UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended: March 31, 2015

 

Commission File Number: 0-17264

 

Omagine, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware		20-2876380
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

 

350 Fifth Avenue, 48th Floor, New York, N.Y. 10118

(Address of principal executive offices)

 

(212) 563-4141

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer	☐	Accelerated filer	☐
Non accelerated filer	☐	Smaller reporting company	☒

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes☒ No

 

As of May 12, 2015, the Registrant had outstanding 17,125,883 shares of common stock, par value $.001 per share (“Common Stock”).

 

		Page
	FORWARD LOOKING STATEMENTS	3
	PART I - FINANCIAL INFORMATION
ITEM 1:	FINANCIAL STATEMENTS	4
	CONSOLIDATED BALANCE SHEETS:
	MARCH 31, 2015 AND DECEMBER 31, 2014	4
	CONSOLIDATED STATEMENTS OF OPERATIONS:
	THREE MONTHS ENDED MARCH 31, 2015 AND MARCH 31, 2014	5
	CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT	6
	CONSOLIDATED STATEMENTS OF CASH FLOWS:
	THREE MONTHS ENDED MARCH 31, 2015 AND MARCH 31, 2014	7
	NOTES TO FINANCIAL STATEMENTS	9
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	24
ITEM 3:	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	43
ITEM 4:	CONTROLS AND PROCEDURES	43
PART II - OTHER INFORMATION
ITEM 1:	LEGAL PROCEEDINGS	44
ITEM 1A:	RISK FACTORS	44
ITEM 2:	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	44
ITEM 3:	DEFAULTS UPON SENIOR SECURITIES	44
ITEM 4:	MINE SAFETY DISCLOSURES	45
ITEM 5:	OTHER INFORMATION	45
ITEM 6:	EXHIBITS	45
	SIGNATURES	48

  

 

FORWARD-LOOKING STATEMENTS

Some of the statements contained in this report that are not statements of historical facts constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, notwithstanding that such statements are not specifically identified as such. These forward-looking statements are based on current expectations and projections about future events. The words “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. Examples of forward-looking statements include but are not limited to statements about or relating to: (i) future 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) plans, objectives and expectations of Omagine, Inc. or its management or Board of Directors, (iii) the Company’s business plans, products or services, (iv) future economic or financial performance, and (v) assumptions underlying such statements. Forecasts, projections and assumptions contained and expressed herein were reasonably based on information available to the Company at the time so furnished and as of the date of this report. All such forecasts, projections and assumptions are subject to significant uncertainties and contingencies, many of which are beyond the Company's control, and no assurance can be given that such forecasts, projections or assumptions will be realized. 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 future 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 political events in the Middle East and North Africa (the “MENA Region”) in general, including the ongoing civil disorder and military activities in the MENA Region;

●

the success or failure of Omagine’s efforts to secure additional financing, including project financing for the Omagine Project;

●

oversupply of residential and/or commercial property inventory in the Oman real estate market or other adverse conditions in such market;

●

the impact of MENA Region or international economies and/or future events (including natural disasters) on the Oman economy, on Omagine’s business or operations, on tourism within or into Oman, on the oil and natural gas businesses in Oman and on other major industries operating within the Omani market;

●

deterioration or malaise in economic conditions, including the continuing destabilizing factors associated with the recent rapid decline in the price of crude oil on international markets;

●

inflation, interest rates, movements in interest rates, securities market and monetary fluctuations;

●

threatened and ongoing acts of war, civil or political unrest, terrorism or political instability in the MENA Region; or

●

the ability to attract and retain skilled employees.

 

Potential investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

 

ITEM  1 : FINANCIAL STATEMENTS

 

 

OMAGINE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

			March 31,				December 31,
			2015				2014
			(Unaudited)
ASSETS
CURRENT ASSETS:
Cash		$	529,728			$	1,113,679
Prepaid expenses and other current assets			33,910				5,780
Total Current Assets			563,638				1,119,459
PROPERTY AND EQUIPMENT:
Office and computer equipment			153,604				153,604
Less accumulated depreciation and amortization			(144,931	)			(144,036	)
Total Property and Equipment			8,673				9,568
OTHER ASSETS			31,982				31,982
TOTAL ASSETS		$	604,293			$	1,161,009
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Convertible notes payable and accrued interest		$	377,209			$	370,429
Note payable and accrued interest - YA Global Master SPV, Ltd.
(less unamortized discount of $2,383 and $12,133, respectively)			108,551				214,778
Accounts payable			299,642				257,736
Accrued officers payroll			585,130				637,922
Accrued expenses and other current liabilities			130,200				159,332
Total Current Liabilities			1,500,732				1,640,197
Long Term Liabilities			-				-
TOTAL LIABILITIES			1,500,732				1,640,197
STOCKHOLDERS' DEFICIT
Preferred stock:
$0.001 par value
Authorized:  850,000 shares
Issued and outstanding: - none			-				-
Common stock:
$0.001 par value
Authorized: 50,000,000 shares
Issued and outstanding:
17,125,883 shares in 2015 and 16,878,119 in 2014			17,126				16,878
Capital in excess of par value			34,170,706				33,864,254
Deficit			(34,970,673	)			(34,280,699	)
Total Omagine, Inc. stockholders' deficit			(782,841	)			(399,567	)
Noncontrolling interests in Omagine LLC			(113,598	)			(79,621	)
Total Stockholders' Deficit			(896,439	)			(479,188	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	604,293			$	1,161,009

 

See accompanying notes to consolidated financial statements.

 

 

 OMAGINE, INC. AND  SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS 

 (Unaudited)

 

 

		Three Months Ended March 31,
		2015				2014
REVENUE:
Total revenue		$	-			$	-
OPERATING EXPENSES:
Officers and directors compensation (including stock-based
compensation of  $76,385 and $200,390, respectively)			170,135				276,640
Professional fees (includes stock-based compensation of
$0 and $10,436, respectively)			55,107				17,671
Consulting fees (including stock-based compensation
of $10,316 and $97,174, respectively)			205,294				103,647
Travel			138,885				16,322
Occupancy			40,469				39,353
Other selling general and administrative			92,496				32,812
Total Costs and Expenses			702,386				486,445
OPERATING LOSS			(702,386	)			(486,445	)
OTHER (EXPENSE) INCOME
Amortization of debt discounts			(9,750	)			(2,332	)
Interest expense			(11,815	)			(11,758	)
Other (Expense) - Net			(21,565	)			(14,090	)
NET LOSS			(723,951	)			(500,535	)
Add net loss attributable to noncontrolling interests in Omagine LLC			33,977				5,393
NET LOSS ATTRIBUTABLE TO OMAGINE, INC.		$	(689,974	)		$	(495,142	)
LOSS PER SHARE - BASIC AND DILUTED		$	(0.04	)		$	(0.03	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
- BASIC AND DILUTED			16,936,153				15,080,792

  

See accompanying notes to consolidated financial statements.

 

 

OMAGINE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT 

 

 

			Common Stock
			Issued and Outstanding								Committed to be issued								Capital in								Noncontrolling
							$0.001 Par								$0.001 Par				Excess of								Interests in
			Shares				Value				Shares				Value				Par Value				Deficit				Omagine LLC				Total
Balances at December 31, 2012			14,369,041			$	14,369				107,500			$	107			$	23,996,481			$	(24,867,849	)		$	9,419			$	(847,473	)
Issuance of Common Stock committed to stockholder
relations agent for fees			107,500				107				(107,500	)			(107	)			-				-				-				-
Issuance of Common Stock for cash			100,000				100				-				-				124,900				-				-				125,000
Stock option expense			-				-				-				-				1,445,744				-				-				1,445,744
Issuance of Common Stock  for 401(k) Plan contribution			55,253				55				-				-				76,195				-				-				76,250
Stock options exercised by Director's Estate			4,000				4				-				-				2,716				-				-				2,720
Issuance of Common Stock for cash			71,162				71				-				-				74,929				-				-				75,000
Stock grant to consultant for services rendered			5,000				5				-				-				5,325				-				-				5,330
Stock grants to stockholder relation agents for fees			40,000				40				-				-				38,500				-				-				38,540
Issuance of Common Stock under New Standby Equity
Distribution Agreement (New SEDA)			163,094				164				-				-				204,836				-				-				205,000
Stock grant to IT consultants for fees			19,988				20				-				-				18,169				-				-				18,189
Adjustments for noncontrolling interests in
Omagine LLC			-				-				-				-				-				-				(35,371	)			(35,371	)
Net loss			-				-				-				-				-				(2,640,590	)			-				(2,640,590	)
Balances at December 31, 2013			14,935,038				14,935				-				-				25,987,795				(27,508,439	)			(25,952	)			(1,531,661	)
Stock grant issued to law firm in satisfaction of
$15,812 of accounts payable			34,374				34				-				-				26,214				-				-				26,248
Issuance of Common Stock under New Standby Equity
Distribution Agreement (New SEDA)			218,941				219				-				-				309,781				-				-				310,000
Issuance of Common Stock for SEDA commitment fees			85,822				86				-				-				149,914				-				-				150,000
Issuance of Common Stock for 401(k) Plan contribution			73,315				73				-				-				76,177				-				-				76,250
Issuance of Common Stock for cash			1,004,629				1,004				-				-				1,486,096				-				-				1,487,100
Issuance of Common Stock for finders' fees on restricted
Common Stock sales			46,000				47				-				-				76,121				-				-				76,168
Exercise of Tempest Warrants			490,000				490				-				-				663,010				-				-				663,500
Cancellation of shares issued to stockholder relations agent			(10,000	)			(10	)			-				-				(9,010	)			-				-				(9,020	)
Stock Option expense			-				-				-				-				5,098,156				-				-				5,098,156
Adjustments for noncontrolling interests in
Omagine LLC			-				-				-				-				-				-				(53,669	)			(53,669	)
Net loss			-				-				-				-				-				(6,772,260	)			-				(6,772,260	)
Balances at December 31, 2014			16,878,119				16,878				-				-				33,864,254				(34,280,699	)			(79,621	)			(479,188	)
Issuance of Common Stock for 401(k) Plan contribution			36,483				37				-				-				76,213				-			$	-				76,250
Stock grant to consultant for services rendered			5,000				5				-				-				9,445				-			$	-				9,450
Issuance of Common Stock for cash			206,281				206				-								219,794				-			$	-				220,000
Stock Option expense			-				-				-				-				1,000				-			$	-				1,000
Adjustments for noncontrolling interests in
Omagine LLC			-				-				-				-				-				-			$	(33,977	)			(33,977	)
Net loss			-				-				-			$	-				-				(689,974	)		$	-				(689,974	)
Balances at March 31, 2015 (Unaudited)			17,125,883			$	17,126				-			$	-			$	34,170,706			$	(34,970,673	)		$	(113,598	)		$	(896,439	)

 

 

See accompanying notes to consolidated financial statements.

 

 

 

OMAGINE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

		Three Months ended March 31,
		2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss attributable to Omagine, Inc.		$	(689,974	)		$	(495,142	)
Adjustments to  reconcile net loss to net cash flows
used by operating activities:
Net loss attributable to noncontrolling interests in
Omagine LLC			(33,977	)			(5,393	)
Depreciation and amortization			10,645				3,515
Stock-based compensation related to stock options			1,000				204,938
Stock-based compensation related to issuance of Common Stock
for stockholder investor relations, including amortization of $0
and $10,275 in 2015 and 2014 respectively, arising from grants to
service providers			-				10,275
Issuance of Common Stock for consulting fees			9,450				6,101
Excess of fair value of Common Stock issued to law firm in excess
of liability satisfied - charged to legal fees			-				10,436
Issuance of Common Stock for 401(k) Plan contributions			76,250				76,250
Changes in operating assets and liabilities:
Prepaid expenses, other current assets and other
assets			(28,130	)			(26,910	)
Accrued interest on notes payable			5,803				1,379
Accounts payable			41,906				(29,367	)
Accrued officers' payroll			(52,792	)			29,250
Accrued expenses and other current liabilities			(29,132	)			5,387
Net cash flows used by operating activities			(688,951	)			(209,281	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment			-				-
Net cash flows used by investing activities			-				-
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on 2014 note payable to YA Global Master SPV, Ltd.			(115,000	)			-
Repayment of 2013 note payable to YA Global Master SPV, Ltd.			-				(47,500	)
Proceeds from sale of Common Stock			220,000				305,000
Net cash flows provided by financing activities			105,000				257,500
NET (DECREASE) INCREASE  IN CASH			(583,951	)			48,219
CASH BEGINNING OF PERIOD			1,113,679				19,723
CASH END OF PERIOD		$	529,728			$	67,942
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid		$	1,100			$	1,075
Interest paid		$	4,675			$	9,027
NON - CASH FINANCING ACTIVITIES:
Excess of fair value of Common Stock issued to law firm in excess of
liability satisfied - charged to legal fees		$	-			$	10,436
Issuance of Common Stock for consulting fees		$	9,450				-

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

OMAGINE, INC. AND SUBSIDIARIES  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 - NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Nature of the Business

Omagine, Inc. (“Omagine”) is a holding company incorporated in Delaware in October 2004 which operates through its wholly owned subsidiary, Journey of Light, Inc., a New York corporation (“JOL”) and its 60% owned subsidiary Omagine LLC, a limited liability company incorporated under the laws of the Sultanate of Oman (“LLC”). Omagine, JOL and LLC are collectively referred to herein as the “Company”.

