directors; (f) a $72,001 increase in accrued officers payroll; and (g) a $36,628 increase in accrued expenses and other current liabilities.

 

At December 31, 2011, the Company had $255,207 in current assets, consisting of cash, prepaid expenses and other current assets. The Company's current liabilities at December 31, 2011 totaled $1,667,518 consisting of $647,949 of convertible notes payable and accrued interest, $473,405 of accounts payable and accrued expenses, $16,864 due to officers and directors and $529,300 in accrued payroll. Of the $1,667,518 of current liabilities at December 31, 2011, $1,024,802 or 62% represents amounts due to officers and/or directors.

 

 

The $737,495 of funds used by operating activities during 2011 were used primarily to fund the net loss of $1,804,451 [less the non-cash charges totaling $962,698]. Such non-cash charges totaling $962,698 consisted of  (a) $92,498 of stock based compensation related to stock options and issuances of Common Stock (b) 401(k) contributions of Common Stock valued at $72,500, (b) the use of $187,500 of unpaid and accrued compensation by two officers of the Company to exercise stock options, (c) the payment in Common Stock of an account payable of $300,000 owed by the Company to a vendor, (d) the issuance of Common Stock valued at $306,460 to consultants, and depreciation of $3,740. As a result of the foregoing, the Company had a cash balance at December 31, 2011 of $235,381, as compared to a cash balance of $148,217 at December 31, 2010.

 

The Company will rely upon the future business of its majority owned subsidiary Omagine LLC for revenue growth.

 

As indicated in the report of the independent registered public accounting firm, the 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. The continued existence of the Company is dependent upon its ability to execute its business plan and attain profitable operations or obtain additional financing.

 

Omagine LLC presently has limited resources resulting from the initial capital investments into it by Omagine, Inc. and the New Shareholders. Shortly after the Shareholder Agreement was signed in May 2011, Omagine LLC’s resources increased as a result of the nominal initial investments made pursuant to the terms of the Shareholder Agreement (see Exhibit 10.4). The initial portion of the Cash Investment equal to approximately $390,000 has been received by Omagine LLC. Omagine LLC’s resources will again increase when the OMAG Final Equity Investment of 210,000 Omani Rials (equivalent to approximately $546,000) is made by Omagine, Inc. after the DA is signed and prior to the Financing Agreement Date. Not until on or immediately subsequent to the Financing Agreement Date however, will the final portion of the Cash Investment equal to approximately $69,233,125 be received by Omagine LLC from the New Shareholders. The value of the non-cash “payment-in-kind” investment by RCA will be added to Omagine LLC’s capital after such value is determined subsequent to the signing of the Development Agreement. The continuation of Omagine LLC’s business and its efforts to sign the Development Agreement have to a large extent been financed to date by Omagine, Inc. and it is planned that such activities will, to a large extent, continue to be financed by Omagine, Inc. until the DA is signed. The continuation of the Company’s operations is dependent upon its ability to secure financing for its operations until such time as the DA is signed, the Financing Agreement Date occurs, and Omagine LLC begins paying Omagine, Inc. the $10 million Success Fee and the approximately $9 million of Pre-Development Expenses.

 

The Company has relied to a great extent on the Standby Equity Distribution Agreements discussed below to provide financing for its previous and current activities. The failure to sign the Development Agreement or the failure of the Financing Agreement Date to occur will significantly affect the Company’s ability to continue operations. Omagine, Inc. may, if it has the necessary financial resources available to it, make a secured loan to Omagine LLC in order to trigger the first Financing Agreement Date.

 

On December 22, 2008, the Company signed a two year Standby Equity Distribution Agreement (the “First SEDA”) with YA Global Investments, L.P. (“YA”). The First SEDA expired on April 30, 2011. Pursuant to the First SEDA Omagine could, at its sole option and upon giving written notice to YA (a “Purchase Notice”), sell shares of its Common Stock (“Shares”) to YA (“Sales”) at the Purchase Price (as determined pursuant to the terms of the First SEDA). The Company was not obligated to sell any Shares to YA but could, in its sole discretion, sell that number of Shares valued at the Purchase Price from time to time in effect that equaled five million dollars ($5,000,000) in the aggregate. YA was obligated to purchase such Shares from the Company subject to certain conditions including (i) the Company filing a registration statement with the SEC to register the Shares, (ii) the SEC declaring such registration statement effective, (iii) periodic Sales had to be separated by a time period equal to five trading days, and (iv) the amount of any such individual Sale could not exceed two hundred thousand dollars ($200,000). The registration statement filed by the Company was declared effective by the SEC as of May 1, 2009 and its effective status expired on April 30, 2010. The Company filed a new registration statement with the SEC to continue to make Sales available to it pursuant to the First SEDA and the SEC declared such new registration statement to be effective as of June 7, 2010. The effective status such registration statement and the First SEDA have both expired.