JOL was acquired by Omagine in October 2005. LLC is the Omani real estate development company organized by Omagine to do business in Oman.

The Company is focused on entertainment, hospitality and real-estate development opportunities in the Middle East and North Africa (the “MENA Region”). On October 2, 2014, LLC signed a Development Agreement with the Government of Oman for the development of the Omagine Project. Meaningful LLC operations are subject to completing financing arrangements for this project and commencement and completion of construction of this project (See Note 9).

Interim Financial Statements

The consolidated balance sheet for the Company at the end of the preceding fiscal year has been derived from the audited balance sheet and notes thereto contained in the company’s annual report on Form 10-K for the fiscal year ended December 31, 2014 and is presented herein for comparative purposes. All other financial statements are unaudited. In the opinion of management, all adjustments, which include only normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for all periods presented, have been made. The results of operations for the interim periods presented are not necessarily indicative of the operating results for the respective full years.

Certain footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted in accordance with the published rules and regulations of the Securities and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2014 filed with the SEC on April 13, 2015.

Summary of Significant Accounting Policies

Principles of Consolidation - The consolidated financial statements include the accounts of Omagine, JOL and LLC. LLC is an Omani limited liability company which was organized under the laws of the Sultanate of Oman on November 23, 2009. All inter-company transactions have been eliminated in consolidation.

Financial Instruments - Financial instruments include cash, convertible notes payable and accrued interest, note payable and accrued interest, accounts payable, accrued officers’ payroll and accrued expenses and other current liabilities. The amounts reported for financial instruments are considered to be reasonable approximations of their fair values, based on market information available to management.

Cash and Cash Equivalents – The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. At March 31, 2015 and December 31, 2014, cash includes approximately $4,200 and $11,200 respectively in an Oman bank account not covered by FDIC insurance.

Estimates and Uncertainties - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results as determined at a later date could differ from those estimates.

 

Revenue Recognition - The Company follows the guidelines of SEC Staff Accounting Bulletin No. 101,”Revenue Recognition in Financial Statements” (SAB101). LLC signed a development agreement for the Omagine Project with the Government of Oman in October 2014, and will recognize revenue ratably over the development period of the Omagine Project measured by methods appropriate to the services or products provided.

Property and Equipment - Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets.

Income Taxes - Omagine and JOL are subject to United States (“U.S.”) income taxes at both the federal and state level and LLC is subject to income taxes in Oman. Separate state income tax returns are filed with each state in the U.S. in which Omagine or any subsidiary of Omagine is incorporated or qualified as a foreign corporation. LLC files an income tax return in Oman. Other than with respect to LLC, the Company is not presently subject to income taxes in any foreign country. The Company reports interest and penalties as income tax expense. Deferred tax assets and liabilities are recognized based on differences between the book and tax bases of assets and liabilities using presently enacted income tax rates. The Company establishes a provision for U.S. income taxes by applying the provisions of the applicable enacted tax laws to taxable income, if any, for the relevant period. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Stock-based Compensation - Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification 718, “Compensation – Stock Compensation” (“ASC 718”). For stock options granted, Omagine has recognized compensation expense based on the estimated grant date fair value method using the Black-Scholes valuation model. For such stock option awards, Omagine has recognized compensation expense using a straight-line amortization method over the requisite service period. ASC 718 requires that stock-based compensation expense be based on awards that are ultimately expected to vest. Stock option expense for the three months ended March 31, 2015 and 2014 were $1,000 and $204,938, respectively. (See Note 7).

Earnings (Loss) Per Share – Basic earnings (loss) per share of Omagine’s $0.001 par value common stock (“Common Stock”) is based upon the weighted-average number of shares of Common Stock (“Common Shares”) outstanding during the relevant period. Diluted earnings (loss) per share is based upon the weighted-average number of Common Shares and dilutive securities (stock options, warrants and convertible notes) outstanding during the relevant period. Dilutive securities having an anti-dilutive effect on diluted earnings (loss) per share are excluded from the calculation.

For the three months ended March 31, 2015 and 2014, the Common Shares underlying the following dilutive securities were excluded from the calculation of diluted shares outstanding as the effect of their inclusion would be anti-dilutive:

 

		Common Shares Issuable
		Three Months Ended
		March 31,
		2015				2014
Convertible Notes			150,884				139,884
Stock Options			3,265,000				2,315,000
Warrants			6,932,124				6,422,124
Total Common Shares Issuable			10,348,008				8,877,008

 

 

Non-controlling Interests in Omagine LLC - As of the date of this report LLC is owned 60% by Omagine. In May 2011, Omagine, JOL and three new investors (the “New Investors”) entered into a shareholders’ agreement (the “Shareholder Agreement”) pursuant to which Omagine’s 100% ownership of LLC was reduced to 60%.

The New Investors are:

i.

The Office of Royal Court Affairs (“RCA”), an organization representing the personal interests of His Majesty Sultan Qaboos bin Said, the ruler of Oman, and

 

ii.

Two subsidiaries of Consolidated Contractors International Company, SAL (“CCIC”). CCIC is a 60 year old Lebanese multi-national company headquartered in Athens, Greece having approximately five and one-half (5.5) billion dollars in annual revenue, one hundred thirty thousand (130,000) employees worldwide, and operating subsidiaries in among other places, every country in the Middle East. The two CCIC subsidiaries which are LLC shareholders are:

 

1.

Consolidated Contracting Company S.A. (“CCC-Panama”), a wholly owned subsidiary of CCIC and is its investment arm, and

 

2.

Consolidated Contractors (Oman) Company LLC, CCIC’s operating subsidiary in Oman which is a construction company with approximately 13,000 employees.

 

As of the date hereof, the shareholders of LLC and their associated ownership percentages as registered with the Government of Oman are as follows:

LLC Shareholder		Percent Ownership
Omagine			60	%
RCA			25	%
CCC-Panama			10	%
CCC-Oman			5	%
Total:			100	%

 

Recent Accounting Pronouncements

On August 27, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 provides guidance on determining when and how reporting entities must disclose going concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements (or within one year after the date on which the financial statements are available to be issued, when applicable). Further, an entity must provide certain disclosures if there is “substantial doubt about the entity's ability to continue as a going concern.” The FASB believes that requiring management to perform the assessment will enhance the timeliness, clarity and consistency of related disclosures and improve convergence with IFRSs (which emphasize management's responsibility for performing the going concern assessment). However, the time horizon for the assessment (look-forward period) and the disclosure thresholds under U.S. GAAP and IFRSs will continue to differ. This ASU 2014-15 is effective for annual periods ending after December 16, 2016, and interim periods thereafter; early adoption is permitted. The Company does not believe that this pronouncement will have a material impact on our financial statement disclosures.

In June 2014, the FASB issued ASU 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation” (“ASU 2014-10”). ASU 2014-10 removes the financial reporting distinction between development stage entities and other reporting entities and eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The Company is required to adopt this new standard on a retrospective basis for the year ending December 31, 2015, and interim periods therein; however, early application is permitted. The Company has elected to adopt the new reporting standard for financial statements filed commencing with the 10-Q for the period ended September 30, 2014. Other than simplifying the presentation of the Company’s financial statements and needed disclosures, the adoption of ASU 2014-10 has not affected the Company’s consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, ”Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry forward, a Similar Tax Loss, or a Tax Credit Carry forward Exists” (”ASU 2013-11”), which states that entities should present the unrecognized tax benefit as a reduction of the deferred tax asset for a net operating loss (”NOL”) or similar tax loss or tax credit carry forward rather than as a liability when the uncertain tax position would reduce the NOL or other carry forward under the tax law. The Company will be required to adopt this new standard on a prospective basis in the first interim reporting period of fiscal 2015, however early adoption is permitted as is a retrospective application. The adoption of ASU 2013-11 has not materially affected its consolidated financial statements.

Certain other accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and therefore have not yet been adopted by the Company. The impact on the Company’s financial position and results of operations from adoption of these standards is not expected to be material.

NOTE 2 - GOING CONCERN AND LIQUIDITY

At March 31, 2015, the negative working capital of the Company was $937,094. Further, the Company incurred net losses of $689,974 and $6,772,260 for the three months ended March 31, 2015 and for the year ended December 31, 2014 respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts or classification of liabilities that might be necessary in the event the Company cannot continue in existence. The continued existence of the Company is dependent upon its ability to execute its business plan and attain profitable operations or obtain additional financing.

NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of:

		March 31,				December 31,
		2015				2014
		(Unaudited)
Travel Advances		$	7,000			$	5,000
Prepaid office salaries (Muscat, Oman office)			-				780
Prepaid rent (Muscat Oman office)			26,910				-
		$	33,910			$	5,780

 

 

NOTE 4 – CONVERTIBLE NOTES PAYABLE AND ACCRUED INTEREST

Convertible notes payable and accrued interest thereon consist of:

		March 31,				December 31,
		2015				2014
		(Unaudited)
Due to a director of Omagine, interest at 10% per annum, due on demand, convertible into Common Stock at a conversion price of $2.50 per Common Share:
Principal		$	150,000			$	150,000
Accrued Interest			67,425				63,726
Due to investors, interest at 15% per annum, due on demand, convertible into Common Stock at a conversion price of $2.50 per Common Share:
Principal			50,000				50,000
Accrued Interest			45,544				43,696
Due to investors, interest at 10% per annum, due on demand, convertible into Common Stock at a conversion price of $2.50 per Common Share:
Principal			50,000				50,000
Accrued Interest			14,240				13,007
		$	377,209			$	370,429

 

NOTE 5 –NOTES PAYABLE AND ACCRUED INTEREST – YA GLOBAL MASTER SPV, LTD. 

In July 2013, Omagine borrowed $200,000 from YA Global Master SPV, Ltd. (“YA”) via an unsecured loan (the “2013 YA Loan”) and on April 23, 2014 Omagine paid off the 2013 YA Loan balance and accrued interest thereon due at April 23, 2014 and borrowed an additional $500,000 from YA via a second unsecured loan (the “2014 YA Loan”).

Notes payable and accrued interest thereon due to YA consist of:

		March 31,				December 31,
		2015				2014
		(Unaudited)
Due to YA in the original principal amount of $500,000 (which includes: (i) a $39,000 commitment fee, (ii) the 2013 YA Loan balance of $110,680, and (iii) $1,096 of pre-paid interest), interest at 10% per annum. The 2014 YA Loan is due in 12 monthly installments of principal ($50,000 in June 2014; $40,000 monthly July 2014 to September 2014; $35,000 monthly October 2014 to January 2015; $40,000 monthly February 2015 to April 2015; and $70,000 on April 22, 2015), plus interest.		$	110,000			$	225,000
Less:  Unamortized debt discount at March 31, 2015 and December 31, 2014			(2,383	)			(12,133	)
Principal, net			107,617				212,867
Accrued interest			934				1,911
Total		$	108,551			$	214,778

 

 

NOTE 6 – COMMON STOCK

With respect to the issuances of the Common Shares listed below:

1.

see Note 9 under ”Equity Finance Agreements” with respect to sales of Common Shares made to YA Global Master SPV, Ltd. (”YA”) pursuant to the SEDA.

 

2.

where issuances of restricted Common Shares occurred at non-discounted valuations, it is so noted and all such non-discounted valuations were based on the closing price of a Common Share on the relevant date.

 

3.

where issuances of restricted Common Shares occurred at discounted valuations, it is so noted and all such discounted valuations were calculated using the Finnerty Method based on the closing price of a Common Share on the relevant date less a 17% restricted stock discount for 2014 issuances and an 18% restricted stock discount for 2015 issuances.

 

4.

where issuances of restricted Common Shares occurred at agreed upon negotiated prices, the sale proceeds or value of services rendered are so noted.

On January 5, 2015, Omagine contributed an aggregate of 36,483 restricted Common Shares at non-discounted valuation of $76,250 to all eligible employees of the Omagine, Inc. 401(k) Plan.

On February 23, 2015, Omagine paid a consultant 5,000 restricted Common Shares at the discounted valuation of $9,450.

On March 26, 2015, Omagine sold 6,281 restricted Common Shares to an accredited investor for proceeds of $10,000.

On March 26, 2015, Omagine sold 200,000 restricted Common Shares to a non-U.S. person who is an accredited investor for proceeds of $210,000.

On January 10, 2014, Omagine paid a law firm for legal services rendered by issuing such law firm 34,374 restricted Common Shares at the discounted valuation of $26,248, which value was $10,436 in excess of the $15,812 owed by Omagine to such law firm at that date.

On January 8, 2014 pursuant to the SEDA, Omagine sold 29,687 Common Shares to YA for proceeds of $25,000.

On January 17, 2014 pursuant to the SEDA, Omagine sold 24,912 Common Shares to YA for proceeds of $20,000.

On January 24, 2014 pursuant to the SEDA, Omagine sold 31,705 Common Shares to YA for proceeds of $25,000.

On February 13, 2014, Omagine contributed an aggregate of 73,315 restricted Common Shares at the non-discounted valuation of $76,250 to all eligible employees of the Omagine Inc. 401(k) Plan.

On February 14, 2014 pursuant to the SEDA, Omagine sold 68,493 Common Shares to YA for proceeds of $150,000.

On March 14, 2014, Omagine sold 70,000 restricted Common Shares to a non-U.S. person who is an accredited investor for proceeds of $70,000.

On March 14, 2014, Omagine paid a finder’s fee to a non-U.S. person (a “non-U.S. Finder”) in connection with the aforementioned sale of 70,000 restricted Common Shares to a non-U.S. person. Such finder’s fee was satisfied by issuing such non-U.S. Finder 3,500 restricted Common Shares at the discounted valuation of $6,101.

On March 21, 2014 pursuant to the SEDA, Omagine sold 13,597 Common Shares to YA for proceeds of $25,000.

On April 11, 2014, Omagine sold 150,000 restricted Common Shares to a non-U.S. person who is an accredited investor for proceeds of $150,000. At September 30, 2014, such non-U.S. person owned 1,195,300 Common Shares or approximately 7.4% of the Common Shares then outstanding and 441,120 Strategic Warrants (See Note 7).

On April 11, 2014, Omagine paid a finder’s fee to a non-U.S. Finder in connection with the aforementioned sale of 150,000 restricted Common Shares to a non-U.S. person. Such finder’s fee was satisfied by issuing such non-U.S. Finder 7,500 restricted Common Shares at the discounted valuation of $10,147.

On April 22, 2014, Omagine issued 85,822 restricted Common Shares to an affiliate of YA in satisfaction of a $150,000 commitment fee due in connection with the 2014 SEDA.

On May 6, 2014 pursuant to the SEDA, Omagine sold 32,270 Common Shares to YA for proceeds of $50,000.

On June 24, 2014, Omagine sold 362,308 restricted Common Shares and issued 1,000,000 Tempest Warrants (See Note 7) to a non-U.S. person who is an accredited investor (the “Non-U.S. Investor”) for proceeds of $422,100.

On June 24, 2014, Omagine paid a finder’s fee to a non-U.S. Finder in connection with the aforementioned sale to the non-U.S. Investor (See Note 7). Such finder’s fee was satisfied by paying such non-U.S. Finder $20,000 in cash and issuing such non-U.S. Finder 15,000 restricted Common Shares at the discounted valuation of $19,920.

On August 15, 2014, the Non-U.S. Investor transferred 240,000 Tempest Warrants to an affiliate of his which is also a non-U.S. person (the “Non-U.S. Affiliate”) and such Non-U.S. Affiliate exercised such 240,000 Tempest Warrants at an exercise price of $1.40 per Common Share for proceeds to Omagine of $336,000. On August 25, 2014, Omagine paid a finder’s fee of $16,800 to a non-U.S. Finder in connection with such Tempest Warrant exercise.

 

On September 3, 2014, in exchange for a $3,000 cash settlement payment, the Company cancelled 10,000 restricted Common Shares valued at the non-discounted valuation of $9,020 issued to a consultant for services rendered.

On October 2, 2014, the Non-U.S. Investor transferred 250,000 Tempest Warrants to the Non-U.S. Affiliate and the Non-U.S. Affiliate exercised such 250,000 Tempest Warrants at an exercise price of $1.31 per Common Share for proceeds to Omagine of $327,500. On October 6, 2014, Omagine paid a finder’s fee of $16,375 to a Non-U.S. Finder in connection with such Tempest Warrant exercise by the Non-U.S. Affiliate.

On November 7, 2014, Omagine sold 14,881 restricted Common Shares to a non-U.S. person who is a civil engineer of CCC-Oman and an accredited investor for proceeds of $30,000.

On November 10, 2014, Omagine sold 7,440 restricted Common shares to a non-U.S. person who is a civil engineer of CCC-Oman and an accredited investor for proceeds of $15,000.

On November 20, 2014, Omagine sold an aggregate of 400,000 restricted Common Shares at $2.00 per share to two non-U.S. persons who are accredited investors (150,000 shares to one investor and 250,000 shares to the other investor) for aggregate proceeds of $800,000. The two non-U.S. persons are family members of an Omagine stockholder who owns approximately 7.1% of the Common Shares outstanding at December 31, 2014.

On November 21, 2014, Omagine paid a finder’s fee to a non-U.S. Finder in connection with the aforementioned sale of 400,000 restricted Common Shares. Such finder’s fee was satisfied by issuing such non-U.S. Finder 20,000 restricted Common Shares valued at $40,000.

NOTE 7 – STOCK OPTIONS AND WARRANTS

Stock Options

Omagine’s shareholders approved the reservation by Omagine of 2,500,000 Common Shares for issuance under the 2003 Omagine Inc. Stock Option Plan (the “2003 Plan”). The 2003 Plan expired on August 31, 2013. On March 6, 2014, the Board of Directors approved the adoption of the 2014 Omagine Inc. Stock Option Plan (the “2014 Plan”).

Both the 2003 Plan and the 2014 Plan are designed to attract, retain and motivate employees, directors, consultants and other professional advisors of Omagine and its subsidiaries (collectively, the “Recipients”) by giving such Recipients the opportunity to acquire stock ownership in Omagine through the issuance of stock options (“Stock Options”) to purchase Common Shares.

Omagine has registered for resale the 2.5 million Common Shares reserved for issuance under the 2003 Plan by filing a registration statement with the SEC on Form S-8. At March 31, 2015, there were 2,285,000 unexpired Stock Options issued but unexercised under the 2003 Plan and all such Stock Options remain valid until the earlier of their exercise date or expiration date.

Pursuant to the 2014 Plan, 3,000,000 Common Shares were reserved for issuance. Omagine intends to seek its shareholders’ ratification of the adoption by Omagine of the 2014 Plan. At March 31, 2015, there were 990,000 unexpired Stock Options issued but unexercised under the 2014 Plan.

A summary of Stock Option activity for the three months ended March 31, 2015 and 2014 is as follows:

 

		Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (in years)				Aggregate Intrinsic Value
Outstanding at January 1, 2014			2,285,000			$	1.72				1.43			$	1,100
Granted in Q1 2014			40,000			$	1.80				5.06				-
Outstanding March 31, 2014			2,325,000			$	1.73				1.25			$	291,920
Exercisable at March 31, 2014			2,315,000			$	1.73				1.23			$	291,920
Outstanding at January 1, 2015			3,275,000			$	1.97				1.24			$	1,923,170
Outstanding March 31, 2015			3,275,000			$	1.97				0.99			$	400,670
Exercisable at March 31, 2015			3,275,000			$	1.97				0.99			$	400,670

 

Of the 3,275,000 Stock Options outstanding at March 31, 2015, 2,915,000 of such Stock Options were issued by Omagine in January 2012 and December 2014 as “Strategic Options” to officers, directors and consultants of Omagine whose continued service was deemed by the Board of Directors to be particularly crucial to attaining LLC’s then strategic goal of signing the Development Agreement (“DA”) with the Government of Oman and in recognition of those efforts during 2014 and beyond. The Strategic Options are fully vested, provide for a cashless exercise feature and currently expire on December 31, 2015; 1,965,000 of the Strategic Options are exercisable at $1.70 and 950,000 are exercisable at $2.55. To continue to incentivize the retention and sustained service to the Company of its mission-critical employees and consultants, the expiration date of the 1,965,000 Strategic Options issued in January 2012 was extended by Omagine in December 2012 to December 31, 2013 (the “First Extension“) and in December 2013 to December 31, 2014 (the “Second Extension”) and in December 2014 to December 31, 2015(the “Third Extension”).

 

Of the 2,915,000 Strategic Options, an aggregate of 1,685,000 were granted to Omagine’s three officers, an aggregate of 125,000 were granted to Omagine’s independent directors and 1,000,000 were granted to the Deputy Managing Director of LLC who, pursuant to a March 2007 consulting agreement expiring on December 31, 2015, is also a consultant to the Company. The Deputy Managing Director of LLC also holds 160,000 Stock Options granted pursuant to his consulting agreement which are not Strategic Options, exercisable at $1.25 per share and expiring on March 31, 2017. 

The $1,373,326 estimated fair value of the First Extension was calculated using the Black Scholes option pricing model and the following assumptions: (i) $1.77 share price, (ii) 370 day term of the First Extension, (iii) 125% expected volatility, (iv) 0.16% (370 day term) risk free interest rate and such $1,373,326 was expensed evenly by Omagine over the 370 day requisite service period of the First Extension (December 27, 2012 through December 31, 2013). The estimated fair value of the issuance in 2012 of the Strategic Options was $1,685,629.

The $671,440 estimated fair value of the Second Extension was calculated using the Black Scholes option pricing model and the following assumptions (i) $0.89 share price, (ii) 378 day term of the Second Extension, (iii) 144% expected volatility, (iv) 0.13% (378 day term) risk free interest rate, and such $671,440 was expensed evenly over the 378 day requisite service period of the Second Extension (December 19, 2013 through December 31, 2014).

On December 13, 2014, Omagine granted to six persons an aggregate of 950,000 fully vested Strategic Options with a cashless exercise feature (625,000 to three officers, 25,000 to one director and 300,000 to two consultants) exercisable at $2.55 per share and expiring on December 31, 2015. The $1,277,370 estimated fair value of the 950,000 Strategic Options was calculated using the Black Scholes option pricing model and the following assumptions: (i) $2.52 share price, (ii) 368 day term, (iii) 147% expected volatility, (iv) 0.25% (368 day term) risk free interest rate and was expensed in full in the quarterly period ended December 31, 2014.

On December 29, 2014, the expiration date of the 1,965,000 Strategic Options issued in January 2012 was extended from December 31, 2014 to December 31, 2015 (the “Third Extension”). The $3,115,704 estimated fair value of the Third Extension was calculated using the Black Scholes option pricing model and the following assumptions: (i) $2.52 share price, (ii) 368 day term, (iii) 147% expected volatility, (iv) 0.25% (368 day term) risk free interest rate and was expensed in full in the quarterly period ended December 31, 2014.

Both the extension of the expiration date of the 1,965,000 Strategic Options to December 31, 2015 and the grant of the 950,000 fully vested Strategic Options expiring December 31, 2015 were granted to acknowledge and recognize the magnitude and duration of the continued mission critical tasks undertaken without proper compensation during 2014 (past services rendered) by those receiving the grants.

On January 15, 2013 an Omagine independent director was granted 2,000 Stock Options exercisable at $1.38 per share and expiring on January 14, 2018.