 

 

On May 4, 2011, the Company executed a new two year Standby Equity Distribution Agreement (the “May SEDA”) with YA Global Master SPV Ltd (“YA Master”) under substantially the same terms and conditions as the First SEDA executed between YA and the Company in December 2008. On June 21, 2011, the Company and YA Master entered into an agreement amending the May SEDA (the “Amendment Agreement”). The May SEDA and the Amendment Agreement are collectively referred to herein as the “Second SEDA”. Omagine, Inc. issued 244,216 restricted shares of Common Stock to YA Master in satisfaction of a $300,000 commitment fee due under the Second SEDA. Pursuant to the Second SEDA the Company, at its sole discretion and upon giving written notice to YA Master (an “Advance Notice”), may periodically sell shares of its Common Stock to YA Master (“Share Sales”). For each share of Common Stock purchased under the Second SEDA, YA Master will pay to the Company ninety-five percent (95%) of the lowest daily volume weighted average price of the Common Stock as quoted by Bloomberg, LP, during the five (5) consecutive Trading Days (as such term is defined in the Second SEDA) immediately subsequent to the date of the relevant Advance Notice (the “Purchase Price”). The Company is not obligated to sell any shares of Common Stock to YA Master but may, over the term of the Second SEDA and in its sole discretion, sell to YA Master that number of shares of Common Stock valued at the Purchase Price from time to time in effect that equals up to ten million dollars ($10,000,000) in the aggregate. YA Master's obligation to purchase shares of Common Stock under the Second SEDA is subject to certain conditions, including (i) the Company obtaining an effective registration statement for the shares of Common Stock sold under the Second SEDA and (ii) periodic sales of shares of Common Stock to YA Master must be separated by a time period equal to five Trading Days, and (iii) the amount of any individual periodic sale designated by the Company in any Advance Notice shall not exceed the greater of (i) two hundred thousand dollars ($200,000), or (ii) the average of the “Daily Value Traded” for each of the five (5) Trading Days prior to the relevant Advance Notice where Daily Value Traded is the product obtained by multiplying the daily trading volume of the Common Stock for such Trading Day by the closing bid price of the Common Stock for such Trading Day. The registration statement filed by the Company in connection with the Second SEDA was declared effective by the SEC as of August 24, 2011 (Commission File No. 333-175168). As of the date hereof, the effective status of such registration statement has expired and the Company has filed this Registration Statement with the SEC in order to again make Share Sales available to it pursuant to the Second SEDA.

 

The Company has utilized the First SEDA, the Second SEDA and the proceeds from its recent Rights Offering to fund its operations to date and intends, subject to this Registration Statement being declared effective by the SEC, to continue to utilize the Second SEDA to fund its ongoing operations, as and if necessary. Management is hopeful that, when and if the Omagine Development Agreement is signed, that the Warrants will thereafter become “in the money” and will be exercised. Such an exercise of Warrants would provide the significant amount of capital necessary to fund, should that be desirable at the time, (i) a secured loan to Omagine LLC which would in turn trigger the first Financing Agreement Date, and (ii) the OMAG Final Equity Investment into Omagine LLC. There can be no assurance given that the Company will be able to successfully utilize the Warrants or the Second SEDA to secure the significant amounts of financing necessary for it to execute its business plan as presently conceived.

 

Total proceeds from the Rights Offering to the Company received in April 2012 was $1,267,540 of which $731,639 was received in cash and $535,901 was paid via the satisfaction of debt owed by the Company to Record Shareholders exercising such Rights. If the DA is signed, management is hopeful that the Warrants will provide a future source of additional financing. The Company has relied on the net proceeds from sales of Omagine, Inc.'s equity securities made in private placements and in the Rights Offering and pursuant to the First and Second SEDA to fund its operations during the past three years through the date hereof.

 

Off Balance Sheet Arrangements

 

We have not entered into any off-balance sheet financing arrangements and have not formed any special purpose entities.