On April 8, 2013, the estate of a former Omagine director exercised 4,000 Stock Options; 2,000 at $0.51 per share and 2,000 at $0.85 per share.

On March 28, 2014, Omagine granted to four persons an aggregate of 40,000 Stock Options exercisable at $1.80 per share and expiring on March 27, 2019. One such person is an Omagine independent director, one is an Omagine officer and two are consultants. The $55,376 estimated fair value of the 40,000 Stock Options was calculated using the Black Scholes option pricing model and the following assumptions (i) $1.80 share price, (ii) a 5 year term, (iii) 106% expected volatility and (iv) 1.75% (5 year term) risk free interest rate. $51,914 of such estimated fair value was expensed in the year ended December 31, 2014, and $866 was expensed in the three months ending March 31, 2015.

A summary of non-vested Stock Options and the Common Shares underlying such Stock Options for the three months ended March 31, 2015 and 2014 is as follows:

 

		Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (in years)
Non-vested shares at January 1, 2014			40,000			$	1.80				4.81
Vested in Q1 2014			(30,000	)		$	1.80				4.81
Non-vested shares at March 31, 2014			10,000			$	1.80				4.30
Non-vested shares at January 1, 2015			10,000			$	1.80				4.30
Vested in Q1 2015			(10,000	)		$	1.80				4.30
Non-vested shares at March 31, 2015			-				-				-

Issued and outstanding Stock Options (all non-qualified) as of March 31, 2015 are as follows:

Year Granted				Number Outstanding				Number Exercisable				Exercise Price				Expiration Date
	2007				160,000				160,000			$	1.25			March 31, 2017
	2008				150,000				150,000			$	2.60			September 23, 2018
	2010				2,000				2,000			$	0.51			June 30, 2015
	2011				4,000				4,000			$	0.85			May 16, 2016
	2012				1,965,000				1,965,000			$	1.70			December 31, 2015
	2012				2,000				2,000			$	1.70			April 12, 2017
	2013				2,000				2,000			$	1.38			January 14, 2018
	2014				40,000				40,000			$	1.80			March  27, 2019
	2014				950,000				950,000			$	2.55			December 31, 2015
	Totals				3,275,000				3,275,000

 

A summary of information about Stock Options outstanding at March 31, 2015 is as follows:            

 

				Stock Options Outstanding												Exercisable
Range of Exercise Prices				Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (in years)				Number of Shares				Weighted Average Exercise Price
	$ 0.50 - $1.00				6,000			$	0.74				0.85				6,000			$	0.74
	$ 1.01 - $2.00				2,169,000				1.67				0.92				2,169,000				1.67
	$ 2.01 - $3.00				1,100,000				2.56				1.14				1,100,000				2.56
	Totals				3,275,000			$	1.97				0.99				3,275,000			$	1.97

 

 

As of March 31, 2015, there was $4,081 of unrecognized compensation costs relating to unexpired Stock Options. That cost is expected to be recognized $3,001 in 2015, $540 in 2016 and $540 in 2017.

Warrants

As of March 31, 2015 Omagine had 6,932,124 Common Stock purchase warrants (“Warrants”) issued and outstanding. The Warrants do not contain any price protection provisions that would require them to be classified as liabilities (subject to re-measurement at fair value each time a balance sheet is presented) rather than presented as a component of stockholders’ equity.

The Tempest Warrants

On June 24, 2014 in connection with the sale of 362,308 restricted Common Shares to an investor (See Note 6), Omagine issued 1,000,000 Warrants to such investor, each of which are exercisable for the purchase of one restricted Common Share at a per Common Share exercise price equal to the greater of: (a) $1.00 per Common Share, or (b) 80% of the closing sale price for a Common Share on the trading day immediately preceding the relevant exercise date (the “Tempest Warrants”). Both the exercise price of the Tempest Warrants and the number of Common Shares issuable upon exercise of the Tempest Warrants are subject to adjustment in the event of a stock split, combination or subdivision of the Common Stock, or a dividend, reclassification, reorganization, or spin off.

The Tempest Warrants and the Common Shares issuable upon exercise of the Tempest Warrants are “restricted securities” as that term is defined in the Securities Law. The Tempest Warrants expire on June 23, 2016 and are not redeemable by Omagine.

On August 15, 2014, 240,000 Tempest Warrants were transferred to an affiliate of the investor. The affiliate exercised the 240,000 Tempest Warrants at an exercise price of $1.40 per Common Share for proceeds of $336,000. On October 2, 2014 a further 250,000 Tempest Warrants were exercised by such affiliate at an exercise price of $1.31 per Common Share for proceeds of $327,500. As of the date of this report, there are 510,000 Tempest Warrants issued and outstanding.

The Strategic Warrants

Omagine has 6,422,124 Warrants outstanding, 3,211,062 of which are exercisable for the purchase of one Common Share at a per Common Share exercise price of $5.00 and 3,211,062 of which are exercisable for the purchase of one Common Share at a per Common Share exercise price of $10.00 (collectively, the “Strategic Warrants”).

Omagine filed a post-effective amendment to its registration statement on Form S-1 (Commission File No. 333-183852) whereby the Strategic Warrants and the 6,422,124 Common Shares underlying the Strategic Warrants were registered by Omagine (the “Warrant Registration”). The Warrant Registration was declared effective by the SEC and its effective status expired. Omagine filed another post-effective amendment to the Warrant Registration on January 28, 2015 which was declared effective by the SEC on February 13, 2015. Neither the exercise prices of the Strategic Warrants nor the number of Common Shares issuable upon exercise of the Strategic Warrants are subject to adjustment in the event of a stock split, combination or subdivision of the Common Stock, or a dividend, reclassification, reorganization, or spinoff.

 

On August 18, 2014, pursuant to a resolution of the Board of Directors, the expiration date for all Strategic Warrants was extended for a third time to June 30, 2015 and again on January 5, 2015, pursuant to a resolution of the Board of Directors, the expiration date for all Strategic Warrants was extended for a fourth time to December 31, 2015. All other terms and conditions of the Strategic Warrants remained the same. All Strategic Warrants expire on December 31, 2015 unless redeemed earlier by Omagine upon 30 days prior written notice to the Strategic Warrant holders.

NOTE 8 – U.S. INCOME TAXES

Deferred U.S. tax assets are comprised of the following:

		March 31,				December 31,
		2015				2014
U.S. federal net operating loss carry forwards		$	5,215,000			$	5,293,000
U.S. state and city net operating loss carry forwards, net of U.S. federal tax benefit			1,490,000				1,512,000
			6,705,000				6,805,000
Less: Valuation allowance			(6,705,000	)			(6,805,000	)
Total		$	-			$	-

 

Management has determined, based on the Company's current condition, that a full valuation allowance is appropriate at March 31, 2015.

At March 31, 2015, the Company had U.S. federal net operating loss carry forwards of approximately $14,900,000 expiring in various amounts from fiscal year 2017 to fiscal year 2035.

Current U.S. income tax law limits the amount of loss available to offset against future taxable income when a substantial change in ownership occurs. 

The Company believes that it has no uncertain tax positions and no unrecognized tax benefits at March 31, 2015 and December 31, 2014.

NOTE 9 – COMMITMENTS

Leases

Omagine leases its executive office in New York, New York under a ten-year lease entered into in February 2003 and extended in March 2013 and which lease now expires on December 31, 2015. LLC leases office space in Muscat, Oman from an unaffiliated third party under a one year prepaid lease which commenced in January 2015 and which provides for an annual rental of $35,880. The Company’s rent expense for the three months ended March 31, 2015 and 2014 was $40,469 and $39,353, respectively.

At March 31, 2015, the future minimum lease payments under non-cancelable operating leases were $79,158 (all due in 2015).

Employment Agreements

The Company presently has no employment agreements with any person.

Pursuant to a prior employment agreement, Omagine was obligated to employ its President and Chief Executive Officer at an annual base salary of $125,000 plus an additional amount based on a combination of net sales and earnings before taxes. Omagine plans to enter into a new employment agreement with its President although the terms of such employment agreement have not yet been determined. For the three months ended March 31, 2015 and for the year ended December 31, 2014, Omagine has continued to accrue salary payable to its President on the basis of an annual salary of $125,000 and on April 24, 2014, Omagine paid its President $187,691 of such accrued officer’s payroll. At March 31, 2015 and December 31, 2014, Omagine had unpaid accrued officer’s compensation due to its President of $315,672 and $310,464, respectively.

Pursuant to a prior employment agreement, Omagine was obligated to employ its Vice-President and Secretary at an annual base salary of $100,000. Omagine plans to enter into a new employment agreement with its Vice-President although the terms of such employment agreement have not yet been determined. For the three months ended March 31, 2015 and for the year ended December 31, 2014, Omagine partially paid and partially accrued officers’ compensation to its Vice President on the basis of an annual salary of $100,000. At March 31, 2015 and December 31, 2014, Omagine had unpaid accrued officer’s compensation due to its Vice-President of $138,575 and $171,575, respectively.

For the three months ended March 31, 2015 and for the year ended December 31, 2014, Omagine partially paid and partially accrued officers’ compensation to its Controller on the basis of an annual salary of $80,000. At March 31, 2015 and December 31, 2014, Omagine had unpaid accrued officers’ compensation due to its Controller of $130,883 and $155,883, respectively.

Contingent Fee Payment Obligation

Depending on circumstances, LLC may execute an agreement with Michael Baker Corporation ("Baker") to hire Baker as its Program Manager and/or Project Manager (the potential “PM Contract”). Omagine has employed Baker to provide design and engineering services through the feasibility and engineering study phases of the Omagine Project. As part of its compensation agreement with Baker, Omagine agreed that when and if LLC signs a DA with the Government of Oman, then, and only then, Omagine would be obligated to pay Baker the sum of $72,000 (the “Contingent Fee”). The payment to Baker of the Contingent Fee is not conditional upon the execution of the PM Contract. Omagine became obligated to pay Baker the Contingent Fee concurrent with the Ratification of the DA by the Ministry of Finance of Oman on March 15, 2015. (See Note 9).

Equity Financing Agreements

Omagine, Inc. and YA were parties to a Stand-By Equity Distribution Agreement (the “2011 SEDA”) which was due to expire on September 1, 2014. On July 21, 2014, the 2011 SEDA was terminated by the mutual consent of Omagine and YA.

On April 22, 2014, Omagine and YA entered into a new Standby Equity Distribution Agreement on generally the same terms and conditions as the 2011 SEDA (the”2014 SEDA“). Unless earlier terminated in accordance with its terms, the 2014 SEDA shall terminate automatically on the earlier of (i) the first day of the month next following the 24-month anniversary of the “Effective Date” (as hereinafter defined), or (ii) the date on which YA shall have made payment to Omagine of Advances pursuant to the 2014 SEDA in the aggregate amount of $5,000,000. On April 22, 2014, in satisfaction of a $150,000 commitment fee due pursuant to the 2014 SEDA, Omagine issued 85,822 restricted Common Shares to YA Global II SPV, LLC, which is an affiliate of YA (See Note 6).

Pursuant to the terms of the 2014 SEDA, Omagine may in its sole discretion, and upon giving written notice to YA (an ”Advance Notice”), periodically sell Common Shares to YA (“Shares”) at a per Share price (“Purchase Price”) equal to 95% of the lowest daily volume weighted average price (the “VWAP”) for a Common Share as quoted by Bloomberg, L.P. during the five (5) consecutive Trading Days (as such term is defined in the 2014 SEDA) immediately subsequent to the date of the relevant Advance Notice (the “Pricing Period”).

Omagine is not obligated to sell any Shares to YA but may, over the term of the 2014 SEDA and in its sole discretion, sell to YA that number of Shares valued at the Purchase Price from time to time in effect that equals up to five million dollars ($5,000,000) in the aggregate. YA is obligated under the 2014 SEDA to purchase such Shares from Omagine subject to certain conditions including (i) Omagine filing a registration statement with the SEC to register the resale by YA of the Shares sold to YA under the 2014 SEDA (“Registration Statement”), (ii) the SEC declaring such Registration Statement effective (the date of such declaration by the SEC being the “Effective Date”), (iii) Omagine certifying to YA at the time of each Advance Notice that Omagine has performed all covenants and agreements to be performed and has complied with all obligations and conditions contained in the 2014 SEDA, (iv) periodic sales of Shares to YA must be separated by a time period of at least five Trading Days, and (v) the dollar value of any individual periodic sale of Shares designated by Omagine in any Advance Notice may not exceed the greater of (a) two hundred thousand dollars ($200,000), or (b) the average of the ”Daily Value Traded” for each of the five (5) Trading Days immediately preceding the date of the relevant Advance Notice, where Daily Value Traded is the product obtained by multiplying the number representing the daily trading volume of Common Shares for such Trading Day by the VWAP for a Common Share on such Trading Day.