 

 

DESCRIPTION OF PROPERTY

 

The Company maintains its corporate offices at The Empire State Building, Suite 4815-17, 350 Fifth Avenue, New York, N.Y., 10118. The premises are leased by the Company under a lease expiring February 28, 2013. Omagine LLC leases office space in Muscat, Oman under a lease expiring December 31, 2012.

 

Frank J. Drohan has served as a director, Chairman of the Board of Directors, and President and CEO of the Company since 1991. Mr. Drohan is also the Managing Director and Chief Executive Officer of Omagine LLC. He was chairman of the board of directors, president and sole shareholder of Rif International Corp., a privately held company which had extensive overseas activities in the MENA Region between 1977 and 1986. Rif was acquired by Omagine, Inc. in 1997. Mr. Drohan serves as a director and the chairman of JOL. He is also a director and the chairman of The Renaissance Team, Inc. (“TRT”) which is a privately held company offering a wide variety of services including: branding, marketing, management, political and strategic visioning, and development management consulting services. Mr. Drohan holds a Bachelor of Science degree in Economics and Political Science from Manhattan College in New York City.

 

Charles P. Kuczynski has served as a director, Secretary and a Vice-President of the Company since 1996 and previously served as a director and the Secretary of the Company from 1988 to 1993. Mr. Kuczynski is a director and the secretary of JOL and also serves as the secretary of TRT. Prior to joining the Company Mr. Kuczynski was a sales executive with Hillenbrand Industries. Mr. Kuczynski holds a Bachelor of Arts degree from Merrimack College, Massachusetts.

 

William Hanley has served as the Controller and Principal Accounting Officer of the Company since January 2008.  Mr. Hanley served as the controller of Mittal Steel from 1986 to 2007 and as the Controller and Chief Financial Officer of Rif International Corp. from 1980 to 1986. From 1973 to 1985 he served as the controller at two Wall Street brokerage firms and from 1968 to 1972 as a senior accountant at Main LaFrentz & Company. He was an accounting specialist with the United States Army from 1966 to 1968. Mr. Hanley holds a Bachelor of Business Administration degree in Accounting from St. Francis College in New York.

 

Louis J. Lombardo has served as an independent director of the Company since 2005. Mr. Lombardo retired after 35 years at American Express Company 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. Mr. Lombardo holds an MBA degree from New York University. He lives in New York City where he owns and operates two privately held businesses and a consulting company.

 

Kevin Green had served as an independent director of the Company from 2001 until January 31, 2012. Due to the demands of other business commitments, Mr. Green resigned as a director of Omagine, Inc. effective January 31, 2012. His resignation was not the result of any disagreements with the Company on any matters relating to the Company’s operations, policies or practices. Salvatore J. Bucchere had served as an independent director of the Company from 2001 until his sudden and unexpected death on April 9, 2012.

 

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. Directors who are Company employees receive no fees for acting as such. Independent non-employee Directors receive stock options and receive a minimal fee for attendance at board meetings and the Company's annual meeting and are entitled to reimbursement of reasonable out-of-pocket expenses incurred by them in attending such meetings. The Board of Directors plans to undertake a search to identify two persons who are qualified and willing to serve as independent non-employee directors to replace the vacancies resulting from Mr. Green’s resignation and Mr. Bucchere’s untimely passing.

 

 

(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 (d) represents contributions of the Registrant’s Common Stock to the accounts of eligible employees of its 401(k) Plan, valued at the closing bid price on the dates of such contributions.
(3)	Column (f) represents the dollar amount recognized as compensation expense for financial statement reporting purposes for the year indicated under ASC 718, and not an amount paid to or realized by the named executive officer. There can be no assurance that the amounts determined by ASC 718 will ever be realized. Assumptions used in the calculation of these amounts are included in Note 1- STOCK-BASED COMPENSATION- to the Company's audited financial statements for the fiscal years ended December 31, 2010 and December 31, 2011.

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.

 

Equity Compensation Plan Information

 

 

At the Company’s annual meeting on December 29, 2009, the shareholders approved the reservation by the Company subsequent to the Stock Splits of two million five hundred thousand (2,500,000) shares of Common Stock for issuance under the "2003 Omagine Inc. Stock Option Plan" ("Plan"). The adoption of the Plan was approved by the Board of Directors in March 2004 and ratified by the Company's shareholders on September 1, 2004.

 

The Plan is designed to attract, retain and motivate employees, directors, consultants and other professional advisors of the Company and its subsidiaries (collectively, the "Recipients") by giving such Recipients the opportunity to acquire stock ownership in Omagine, Inc. through the granting of incentive stock options and non-qualified stock options (collectively, “Stock Options”) to purchase shares of the Company’s Common Stock.

 

On January 2, 2012, the Board of Directors approved the issuance pursuant to the Plan of 1,994,000 One Year Options to thirteen individuals who were either employees, directors or consultants to the Company at such time. (See: “Employees and Consultants”). On April 13, 2012 pursuant to a resolution of the Board of Directors One Year Options, which were planned to be granted on January 2, 2012 but were not available under the Plan at such time, were granted to 2 individuals as follows: (i) a consultant to the Company was granted 10,000 One Year Options, and (ii) Mr. Drohan was granted an additional 11,000 One Year Options.

 

All One Year Options are exercisable at $1.70 per share (the “Option Exercise Price”), have a “cashless exercise” feature and are fully vested as of the date hereof. All One Year Options (except for Mr. Bucchere’s) expire on December 31, 2012 and require the holder thereof to be an employee of or a consultant to the Company at the time of exercise. One Year Options may be exercised at any time prior to 5 P.M. Eastern Time in the United States on December 31, 2012 (the “Expiration Date”) as follows, by either (i) paying the Option Exercise Price in cash to the Company, or (ii) electing to pay the Option Exercise Price via the cashless exercise feature of the One Year Options:

 

1)

One Year Options may be exercised in whole or in part by the holder thereof by delivery of a written notice to the Company (the “Exercise Notice”), of such holder’s election to exercise such One Year Options, which notice shall specify the number of shares of Common Stock (“Option Shares”) to be purchased, payment to the Company of an amount equal to $1.70 per Option Share multiplied by the number of Option Shares for which the One Year Options are being exercised (the “Aggregate Option Exercise Price”) in cash or wire transfer of immediately available funds and the surrender of the relevant certificate representing such One Year Options (or an indemnification undertaking with respect to such One Year Options in the case of the loss, theft or destruction of such certificate). Such documentation and payment shall be delivered by such holder to a common carrier for overnight delivery to the Company as soon as practicable following such date, but in no event later than one business day prior to the Expiration Date (“Cash Basis”) or

2)

by delivering an Exercise Notice and in lieu of making payment of the Aggregate Option Exercise Price in cash or wire transfer, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (the “Cashless Exercise”):

Net Number  =    (A x B) – (A x C)

B

For purposes of the foregoing formula:

 

	A =	the total number of Option Shares with respect to which the relevant One Year Options are then being exercised.
	B =	the closing bid price of the Common Stock on the date of exercise of the relevant One Year Options.
	C =	the Option Exercise Price of one dollar and seventy cents ($1.70) in United States currency.

 

 

 

On April 13, 2012 pursuant to a resolution of the Board of Directors Mr. Lombardo was granted 2,000 Stock Options which expire on April 18, 2017 and are exercisable at $1.70.

 

As of September 11 , 2012 , there were 2,311,000 unexpired Stock Options issued but unexercised under the Plan. The Plan is explained further in Note 5 to the accompanying consolidated financial statements for the fiscal year ended December 31, 2011. The following table summarizes information as of the close of business on September 11 , 2012 about the Stock Options under the Plan.

 

 

The following table shows the number of shares of Common Stock covered by exercisable and un-exercisable options held by the Company's Chief Executive Officer on September 11 , 2012 .

 

 

In 2008, 100,000 stock options exercisable at $2.60 were granted to the Company's Chief Executive Officer. In January and April of 2012, an aggregate of 750,000 stock options exercisable at $1.70 were granted to the Company's Chief Executive Officer. There can be no assurance that the Grant Date Fair Value of Stock Option awards will ever be realized.

 

The following table shows the number of shares of Common Stock covered by unexpired non-qualified Stock Options issued to officers of the Company under the Plan and unexercised as of September 11 , 2012 :

 

 

In August 2011, Mr. Drohan exercised 100,000 Stock Options at $1.25 to purchase 100,000 Common Shares and Mr. Kuczynski exercised 50,000 Stock Options at $1.25 to purchase 50,000 Common Shares.

 

 

Director Compensation

 

Non-employee independent directors are compensated by the Company for their services as directors of the Company. Directors of the Company who are employees of the Company do not receive additional compensation for their services as directors.

 

The following chart summarizes the annual compensation for Omagine, Inc.'s non-employee independent directors during 2011.