Omagine Project

The Omagine Project is planned to be developed on one million square meters (equal to approximately 245 acres) of beachfront land facing the Gulf of Oman just west of the capital city of Muscat and nearby Muscat International Airport (the “Omagine Site”). The Company signed the Development Agreement for the Omagine Project with the Government of Oman on October 2, 2014. On March 15, 2015 the Development Agreement was ratified by the Ministry of Finance of Oman.

The Omagine Project is planned to be an integration of cultural, heritage, entertainment and residential components including a high-culture theme park and associated buildings, shopping and retail establishments, restaurants and approximately 2,100 residences.

Omagine LLC Development Agreement

On October 2, 2014, LLC, Omagine’s 60% owned subsidiary, signed the Development Agreement (the “DA”) with the Government of Oman (the “Government”) for the development in Oman by LLC of the Omagine Project (the “Execution Date”). The term of the DA is 20 years and the rights and obligations of the parties under the DA are conditional upon ratification of the DA by the Ministry of Finance of the Government (“Ratification”), which Ratification occurred on March 15, 2015. The March 15, 2015 date that the Minister of Finance signed the DA ratifying it is defined in the DA as the “Effective Date”. The continued legal effectiveness of the DA subsequent to Ratification is dependent only upon: (1) LLC’s delivery to the Government within twelve months from the Execution Date of a term sheet with lenders for the financing of the first phase, any other phase or all of the Project, (2) LLC’s submission within 8 months of the Execution Date to the Ministry of Tourism of a social impact assessment and the Government’s approval thereof within 12 months of the Execution Date, (3) the Government’s approval of the development control plan within 12 months of the Execution Date, and (4) the transformation of LLC into a joint stock company within 12 months of the Execution Date.

 

Pursuant to the DA, LLC must substantially complete the construction of the seven Pearl buildings and one hotel (the “Minimum Build Obligation” or “MBO”) within 5 years of the Effective Date (the “MBO Completion Date”). Any material breach by LLC of its obligation to perform the Minimum Build Obligations would constitute an event of default under the DA. For example, should LLC consistently exceed MBO milestone dates, the Government has the right to terminate the DA under the default provisions of the DA. The DA also specifies that the principal construction contracts should be executed within one year of the Effective Date. LLC is required to provide written notice to the Government in certain circumstances, such as LLC’s change in an anticipated milestone date that would result in a substantial achievement of work to occur over 60 days after the milestone date. The DA provides that the Government is required to grant reasonable requests for the extension of the terms of the DA in such circumstances.

The DA also provides that the Government and LLC will enter into a Usufruct Agreement (“UA”) on the Effective Date. The DA and the UA grant LLC certain rights over the land constituting the Omagine Site (including the right to sell the land). The term of the UA is 50 years (renewable) commencing from the Effective Date and in the event of any conflict between the terms of the DA and UA, the terms of the DA control. Pursuant to the DA, a Usufruct Agreement registration fee based on the Annual Usufruct Rent (as such term is defined in the DA) is required to be paid by LLC to the Government. Such fee is currently listed by the Ministry of Housing as being equal to 0.5% of Usufruct Rent, or approximately $600. The DA specifies that the initial 5 year period commencing on the Effective Date shall be a rent free period and that the Annual Usufruct Rent thereafter will be based on the built but unsold commercial area only of the Omagine Project (approximately 150,000 sq. meters) or approximately 45,000 Omani Rials ($117,000) per year based on the current Annual Usufruct Fee of 0.30 Omani Rials ($0.78) per square meter. The UA (and the DA terms relevant to the UA) will survive the expiration of the term of the DA.

The foregoing discussion of the terms of the DA and UA is not meant to be definitive or complete and is qualified in its entirety by reference to the complete texts of the DA and UA as filed by the Company with the SEC.

Omagine LLC Shareholder Agreement

Omagine and JOL organized LLC in Oman and capitalized it with an initial investment of twenty thousand (20,000) Omani Rials ($52,000). Subsequently, Omagine, JOL and the New Investors entered into a shareholder agreement relating to LLC (the “Shareholder Agreement”).

Pursuant to the Shareholder Agreement, Omagine invested an additional 70,000 Omani Rials ($182,000) into LLC and agreed to make a further additional investment into LLC of 210,000 Omani Rials ($546,000) after the execution of the DA (the “OMAG Final Equity Investment”). As of March 31, 2015, Omagine has (a) invested 90,000 Omani Rials ($234,000) into LLC, and (b) made an aggregate of 116,000 Omani Rials ($301,600) of cash advances to LLC against the OMAG Final Equity Investment (See Note 11- Subsequent Events).

Further pursuant to the Shareholder Agreement, the New Investors invested an aggregate of 60,000 Omani Rials ($156,000) into LLC and agreed, subject to certain conditions precedent, to make further additional investments into LLC in the aggregate amount of 26,628,125 Omani Rials ($69,233,125). Additionally pursuant to the Shareholder Agreement, RCA agreed to invest the Omagine Site as a non-cash “payment-in-kind” capital contribution to LLC (the “PIK”). The PIK represents the value of the land previously owned by His Majesty Sultan Qaboos bin Said, the ruler of Oman, which His Majesty transferred to MOT on condition it be used for development of the Omagine Project.

NOTE 10 – RELATED PARTY TRANSACTIONS

At March 31, 2015 and December 31, 2014 respectively, Omagine’s accounts payable included $14,012 and $13,603 due to its officers and directors.

NOTE 11 – SUBSEQUENT EVENTS

On April 28, 2015, Omagine advanced an additional 14,000 Omani Rials ($36,400) to LLC. As of the date of this Report, Omagine has made cash advances against the OMAG Final Equity Investment to LLC totaling 130,000 Omani Rials ($338,000).

 

Item 2- Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Omagine, Inc. (“Omagine” or the ”Registrant”) was incorporated in Delaware in October 2004 and is a holding company which conducts substantially all its operations through its 60% owned subsidiary Omagine LLC, an Omani limited liability corporation (“LLC”) and its wholly-owned subsidiary Journey of Light, Inc., a New York corporation (“JOL”). Omagine, JOL and LLC are collectively referred to herein as the ”Company”.

In November 2009, Omagine and JOL organized LLC as a limited liability company under the laws of the Sultanate of Oman (”Oman”) to design, develop, own and operate our initial project – a mixed-use tourism and real-estate project in Oman named the “Omagine Project” (See “The Omagine Project” below).

Omagine and JOL initially capitalized LLC at 20,000 Omani Rials [$52,000] (the “OMAG Initial Equity Investment”) and Omagine’s 100% ownership of LLC was later reduced to 60% pursuant to a shareholders’ agreement (the “Shareholder Agreement”) signed in May 2011 by Omagine, JOL and three new LLC minority investors (See: “The Shareholder Agreement / LLC Capital Structure” , below).

On October 2, 2014, LLC and the Government of Oman (the “Government”) signed an agreement (the “Development Agreement” or “DA”) for the development in Oman by LLC of the Omagine Project (See: Exhibits 10.24 and 10.25 and “The Development Agreement and the Usufruct Agreement”, below).

The Company is focused on entertainment, hospitality and real-estate development opportunities in the Middle East and North Africa (the “MENA Region”) and on the design and development of unique tourism destinations. The Company presently concentrates the majority of its efforts on the business of LLC and specifically on the Omagine Project.

The number of shares of Omagine’s Common Stock (the “Common Shares”) issued and outstanding as of May 12, 2015 is 17,125,883.

Critical Accounting Policies

Our financial statements attached hereto have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The policies discussed below are considered by management to be critical to an understanding of our financial statements because their application places the most significant demands on management's judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. For all of these policies, management cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.

Revenue Recognition. The method of revenue recognition at LLC will be determined by management when and if it becomes likely that LLC will begin generating revenue.      

Valuation Allowance for Deferred U.S. Tax Assets. The carrying value of deferred U.S. tax assets assumes that Omagine will not be able to generate sufficient future taxable income to realize the deferred tax assets, based on management's prior estimates and assumptions. Now that the DA has been signed, management will re-evaluate such estimates and assumptions.

  

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 LLC in Oman and in particular on the Omagine Project.

The Omagine Project

LLC has entered into a Development Agreement (the “DA”) with the Government of Oman (the “Government”) with respect to the development in Oman by LLC of the Omagine Project - a mixed-use tourism and residential real estate project which is expected to take more than five years to complete. The DA was signed by the Minister of Tourism on behalf of the Government on October 2, 2014 and was ratified by the Ministry of Finance (“MOF”) of Oman on March 11, 2015. The Usufruct Agreement (“UA”), which is the land agreement and is an exhibit to and part of the DA has been separately signed by the Minister of Tourism in late April 2015 after which it has been officially transmitted to the Ministry of Housing (“MOH”) of Oman for signature by the Minister of Housing.  Our present understanding from our attorney’s recent conversations with MOT is that the MOH will then notify LLC to come to the MOH to sign the UA on behalf of LLC and then register it with the MOH and pay the appropriate registration fee therefor. (See: “The Development Agreement and the Usufruct Agreement”, below).

 

 

The Omagine Project will be developed on one million square meters (equal to 100 hectares or 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”). The Omagine Project will require substantial financing to complete (See: “The Shareholder Agreement / LLC Capital Structure” and “Financial Advisor”, below).

 

The Omagine Project is planned to be an elegant integration of cultural, scientific, heritage, entertainment and residential components, including: a high culture theme park containing seven pearl shaped (20 meter diameter) buildings (the “Pearls”) located along an open air boardwalk with associated entertaining exhibitions; an amphitheater and stage; open space green landscaped areas; a canal; an enclosed harbor and marina; boat slips and docking facilities; retail shops; a variety of restaurants and cafes; entertainment venues; a five-star resort hotel; a four-star 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 by LLC.

 

A non-Omani person is not permitted to purchase land in Oman unless such land is located within an Integrated Tourism Project (“ITC”). The Government has designated the Omagine Project as an ITC and has issued a license (an “ITC License”) to LLC thereby permitting the sale by LLC to any person, including any non-Omani person of the freehold title to the land within the Omagine Project (the “Project Land”) and to properties which are developed within the Omagine Project. The Omagine Project will contain significant hotel, retail, commercial, and entertainment elements and accordingly, in addition to the real estate development business, LLC also plans to enter the property management, hospitality and entertainment businesses.

 

 The Development Agreement and the Usufruct Agreement

The contract between the Government and LLC that governs the design, development, construction, management and ownership of the Omagine Project, the use and sale by LLC of the Project Land and the Government’s and LLC’s rights and obligations with respect to the Omagine Project, is the Development Agreement. (See: Exhibits 10.24 and 10.25).

 

The Government of Oman signed the Development Agreement with LLC on October 2, 2014 (the “Execution Date”). The DA was ratified by the MOF on March 11, 2015. The DA defines: (i) the “Effective Date”, as the date Ratification occurs (although there is an ongoing discussion to change that definition to the date the UA is registered); (ii) the “Minimum Build Obligation” or “MBO”, as the substantial completion of the construction of the seven Pearl buildings and one hotel building; and (iii) the “MBO Completion Date”, as the date such substantial completion of the MBO is achieved.

 

The DA requires LLC to substantially complete the MBO within five (5) years of the Effective Date, as such time period may be amended or extended per the DA. The five (5) year time period allocated to complete the MBO begins on the Effective Date and the term of the DA is for 20 years after the Effective Date.

 

In anticipation of the occurrence of the Effective Date, management has, since the October 2, 2014 Execution Date, undertaken a burst of activities associated with the land valuation process for the Omagine Site, the financing, master planning, engineering, design and construction efforts for the Omagine Project, the sale of additional Omagine LLC equity, the creation of the Omagine LLC Strategic Plan and the ramp-up of Omagine LLC’s organizational activities in Oman.