 

(a)     Name		(b)   Fees Earned ($)				(c)   Stock Awards ($)				(d) Option Awards ($)(1)				(e) All Other Compensation ($)				(f)   Total ($)
Salvatore Bucchere		$	5,250				0				0				0				5,250
Kevin Green		$	5,000				0				0				0				5,000
Louis Lombardo		$	4,750				0				0				0				4,750

(1)

Column (d) represents the dollar amount recognized as compensation expense for financial statement reporting purposes for the year indicated under ASC 718, and not an amount paid to or realized by the named director. There can be no assurance that the amounts determined by ASC 718 will ever be realized. Assumptions used in the calculation of these amounts are included in Note 1 - STOCK-BASED COMPENSATION - to the Company's audited financial statements for the fiscal year ended December 31, 2011.

 

Directors who are not Company employees are compensated for their services as a director as shown in the chart below:

 

 

(1)	On the date of appointment to the Board of Directors, new non-employee independent directors are entitled to a one- time grant of 6,000 non-qualified stock options at the closing price on the date of grant, vested ratably over three years.

 

(2)

For non-employee independent directors that have served on the Board for at least 3 years, 2,000 options (or such other number of options as determined by the Board in its discretion) will be granted on the first business day of each fiscal year, at the closing price on the date of grant, vesting ratably over three years (or such other grant date or vesting period as may be determined by the Board).

 

 

 

 

On January 31, 2012, upon his resignation as a Director of the Company, Mr. Green’s 50,000 One Year Options were cancelled. On April 9, 2012, upon his death and pursuant to the Plan, Mr. Bucchere’s 50,000 One Year Options became fully vested and all Stock Options then held by him were assigned an expiration date of April 8, 2013.

 

On the date of appointment to the Board of Directors ("Board"), new non-employee independent directors are entitled to a one-time grant of 6,000 non-qualified stock options (or such other number of options as determined by the Board in its discretion). The price of the Common Stock underlying such options is the closing bid price on the date of grant and the options vest ratably over the three year period subsequent to such date of appointment provided such independent director continues to hold office on the date of such vesting. Non-employee independent directors that have served on the Board of Directors for at least 3 years may be granted 2,000 options (or such other number of options as determined by the Board of Directors in its discretion) on the first business day of each fiscal year subsequent to such three years of service (or on such other day subsequent thereto 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.

 

On January 1, 2008, the Company awarded options to purchase 6,000 shares of its Common Stock to Mr. Louis J. Lombardo, a non-employee independent director, at an exercise price of $4.00 and all such options are fully vested and they expire on December 31, 2013. On May 17, 2011, the Company awarded options to purchase 2,000 shares of its Common Stock to Mr. Lombardo at an exercise price of $0.85 per share and such options are fully vested and they expire on May 16, 2016. The Board of Directors granted 50,000 One Year Options to Mr. Lombardo which are exercisable at $1.70 per share. Mr. Lombardo’s One Year Options are fully vested and require him to be an independent director of the Company at the time of the exercise of any One Year Options. All unexercised One Year Options will expire on December 31, 2012. On April 13, 2012, the Company awarded options to purchase 2,000 shares of its Common Stock to Mr. Lombardo at an exercise price of $1.70 per share and such options are fully vested and they expire on April 18, 2017.

 

On October 30, 2007, the Company awarded options to purchase 6,000 shares of its Common Stock to Mr. Salvatore J. Bucchere who was then a non-employee independent director, at an exercise price of $4.50 per share and all such options are fully vested and they were due to expire on October 29, 2012. On July 1, 2010, the Company awarded options to purchase 2,000 shares of its Common Stock to Mr. Bucchere at an exercise price of $0.51 per share and such options are fully vested and they were due to expire on June 30, 2015. On May 17, 2011, the Company awarded options to purchase 2,000 shares of its Common Stock to Mr. Bucchere at an exercise price of $0.85 per share and such options are fully vested and they were due to expire on May 16, 2016. The Board of Directors granted 50,000 One Year Options to Mr. Bucchere which are exercisable at $1.70 per share. Mr. Bucchere’s One Year Options are fully vested and, except in the event of his death, required him to be an independent director of the Company at the time of  the exercise of any One Year Options. Mr. Bucchere passed away on April 9, 2012 and, pursuant to the terms and conditions of the Plan, all unvested One Year Options held by him at the time of his death became fully vested on April 9, 2012 and his One Year Options and all other Stock Options then held by him (all of which were fully vested) were assigned an expiration date of April 8, 2013.

 

On October 30, 2007, the Company awarded options to purchase 6,000 shares of its Common Stock to Mr. Kevin O’C. Green who was then a non-employee independent director, at an exercise price $4.50 per share and all such options are fully vested and they expire on October 29, 2012. On July 1, 2010, the Company awarded options to purchase 2,000 shares of its Common Stock to Mr. Green at an exercise price of $0.51 per share and all such options are fully vested and they expire on June 30, 2015. On May 17, 2011, the Company awarded options to purchase 2,000 shares of its Common Stock to Mr. Green at an exercise price of $0.85 per share and such options are fully vested and they expire on May 16, 2016. The Board of Directors granted 50,000 One Year Options to Mr. Green which were exercisable at $1.70 per share. 25,000 of Mr. Green’s One Year Options vested upon issuance on January 2, 2012 and the other 25,000 of his One Year Options were due to vest on July 1, 2012 provided Mr. Green remained as an independent director of the Company on July 1, 2012. Mr. Green’s One Year Options also required him to be an independent director of the Company at the time of the exercise of any One Year Options. Mr. Green resigned as a director effective January 31, 2012 and as a result thereof all 50,000 of his One Year Options were cancelled in accordance with their terms.

 

Employment Agreements

 

The Company presently has no employment agreements with any of its employees.

 

In September 2001, Omagine, Inc. 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, Inc. was 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 the Company’s net sales and earnings before taxes. Mr. Drohan's employment agreement provided for an option to purchase 20,000 shares of Common Stock at $1.25 per share during each of the first five years of the employment term (the “Drohan Options”), and payment by the Company of certain life and disability insurance premiums on Mr. Drohan's behalf. The Drohan Options were exercised by Mr. Drohan in August 2011. By mutual agreement between the Company and Mr. Drohan, the Drohan Agreement was modified to provide that the Company could from time to time suspend salary payments to Mr. Drohan and Mr. Drohan would continue to provide services to the Company pursuant to the Drohan Agreement and the Company would accrue Mr. Drohan’s unpaid salary. No salary payments were made to Mr. Drohan in 2009 and 2010 and parts of 2008, 2011 and 2012. The Company has agreed to pay all such unpaid and accrued salary to Mr. Drohan without interest when and if the Company has the financial resources to do so. On September 23, 2008 the Board of Directors granted 100,000 non-qualified stock options to Mr. Drohan which vest ratably over five years from the grant date and which are exercisable at $2.60 per share. 20,000 of such options vested on each September 24 of 2009, 2010 and 2011 and an additional 20,000 of such options shall vest on each of September 24, 2012 and 2013. Expiration of all such options is ten years from the date of grant. The Board of Directors had determined in January 2012 to grant Mr. Drohan 750,000 non-qualified stock options (the “One Year Options”). Because a sufficient number of options were not available under the Plan at the time however, pursuant to a resolution of the Board of Directors, the Company granted 739,000 One Year Options to Mr. Drohan on January 2, 2012. On April 13, 2012 pursuant to a further resolution of the Board of Directors, the Company granted Mr. Drohan an additional 11,000 One Year Options. Mr. Drohan’s One Year Options are fully vested as of July 1, 2012. All One Year Options are exercisable at $1.70 per share, have a cashless exercise feature and may be exercised in whole or in part at any time before their expiry date of December 31, 2012. Mr. Drohan’s One Year Options require him to be an employee of the Company at the time of the exercise of any One Year Options. All unexercised One Year Options will expire on December 31, 2012. Provided the Company is successful in signing the Development Agreement with the Government of Oman, the Company plans to enter into a new employment agreement with Mr. Drohan, although the terms of such employment agreement have not yet been determined.

 

 