 

The contracts between the Government and LLC governing the Project Land are the DA and the UA. The UA is an exhibit to the DA and is incorporated by reference into the DA and both the DA and the UA stipulate that in the event of any conflict between the terms and conditions of the DA and the terms and conditions of the UA, the terms and conditions of the DA will control (See Exhibits 10.24 and 10.25, The Development Agreement).

 

After ratification of the DA by the MOF on March 11, 2015, LLC received verbal confirmation that the Usufruct Agreement was signed by the Minister of Tourism in late April 2015 and that the UA was officially transmitted to the Ministry of Housing (“MOH”) for signature by the Minister of Housing. LLC is awaiting notification from the MOH to have LLC sign and register the UA. The date upon which the registration of the UA at the MOH (and payment of the appropriate registration fee therefor) is accomplished (the “Registration Date”), is the date when the process whereby control of the Project Land is transferred from the Government to Omagine LLC is completed.

 

 

 

The foregoing UA registration process at MOH is a routine bureaucratic procedure but no assurance can be presently given regarding when the Registration Date will occur. The term of the UA is fifty (50) years from the Registration Date (the “Usufruct Term”) and such Usufruct Term is renewable for an additional period upon the agreement of the parties.

 

The DA and UA grant LLC the right to use, control, develop and sell the Project Land (to itself or others) pursuant to the terms of the DA and UA. The DA obligates LLC, beginning on the fifth anniversary of the Registration Date, to pay the Government an annual rental fee equal to three hundred Omani Baisa (equivalent to approximately $0.78) for each square meter of Project Land upon which there is a substantially completed non-residential building (the “Usufruct Rent”). No Usufruct Rent is due or owing during the first five years after the Registration Date (the “Rent Free Period”) and no Usufruct Rent is ever due or owing with respect to plots of Project Land (i) on which there is a residential building, or (ii) on which there is not a substantially completed non-residential building (i.e. Project Land that is open space, roads, building work-in-progress, etc.).

 

The DA also obligates LLC to pay the Government twenty-five (25) Omani Rials (equivalent to approximately $65) for each square meter of Project Land purchased directly by LLC or sold by LLC to any third party (the “Land Price Payment”). At the present time, local real estate agents conservatively estimate that the average selling price for land at the Omagine Site would be at least 250 Omani Rials (approximately $650) per square meter.

 

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 ITC. The Government’s designation and licensing of the Omagine Project as an ITC therefore permits LLC to sell the freehold title to Project Land and properties which are developed on Project Land to any individual or juristic person - Omani or non-Omani. LLC does not anticipate that there will be any unsold Project Land or buildings at the expiration of the 50 year Usufruct Term.

 

The foregoing summary of some of the terms of the Development Agreement and of the Usufruct Agreement does not purport to be complete and is qualified in its entirety by reference to the full texts of such agreements. The full text of the Development Agreement is attached hereto as Exhibits 10.24 and 10.25. The full text of the Usufruct Agreement is contained in Schedule 2A of the Development Agreement.

 

The Shareholder Agreement / LLC Capital Structure

In May 2011, three new investors (the “New Shareholders”) and Omagine and JOL entered into the Shareholder Agreement pursuant to which, among other things, Omagine’s 100% ownership of LLC was reduced to 60%. The Shareholder Agreement is attached hereto as Exhibit 10.5.

 

The New Shareholders are:

 

	i.	The office of Royal Court Affairs (“RCA”), an Omani organization representing the personal interests of His Majesty Sultan Qaboos bin Said, the ruler of Oman, and
	ii.	Two subsidiaries of Consolidated Contractors International Company, SAL (“CCIC”). CCIC is a 60 year old Lebanese multi-national company headquartered in Athens, Greece having approximately five and one-half (5.5) billion USD in annual revenue, one hundred twenty thousand (120,000) employees worldwide, and operating subsidiaries in among other places, every country in the MENA Region. The two CCIC subsidiaries which are LLC shareholders are:

 

	a.	Consolidated Contracting Company S.A., a wholly owned Panamanian subsidiary of CCIC which is CCIC’s investment arm (“CCC-Panama”), and
	b.	Consolidated Contractors (Oman) Company LLC, CCIC’s operating subsidiary in Oman which is a construction company with approximately 13,000 employees in Oman (“CCC-Oman”).

 

 

 

Pursuant to the provisions of the Shareholder Agreement, LLC acknowledged the 20,000 Omani Rial ($52,000) OMAG Initial Equity Investment from Omagine and sold newly issued shares of its capital stock to Omagine and to the New Shareholders for an aggregate cash investment amount of 26,968,125 Omani Rials ($70,117,125) (the “New Investment”) plus a non-cash payment-in-kind investment (the “PIK”) of the land constituting the Omagine Site.

 

The 26,968,125 Omani Rial [$70,117,125] aggregate cash New Investment was or will be invested in two stages.

 

The first stage of the New Investment into LLC consisting of an aggregate of 130,000 Omani Rials [$338,000] was made by Omagine and the New Shareholders before the DA was signed as follows:

 

	i.	Omagine invested an additional 70,000 Omani Rials ($182,000) into LLC for a total investment to date by Omagine of 90,000 Omani Rials [$234,000], and
	ii.	CCIC (through its 2 subsidiaries) invested 22,500 Omani Rials ($58,500) into LLC, and
	iii.	RCA invested 37,500 Omani Rials ($97,500) into LLC.

 

LLC is presently capitalized at 150,000 Omani Rials ($390,000) and, as of the date hereof, Omagine has also advanced it an additional 116,000 Omani Rials ($301,600). Omagine has also continued to pay for most of LLC’s operating expenses to date. A summary of LLC’s capital structure as of the date hereof is as follows:

 

Omagine LLC
Shareholder		Percent Ownership				Investment (Omani Rials)				Investment (US Dollars)				Cash Advance (Omani Rials)
Omagine			60	%			90,000			$	234,000				116,000
RCA			25	%			37,500			$	97,500				0
CCC-Panama			10	%			15,000			$	39,000				0
CCC-Oman			5	%			7,500			$	19,500				0
Total Capital			100	%			150,000			$	390,000				116,000

 

The second stage of the New Investment into LLC will be invested by Omagine and each of the New Shareholders (each investment, a “Deferred Cash Investment”) after the date hereof and in the amounts - and subject to the satisfaction of the conditions precedent for each such Deferred Cash Investment as specified below.

 

The Shareholder Agreement (See: Exhibit 10.5) defines a “Financing Agreement” as follows:

 

Financing Agreement means a legally binding agreement between LLC and an investment fund, Lender or other Person, 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 and such legally binding Financing Agreement may or may not be subject to the satisfaction or waiver of certain conditions precedent and the first such Financing Agreement shall be in an amount sufficient to finance the first phase of the Omagine Project’s construction plus the installment payments due to OMAG specified in clause 16.5(i) and clause 16.6.

 

 

 

The Shareholder Agreement defines the “Financing Agreement Date” as follows:

 

Financing Agreement Date means the Day upon which LLC and an investment fund, Lender or other Person first execute and deliver a Financing Agreement.

 

Omagine and the New Shareholders also agreed in the Shareholder Agreement that a portion of their New Investment into LLC would be Deferred Cash Investments that would be subject to the satisfaction of certain conditions precedent. Pursuant to the Shareholder Agreement, the aggregate Deferred Cash Investments from Omagine and the New Shareholders totaling 26,838,125 Omani Rials [$69,779,125] will be invested on or before the Financing Agreement Date as follows:

 

	i.	The single condition precedent to Omagine’s Deferred Cash Investment of 210,000 Omani Rials ($546,000) is the signing of the DA. Now that the DA is signed, that condition precedent is satisfied and Omagine will invest an additional 210,000 Omani Rials ($546,000) before the Financing Agreement Date (the “OMAG Final Equity Investment”), 116,000 Omani Rials of which ($301,600) has been advanced to LLC by Omagine as of the date hereof, and
	ii.	The three conditions precedent to RCA’s Deferred Cash Investment of 7,640,625 Omani Rials ($19,865,625) and to the CCC-Panama and CCC-Oman aggregate Deferred Cash Investment of 18,987,500 Omani Rials ($49,367,500) are (i) the signing of the DA (which condition precedent is now satisfied), (ii) the occurrence of the Financing Agreement Date, and (iii) the occurrence of the date on which LLC and CCC-Oman execute a contract (the “CCC-Oman Contract”) appointing CCC-Oman as the general contractor for the Omagine Project (the “Contract Date”).

 

Once the Contract Date occurs, the single remaining condition precedent then necessary to be satisfied for the New Shareholders to invest their $69,233,125 aggregate Deferred Cash Investments (the “New Shareholder Deferred Cash Investment”) into LLC is the occurrence of the Financing Agreement Date. Management expects the Contract Date to occur sometime prior to June 30, 2015.

 

The CCC-Oman Contract:

Management is continuing its extensive discussions regarding the CCC-Oman Contract. Over the past several months, LLC management, its engineering and construction consultants and its attorneys held many meetings among themselves and with multiple CCC senior managers and executives in Muscat, Athens, Dubai, London, Pittsburgh and New York City. The foregoing meetings resulted in agreement that the CCC-Oman Contract will be based on the internationally accepted contracting standards promulgated by the International Federation of Consulting Engineers (“FIDIC”) and it will contain a set of industry standard performance parameters, incentives and penalties to ensure Omagine LLC’s interests are protected and that value is delivered. The parties also agreed that the first draft of the CCC-Oman Contract (the “First Draft Construction Contract”) would be written by a law firm representing Omagine LLC and specializing in FIDIC contracts and that such First Draft Construction Contract would outline a two part “framework agreement” specifying a “Pre-Design Period” and a “Post-Design Period” and the different contracting methodologies to be followed for each such period.

 

The First Draft Construction Contract is targeted for completion in May 2015 and it will be used by the parties as a basis for final negotiations and conclusion of the “Final Draft Construction Contract” which will then be presented to the LLC Shareholders for their consideration. Management presently estimates that the CCC-Oman Contract will be signed by LLC and CCC-Oman before June 30, 2015.

 

Part one (the “Pre-Design Period”) will encompass the time period beginning on the Contract Date and lasting approximately 12 months subsequent to the Effective Date during which LLC’s engineers, architects and designers will be undertaking the master-planning, engineering and architectural design work for the Omagine Project (the “Initial Design Work”). During the Pre-Design Period LLC will pay CCC-Oman for its construction activities and services (the “Initial Construction Activities”) via a pre-agreed bill-of-materials (“BOM”) specifying unit pricing for each of the Initial Construction Activities expected to be performed during the Pre-Design Period. Such unit pricing will be incorporated into the CCC-Oman Contract. The Pre-Design Period is expected to consist of several “lettered” phases (Phase A, B, C, D etc.).

 

 

 

Part two (the “Fixed-Price Period”) remains planned to encompass the time period beginning at the conclusion of the Pre-Design Period and lasting until the conclusion of all remaining specified and required construction work on the Omagine Project (the “Remaining Construction Activities”) are completed. In order for LLC to maintain complete design control at all points throughout the development cycle, the Fixed-Price Period is now expected to consist of several “numbered” phases (Phase 1, 2, 3, 4 etc.), each of which will only commence subsequent to that time when the Design Work for such relevant numbered Phase is either 100% completed or when the percentage of Design Work completed for any such numbered Phase is such that LLC and CCC-Oman can agree on a fixed lump-sum price for such numbered Phase. There are multiple construction Phases contemplated for the Fixed-Price Period covering the Remaining Construction Activities. The CCC-Oman Contract will allow for flexibility in determining the actual number of numbered Phases. LLC plans to maintain direct control of the design of each numbered Phase through to completion. CCC-Oman will work closely with LLC and the master planner and architects from the beginning to ensure that constructability and value engineering are integrated in the final design for each numbered Phase.

 

Before being finalized, the Draft Construction Contract will be reviewed and analyzed by two expert construction consultants employed by LLC: (i) LLC’s engineering design consultants, and (ii) an Oman quantity surveying company specializing in construction cost consulting. Subsequent to this process (which is presently expected to be completed following the completion of the Draft Construction Contract sometime in May 2015), the Draft Construction Contract will be presented to the LLC shareholders for their consideration and approval.

 

The costs and expenses associated with the Initial Design Work and the Initial Construction Activities executed during the Pre-Design Period could vary substantially depending on the scope of such activities determined to be undertaken by LLC during the Initial Design Period – which determination by LLC will be driven primarily by the availability of financing for such Initial Design Work and Initial Construction Activities.

 

The Payment-In-Kind (“PIK”)Valuation:

In addition to its 7,640,625 Omani Rials ($19,865,625) Deferred Cash Investment mentioned above, RCA has made an additional non-cash payment-in-kind investment (the “PIK”) into LLC. Pursuant to the DA and UA the Government granted usufruct rights to LLC over the approximately 245 acres of beachfront land constituting the Omagine Site (the “Existing Land”) previously owned by His Majesty Sultan Qaboos bin Said, which His Majesty transferred to MOT on condition that such Existing Land be used for development of the Omagine Project. The value of the PIK equals the value to LLC of the Existing Land. The value of the Existing Land has been determined by professional valuation firms in accordance with the requirements and procedures specified for such a valuation by the Royal Institute of Chartered Surveyors (“RICS”) of London, England. The PIK investment will be perfected on the Registration Date and although LLC has the RICS valuation of the Existing Land in its possession, management has determined that disclosure of such RICS Valuation should not occur until after the Registration Date has occurred.

 

We have held extensive discussions with LLC’s independent accountant and auditor, Deloitte & Touche (M.E.) & Co. LLC (“Deloitte”), and management presently expects that on or shortly after the Registration Date, the value of the PIK will be reflected in LLC’s financial statements as a non-cash capital investment by RCA into LLC in accordance with International Financial Reporting Standards (“IFRS”).

 

Management believes that the PIK investment of the Existing Land and the New Investment of the 26,968,125 Omani Rials [$70,117,125] in cash are the most important parts of LLC’s equity capital structure. They were the most difficult to arrange since they are the highest risk portion of such equity capital structure. Both the PIK investment and the New Investment are memorialized in the Shareholder Agreement. Management is presently holding discussions with several potential equity investors interested in becoming shareholders of LLC.

 

The Transformation:

At some time prior to September 30, 2015, LLC will transform its corporate structure from a limited liability company into a joint-stock company (the “Transformation”). Subsequent to the PIK investment being perfected on the Ratification Date and the Deferred Cash Investments being made, Omagine LLC (or, as the case may be, Omagine SAOC) will then be capitalized at 26,988,125 Omani Rials ($70,169,125) plus the value of the PIK. A summary of Omagine LLC’s / SAOC’s capital structure after such Deferred Cash Investments and PIK valuation are made is as follows:

 

 

Omagine SAOC
Shareholder		Percent Ownership				Investment (Omani Rials)				Investment (US Dollars)
Omagine			60	%			300,000			$	780,000
RCA			25	%			7,678,125			$	19,963,125		+ PIK *
CCC-Panama			10	%			12,673,333			$	32,950,666
CCC-Oman			5	%			6,336,667			$	16,475,334
Total Capital:			100	%			26,988,125			$	70,169,125		+ PIK *

 

*

The capital of LLC / SAOC will be increased when the non-cash value of the PIK is recorded as a capital investment into LLC. Pursuant to the terms of the Shareholder Agreement, the PIK represents a portion of RCA’s payment to LLC for its 25% ownership of LLC. The value of the PIK equals the value to LLC of the provision to LLC of the Existing Land. The value of the Existing Land has been determined in accordance with Omani law and RICS procedures by a professional valuation expert.

Financing / Phase One Activities / The Financing Agreement Date:

Notwithstanding anything contained in this section or anywhere else in this Report, including but not limited to the discussion below and elsewhere in this Report, regarding possible, proposed or planned sales of equity and/or debt securities by Omagine or LLC, loans from Omagine to LLC, or the obtaining by LLC of any project finance facilities or other debt facilities with banks, financial institutions or other persons, no assurance can be given at this time as to whether the Company or LLC will be able to obtain the significant amount of financing necessary to execute the development of the Omagine Project.

 

Management is now in the initial stages of the processes required to arrange the necessary financing to execute the Omagine Project. LLC management is meeting with, interviewing and requesting proposals from a number of banks and financial institutions seeking to act as LLC’s financial adviser (“Financial Adviser”) and it is presently expected that a definitive and binding agreement between one such bank or financial institution will be signed sometime before June 30, 2015. No assurance however can be given that any such agreement will be signed until it is actually signed by the parties.

 

It is anticipated that the Omagine Project will be developed in several “phases’ and therefore several Financing Agreements will be executed during the course of the project’s development, each such Financing Agreement coinciding with the beginning of a new phase of the development. As indicated above, the execution date of the first such Financing Agreement is defined in the Shareholder Agreement as the “Financing Agreement Date”.

 

Although Omagine and the New Shareholders will have invested an aggregate of 360,000 Omani Rials (equivalent to approximately $936,000) prior to the Financing Agreement Date, the 26,628,125 Omani Rial ($69,233,125) New Shareholder Deferred Cash Investment will not be invested by the New Shareholders or received by LLC until the Financing Agreement Date occurs.

 

The first phase of the development of the Omagine Project (the “Pre-Design Phase”) will be the Initial Design Period (i.e. the approximately 12 month period immediately subsequent to the Effective Date). The scope of the Pre-Design Phase is presently being determined and will comprise that set of activities designated by LLC as being within the Pre-Design Phase and, subject to the level of financing available for the Pre-Design Phase, it could include all or some of the Initial Design Work (initial planning, design, environmental studies and approvals, master planning), surveying, soil engineering and testing, initial site work, initial additions by LLC of office space, personnel and equipment, and initial administrative, organizational, marketing and public relations efforts (collectively, the “Pre-Design Phase Activities”). The cost for the Pre-Design Phase Activities could vary substantially (from between $5 million to over $20 million) depending on the scope of the Pre-Design Phase Activities LLC determines to undertake as the Pre-Design Phase – which determination will be driven primarily by the availability of financing for the Pre-Design Phase. 

 

 

 

LLC presently expects that the firm it ultimately selects to be its Financial Adviser (See: “Financial Adviser”) will arrange for the syndication among several banks of debt financing for use by LLC to design, develop and construct the Omagine Project (the “Syndicated Project Financing”). The closing of each tranche (coinciding roughly with the phases of the project) of such Syndicated Project Financing will be memorialized by a Financing Agreement (each, a “Syndicated Financing Agreement”). The arrangement for and closing of such Syndicated Project Financing is presently projected by LLC management to occur within twelve months after the Effective Date.

 

Provided the execution and delivery of a Syndicated Financing Agreement is the first Financing Agreement to be executed and delivered, the date of such execution and delivery will therefore be the Financing Agreement Date (as defined in the Shareholder Agreement) and the New Shareholders will then be obligated pursuant to the Shareholder Agreement to invest the $69,233,125 New Shareholder Deferred Cash Investment into LLC. If alternate financing is not available, LLC will wait until the closing of the Syndicated Project Financing (and the first Financing Agreement Date) to begin most of the aforesaid Pre-Design Phase Activities.

 

LLC management however is of the opinion that the optimum development plan for the Omagine Project entails a strategy which undertakes the Initial Design Work and the maximum amount of Pre-Design Phase Activities as soon as possible after the Effective Date. By fully launching the design and development processes in parallel with the up to 12 months required for the Syndicated Project Financing effort, LLC would realize many benefits. This fast-track strategy however is not possible to execute absent significant Pre-Design Phase financing.

 

LLC is presently considering several methods to finance this fast-track development strategy for the Pre-Design Phase of the Omagine Project in an effort to facilitate the initiation, early implementation, and completion during the Initial Design Period of the maximum amount of Initial Design Work and the Pre-Design Phase Activities. Some of the financing methods presently under consideration are:

 

	i.	a sale by LLC to non-U.S. investors of mandatory convertible LLC promissory notes (“Notes”), which Notes would automatically convert at a future date into shares of LLC capital stock representing a minority LLC equity stake.
	ii.	a secured loan from Omagine to LLC, which loan could be funded by either:

 

	a.	funds available to Omagine at such time, or
	b.	funds received by Omagine from the sale by Omagine to non-U.S. investors of shares of LLC capital stock owned by Omagine.

 

iii.

a sale to non-U.S. investors of a minority equity stake in LLC.

 

The closing of debt financing by LLC sufficient to finance the Pre-Design Phase (the “Pre-Design Phase Financing”), which Pre-Design Phase Financing consists of:

 

	1.	the sale of Notes by LLC mentioned in (i) above, or
	2.	the Omagine loan to LLC mentioned in (ii) above, or
	3.	a combination of the sale of LLC Notes and the Omagine loan to LLC

 

will be memorialized by a written agreement constituting a Financing Agreement (as defined in the Shareholder Agreement) and the date of any such closing, provided it is the first Financing Agreement to be executed, would therefore be the Financing Agreement Date (as defined in the Shareholder Agreement).

 

 

 

Because such Pre-Design Phase Financing would also trigger the Financing Agreement Date (as defined in the Shareholder Agreement), in addition to financing the Pre-Design Phase, it would also coincidently provide additional advantages to LLC:

 

i.

it would accelerate the date the New Shareholders become obligated under the Shareholder Agreement to make their $69,233,125 New Shareholder Deferred Cash Investment into LLC, and

 

ii.

it would facilitate the Syndicated Project Financing effort which LLC’s designated financial adviser will be conducting with the bank syndicate because:

 

	a.	LLC’s capital will be increased, and
	b.	the CCC-Oman Contract will likely be in effect with its fixed price lump sum provision for the Remaining Construction Activities and such fixed price construction contracts are very attractive to banks when considering construction financing for projects, and
	c.	much of the Omagine Project design will be greatly advanced or completed as the bank syndication process is underway, and
	d.	many critical non-design activities included in the Pre-Design Phase Activities will be underway or completed as the bank syndication process is underway, and

 

iii.

it advances LLC’s marketing, advertising and sales schedules relevant to the sales releases of its residential and commercial properties, and

 

iv.

it advances LLC’s development and construction schedules with respect to such Pre-Design Phase Activities by nine to twelve months ahead of the schedules that would otherwise be attainable, and

 

v.

it further solidifies LLC’s relationship with the Oman Government and the MOT as the relevant Government authorities see the development of the Omagine Project being rapidly initiated.

 

The DA was signed on October 2, 2014 and LLC management is, among other things, presently pursuing the above mentioned strategies in order to finance its planned Pre-Design Phase Activities. Management presently believes it can maintain Omagine’s majority control of LLC by selling a further minority percentage of LLC’s equity to non-U.S. investors in the MENA Region for an amount in excess of the average cash investment amount paid by the New Shareholders.

 

Subject to the necessary financial resources becoming available to Omagine, the Company presently intends to finance the Pre-Design Phase Activities and trigger the Financing Agreement Date by exerting its best efforts to organize and arrange the Pre-Design Phase Financing as described above. No assurance however can be given at this time (i) as to whether such necessary financial resources required to make such secured loan to LLC will be available to Omagine, or (ii) if the Company will be successful in arranging such Pre-Design Phase Financing. Management is also exploring additional financing mechanisms to facilitate the initiation of its fast-track development strategy and the financing of the Pre-Design Phase Activities. (See: “Design, Engineering, Content Development and Construction” below).

 

Consolidated Results

The financial results of LLC are included in the consolidated financial results of the Company in accordance with accounting principles generally accepted in the United States. If and when the Financing Agreement Date occurs, the Company will experience a substantial increase in capital when 60% (or the then appropriate percentage representing Omagine’s ownership interest in LLC) of the approximately $70 million of cash capital investments into LLC are recorded in the Company’s consolidated financial statements as Omagine’s ownership interest in LLC. At or prior to such time the Company may experience an additional substantial increase in its capital when 60% (or the then appropriate percentage representing Omagine’s ownership interest in LLC) of the valuation of the PIK is also recorded as capital on the Company’s consolidated financial statements. LLC's ongoing financial results will be included in the consolidated financial statements of the Company as appropriate for as long as Omagine remains a shareholder of LLC.