Pursuant to a written employment agreement effective September 1, 2001 (the “Kuczynski Agreement”), Omagine, Inc. was obligated through December 31, 2010 to pay its Vice-President & Secretary, Mr. Kuczynski, an annual base salary of $75,000, plus an additional bonus based on a combination of the Company’s net sales and earnings before taxes. The Kuczynski Agreement provided for an option to purchase 10,000 shares of Common Stock at $1.25 per share during each of the first five years of the employment term (the “Kuczynski Options”). By mutual agreement between the Company and Mr. Kuczynski, the Kuczynski Agreement was ended but the Kuczynski Options were maintained in effect. The Kuczynski Options were exercised by Mr. Kuczynski in August 2011. Mr. Kuczynski is presently employed by the Company at an annual salary of $100,000 and Omagine, Inc. has from time to time fully or partially suspended salary payments to Mr. Kuczynski and Mr. Kuczynski has continued to provide services to the Company and the Company has accrued Mr. Kuczynski’s unpaid salary. The Company 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. On September 23, 2008 the Board of Directors granted 50,000 non-qualified stock options to Mr. Kuczynski which vest ratably over five years from the grant date and which are exercisable at $2.60 per share. 10,000 of such options vested on each September 24 of 2009, 2010 and 2011 and an additional 10,000 of such options shall vest on each of September 24, 2012 and 2013. Expiration of all such options is ten years from the date of grant. Pursuant to a resolution of the Board of Directors, the Company granted 250,000 One Year Options to Mr. Kuczynski. Mr. Kuczynski’s One Year Options are fully vested as of July 1, 2012. Mr. Kuczynski’s One Year Options require him to be an employee of the Company at the time of the exercise of any One Year Options. All unexercised One Year Options will expire on December 31, 2012. Provided the Company is successful in signing the Development Agreement with the Government of Oman, Omagine, Inc. plans to enter into a new employment agreement with Mr. Kuczynski, although the terms of such employment agreement have not yet been determined.

 

Consulting Agreement

 

Effective March 19, 2007 Omagine, Inc. entered into a consulting agreement expiring December 31, 2007 (the “Hamdan Agreement”) with Mr. Sam Hamdan. Pursuant to the Hamdan Agreement, (i) Mr. Hamdan provides consulting services to the Company, and (ii) under certain circumstances and conditions precedent, Mr. Hamdan may become the President and Chief Operating Officer of Omagine, Inc., and (iii) Omagine, Inc. issued Hamdan options to purchase up to 160,000 shares of Omagine, Inc.’s Common Stock at $1.25 per share (the “Hamdan Option”). The Hamdan Option vested ratably over the 5 year period beginning on April 1, 2007 and the Hamdan Option which is now fully vested expires on March 30, 2017. The Hamdan Option is exercisable only if, at the time of such exercise: (i) the Hamdan Agreement is in effect, or (ii) Hamdan is an employee of the Company. The Hamdan Agreement was renewed four times (effective December 31, 2007, 2008, 2009 and 2010) without further compensation to Mr. Hamdan. Upon the fifth renewal of the Hamdan Agreement effective December 31, 2011 and pursuant to a resolution of the Board of Directors, Mr. Hamdan was granted 750,000 One Year Options. Mr. Hamdan’s One Year Options are fully vested as of July 1, 2012. Mr. Hamdan’s One Year Options require him to be an employee of or a consultant to the Company at the time of the exercise of any One Year Options. All unexercised One Year Options will expire on December 31, 2012. Mr. Hamdan also serves without compensation as the Deputy Managing Director of our 60% owned subsidiary, Omagine LLC.

 

On December 8, 2011, the Board of Directors approved grants of an aggregate of 215,000 restricted shares of Common Stock to six other consultants.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

Certain Relationships and Related Transactions

 

Mr. Sam Hamdan who is the Deputy Managing Director of our 60% owned subsidiary Omagine LLC has a consulting agreement with Omagine, Inc. and he may, under certain circumstances, also become Omagine, Inc.’s president. Mr. Hamdan is also the president of The Renaissance Team, Inc., a privately held company ("TRT"). Mr. Frank J. Drohan ("Drohan"), the Company's President and Chief Executive Officer, is the Chairman of TRT and Charles P. Kuczynski, the Company's Vice President and Secretary, is the Secretary of TRT. TRT is not in competition with the Company and each of Mr. Hamdan and Mr. Drohan own 50% of TRT's equity. TRT had intended to acquire the business and certain assets of The Global Leadership Team, Inc. ("GLT") of which Mr. Hamdan is currently the president and sole shareholder but that plan has now been abandoned. There have been no transactions between TRT and the Company to date and the Company anticipates that no such transactions will occur in the future. Mr. Hamdan and Mr. Drohan intend to form a new corporation (“Newco”) which will not compete with the Company and which will concentrate exclusively on business opportunities in the MENA Region. Mr. Drohan's employment agreement with the Company which expired on December 31, 2010 permitted him to be involved in any other business enterprise that does not compete with the Company. In 2006 and 2007 Mr. Hamdan and GLT 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. The unpaid account payable of $245,449 due to GLT from JOL for such services was extinguished and exchanged for 490,880 shares of Common Stock. Hamdan and Drohan have agreed with respect to any possible future transaction(s) between Newco and the Company (a "Related Party Transaction") that they will exercise their best efforts to assure 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.

 

Director Independence

 

The Company complies with the standards of "independence" under the NASDAQ Marketplace Rules. Accordingly, a director will only qualify as an "independent director" if, in the opinion of our Board of Directors, that person does not have a material relationship with our company which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. A director who is, or at any time during the past three years, was employed by the Company or by any parent or subsidiary of the Company, shall not be considered independent. Accordingly Louis J. Lombardo meet the definition of an "independent director" under NASDAQ Marketplace Rule 5605(a)(2). At December 31, 2011 three of the five directors of Omagine, Inc. were independent. On January 31, 2012 one independent director of the Registrant resigned and on April 9, 2012 another independent director of the Registrant died suddenly. As of the date of this Prospectus, one of the Registrant’s three directors, Mr. Lombardo, is independent.

 

 

 

*  Based on 14,369,041 Common Shares issued and outstanding as of September 11 , 2012 .

 

(1)	The address for each of these individuals is c/o Omagine, Inc. and each is a director of Omagine, Inc. Messrs. Drohan and Kuczynski are officers of the Company.
(2)	The address for each of these individuals is c/o Omagine, Inc. Mr. Hanley is an officer of Omagine, Inc.
(3)	Does not include Mr. Drohan's (i) 60,000 currently exercisable and 40,000 un-exercisable Stock Options at $2.60 per share or (ii) 750,000 currently exercisable Stock Options at $1.70 per share.
(4)	Does not include Mr. Kuczynski's (i) 30,000 currently exercisable and 20,000 un-exercisable Stock Options at $2.60 per share or (ii) 250,000 currently exercisable Stock Options at $1.70 per share.
(5)	Does not include Mr. Lombardo's (i) 6,000 currently exercisable Stock Options at $4.00 per share, (ii) 2,000 currently exercisable Stock Options at $0.85 per share, (iii) 2,000 currently exercisable Stock Options at $1.70 per share, or (iv) 50,000 currently exercisable Stock Options at $1.70 per share.
(6)	Does not include Mr. Hanley's (i) 6,000 currently exercisable Stock Options at $2.60 per share, or (ii) 60,000 currently exercisable Stock Options at $1.70 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.

 

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

 

None.

 

 

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Under our Certificate of Incorporation, our directors will not be personally liable to us or to our shareholders for monetary damages for any breach of their fiduciary duty as a director, except liability for the following:

 

	● Any breach of their duty of loyalty to our Company or to our stockholders.
	● Acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law.
	● Unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law.
	● Any transaction from which the director derived an improper personal benefit.

 

We believe that these limitation of liability provisions are necessary to attract and retain qualified persons as directors and officers.

 

The limitation of liability provisions in our Certificate of Incorporation may discourage shareholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

 

 

WHERE YOU CAN FIND MORE INFORMATION

 

We are filing with the SEC a Registration Statement on Form S-1 under the Securities Act, of which this Prospectus is a part, covering the securities being offered by the Selling Stockholder. As permitted by the SEC, this Prospectus does not contain all of the information set forth in the Registration Statement or the exhibits and schedules filed therewith. For further information with respect to us and the securities covered by this Prospectus, please see the Registration Statement and the exhibits filed with the Registration Statement. A copy of the Registration Statement and the exhibits filed with the Registration Statement may be inspected without charge at the Public Reference Room maintained by the SEC, located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more information about the operation of the Public Reference Room. The SEC also maintains an internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.

 

We are subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, and, in accordance therewith, we file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information are available for inspection and copying at the Public Reference Room and website of the SEC referred to above.

 

September  , 2012

 

OMAGINE, INC.

 

3,244,216 Shares of Common Stock

 

 

 

 

 

 

PROSPECTUS

 

 

We have not authorized any dealer, salesperson or other person to give you written information other than this Prospectus or to make representations as to matters not stated in this Prospectus. You must not rely on unauthorized information. This Prospectus is not an offer to sell these securities or our solicitation of your offer to buy these securities in any jurisdiction where that would not be permitted or legal. Neither the delivery of this Prospectus nor any sales made hereunder after the date of this Prospectus shall create an implication that the information contained herein or the affairs of the Company have not changed since the date of this Prospectus.

 

OMAGINE, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012