 

 

 

Now that the DA has been signed, the Company has accelerated its preparation for its future business activities in various ways including but not limited to: (i) recruiting various executive level personnel for both Omagine and LLC that are now required to ramp up organizationally for the Omagine Project, (ii) examining and implementing various methods of raising additional capital for both Omagine and LLC, (iii) soliciting and issuing requests-for-proposals (“RFPs”) from various professional vendors including designers, engineers, real-estate consultants, financial advisers, and others, (iv) negotiating and concluding the legally binding and definitive CCC-Oman Contract,; (v) negotiating various agreements with other major vendors, contractors, consultants and employees proposed to be involved in the Omagine Project, (vi) leasing and furnishing expanded office space in Oman for LLC, (vii) arranging the appropriate and required legal, accounting, tax and other professional services both in Oman and the U.S., (viii) 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, (ix) examining various other matters we believe will enhance shareholder value, and (x) examining other potential Company revenue streams which are ancillary to, and derivative of, the Omagine Project.

 

The Company plans to enter businesses other than real estate development - and ancillary to, and derivative of, the Omagine Project - 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. The Company is not expected to generate revenue in the near term until the development of the Omagine Project is substantially underway.

 

Pre-Development Expenses / Success Fee

The Shareholder Agreement defines the “Pre-Development Expense Amount” as the total amount of Omagine Project related expenses incurred by Omagine and JOL prior to the signing of the DA. Such Pre-Development Expense Amount expenses were heretofore incurred by Omagine and JOL and continue to be incurred by Omagine 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 DA with the Government.

The Shareholder Agreement (i) estimates that, as of the date of the Shareholder Agreement (April 20, 2011), 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 will receive payment in full from LLC of:

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

The Shareholder Agreement also defines the date subsequent to the Financing Agreement Date when 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 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 on or within ten (10) days after the Draw Date and the remaining fifty percent (50%) will be paid to Omagine in five equal annual installments beginning on the first anniversary of the Draw Date.

All of the aforementioned investment amounts, ownership percentages and other terms and conditions of the Shareholder Agreement were negotiated by Omagine management on behalf of LLC in arms-length transactions between LLC and the New Shareholders. Other than their present ownership positions in LLC, none of the New Shareholders are affiliates of Omagine. The Shareholder Agreement also specifies, among other things, the corporate governance and management policies of LLC and it provides for the LLC shares presently owned by JOL to be transferred to Omagine subsequent to the signing of the DA. We presently expect this share transfer to occur at the time of the Transformation of LLC into a joint stock company.

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 10.5 hereto.

 

Financial Adviser

LLC intends to appoint a firm as its Financial Adviser that has an international reputation for excellence and a strong presence in the MENA region. There are presently many such reputable financial advisory firms and financial institutions that have indicated their interest in the Omagine Project. Since the Execution Date, management has been meeting with, interviewing and requesting proposals from a number of such highly reputable banks and financial institutions seeking to act as LLC’s Financial Adviser. It is presently expected that a definitive and binding agreement between LLC and one such Financial Adviser will be executed sometime before June 30, 2015.

 

LLC’s Financial Adviser will advise on capital structure and lead the syndication of the debt financing required to execute the Omagine Project. LLC will then work together with its Financial Advisor to appoint lead arrangers for such syndicated debt financing, which may include the Financial Advisor itself.

 

Recent press reports incorrectly stated that LLC had appointed BNP Paribas (“BNP”) as its Financial Adviser. This is untrue. Although LLC did have a two year old non-binding letter of intent with BNP, BNP was never appointed as the Financial Advisor for LLC. As of the date hereof, both LLC and BNP agree that they maintains a good relationship with each other, but for BNP internal reasons, BNP will not be LLC’s Financial Adviser.

 

LLC is in the process of appointing its Financial Adviser and the Company will be making the appropriate announcement of the appointment in due course. No assurance however can be given that any such agreement will be signed until it is actually signed by the parties.

 

As previously disclosed (i) LLC has held discussions with and received letters of interest and “comfort letters” in support of the Omagine Project from some of the largest banks in the MENA Region including three banks in Oman, and (ii) LLC has a longstanding relationship with Bank Muscat SAOG (“BankMuscat”) which is 30% owned by RCA and is the largest financial institution in Oman. It is likely that LLC will nominate an Omani bank to be either its Financial Adviser or a joint-venture partner with its Financial Adviser with respect to the syndication by such Financial Adviser with various banks and financial institutions (the “Lenders”) of the debt financing (the “Construction Financing”) that Omagine LLC will require for the development and construction of the Omagine Project. The amount of Construction Financing debt owed at any one time by LLC to its Lenders is expected to fluctuate over the development and construction cycle of the Omagine Project and will be greatly influenced by (i) any sales of additional capital stock by LLC, and (ii) the pace and tempo of LLC’s receipt of proceeds from its planned sales of real-estate to third parties. The maximum amount of such Construction Financing debt presently expected to be outstanding at any one time during the development and construction cycle of the Omagine Project is presently estimated by management to be between $300 million and $500 million.

 

As presently contemplated a Financial Adviser will be engaged by LLC to assist LLC in arranging the necessary Construction Financing for the Omagine Project and other financing for LLC as may be required. The capital of LLC, proceeds from the sales, if any, by LLC of additional equity stakes, bank borrowings and the proceeds from sales of its residential and commercial properties, are expected to be utilized by LLC to develop the Omagine Project.

 

As is present practice in Oman, LLC anticipates that sales contracts with third party purchasers of residential or commercial properties that are purchased “off plan” (i.e. purchased before the construction thereof), will stipulate the payment to LLC by such purchasers of (i) a deposit on signing of such sales contract, and (ii) progress payments during the construction period of the relevant property covered by such sales contract. Since the aggregate of such deposit and progress payments before and during the construction of the relevant property is expected to be approximately 85% of the sales price of the relevant property stipulated in such sales contract, LLC anticipates that (i) the construction costs for properties that are sold “off plan” will be “owner-financed” by the relevant purchaser, and (ii) it will likely be unnecessary therefore for LLC to utilize any or very much Construction Financing from its banks in order to pay for the construction costs of properties which are sold pursuant to “off plan” sales contracts. Management expects that this commonly accepted sales contract and payment process will significantly benefit LLC by reducing its aggregate requirements for Construction Financing from its banks. The consumer appetite for such “off plan” sales is less today than it was before the recent worldwide banking and financial crisis. (See: “Market Conditions” below).

 

 

 

Furthermore, Land Price Payments are not due or owing to the Government from LLC until such time as LLC legally transfers the freehold title to such land to such purchasers, which time will coincide with the closing of the sale of such properties. Such closings will only occur after LLC has received final payment from the purchaser of the relevant sales contract amount for such properties. LLC’s financing profile is therefore further enhanced since it is not obligated to make any Land Price Payments to the Government until after it has already received 100% of the contracted sales price amount from the relevant purchaser at the closing when the freehold title to such land and property is transferred to the purchaser.

 

Before the DA was signed we had extensive discussions with a number of MENA Region 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 will be advanced further and continued by LLC’s designated Financial Adviser. With LLC’s Financial Adviser leading this effort, management is optimistic with respect to 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 DA 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.” (See: Exhibits 10.24 and 10.25).

 

MENA Region banks and financial institutions continue to maintain high levels of liquidity but the project financing environment in Oman and the MENA Region remains cautious after the recent worldwide bank liquidity problems and Eurozone debt crisis. LLC management has met recently with several internationally recognized Financial Advisers, all of whom have deep and wide-ranging expertise in the MENA Region project financing markets and as part of their normal business activities are in regular contact with MENA Region banks and international financial institutions regarding the status of and conditions prevailing in the project finance marketplace. The Company is optimistic that LLC’s designated Financial Adviser will be able to arrange the necessary project financing for the Omagine Project. Management believes that all the Financial Advisers with whom it has recently met concur that there is currently a high degree of liquidity and a strong appetite among MENA Region banks and financial institutions for lending to, and investing in, sound development projects in the MENA Region. The banks and Financial Advisers with which we have discussed the Omagine Project both before and after the DA was signed (including BNP Paribas) have been uniformly impressed with the design vision for the Omagine Project and with the quality of the LLC shareholders.

 

Notwithstanding the foregoing, no assurance can be given at this time that LLC will be able to obtain any of, or a sufficient amount of, the Construction Financing required to develop, build and complete the Omagine Project. If such a circumstance were to occur, it would have a material adverse effect on our business and operations.

 

The value of the Project Land has been determined in accordance with the requirements and procedures specified for such a valuation by the Royal Institute of Chartered Surveyors of London, England (“RICS”). Following the Registration of the Usufruct Agreement with the Ministry of Housing for the Project Land such valuation will be utilized (i) by LLC’s Financial Adviser in its discussions with banks and other financial institutions in order to arrange the Construction Financing, and (ii) by Deloitte & Touche (M.E.) & Co. LLC, in order to determine in accordance with International Financial Reporting Standards (the “IFRS”) the proper accounting treatment of the PIK valuation in LLC’s financial statements.

 

  

Market Conditions

The market intelligence garnered by management indicates that local bankers and market participants believe that both transaction volume and pricing in the Omani real estate market are steadily improving. Management plans to obtain third party verification of its assumptions and beliefs by engaging well known professional real estate, tourism, marketing and financial consultants to update and assess LLC’s market feasibility study for the Omagine Project. It is presently planned that one or a combination of such consultants will also perform a full third-party financial feasibility assessment to update LLC’s underlying assumptions in its financial model for the Omagine Project. These studies and assessments will then be utilized by LLC to fine tune its development plans, and by LLC’s designated Financial Adviser in arranging the necessary Construction Financing and other financing for LLC as may be required.

 

Management believes that LLC is well positioned to benefit from the ongoing and improving market conditions in both the real-estate and project financing sectors since, from a timing perspective and subject to the Pre-Design Phase Financing becoming available as described above, LLC plans to now begin the Pre-design Phase constituting the Initial Design Period of a year or more of intensive design and planning activities followed by the launch of residential and commercial sales at the Omagine Project. Notwithstanding the foregoing, we continue to be of the opinion that the real estate market as well as the project finance market in Oman remains challenging.

 

The worldwide financial crisis, the “Arab Spring” uprisings, the Eurozone financial crisis - and the plethora of their poisonous knock-on effects - had deep and deleterious banking, economic, market and political consequences. It is indisputable that in the immediate and near-term aftermath of these crises, real estate and financial markets worldwide (including the Oman markets) were vastly more troubled and challenging than they are at present. Trends in the Omani market subsequent to the recent worldwide financial crisis have indicated a reduced presence of speculative buyers and a reduced consumer appetite for pre-sales of residence units (“off-plan” sales) as many more buyers are now demanding a finished product before entering into sales contracts with developers. It is clear that operating in today’s recovering market environment is preferable to having to operate in the prior years’ toxic environment characterized by tumultuous and severely adverse economic, political, financial and societal disorders. Present market conditions should favorably impact LLC’s future operations.

 

Although the Oman economy and markets were not nearly as severely affected by the aforementioned crises as nearby Dubai or other countries, it did experience negative effects, slowdowns and volatility in both residential and commercial selling prices and market absorption rates during the past several years. Raw material and labor prices initially dropped dramatically but have now recovered and stabilized.

 

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 2011 Oman experienced several low-intensity demonstrations against government corruption and 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 an aggressive anti-corruption campaign and widely acclaimed elections) to address the expressed concerns of the citizens of Oman. Short term work stoppages and strikes with respect to labor matters accompanied by non-violent demonstrations now occur occasionally in Oman but these events, as well as several newly organized and legally allowed labor unions and the aforementioned anti-corruption campaign, are now regarded as a normal part of the emerging democratic fabric of Omani society. In recent months, anxiety over the health of His Majesty, the much beloved Sultan Qaboos, and what effect, if any, that will have on Oman’s political stability has been widely reported in the media.

 

Construction material costs and property selling prices in Oman and the surrounding region remain somewhat volatile and undue reliance on present forecasts 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 cost estimates for the Omagine Project will require adjustment – possibly significant adjustment – as future events unfold. Investors and shareholders are cautioned not to place undue reliance on any such forward-looking statement or forecast, which speaks only as of the date hereof.

 

At present, both the economy and real estate sector of nearby Dubai are experiencing a robust recovery. Dubai leads the way for the Gulf tourism market and this is likely to be the case for the foreseeable future, given its existing visitor market (nearly 12 million visitors in 2014), attractions, its impressive future capital development and marketing investment programs, and especially given its recent selection as the host for EXPO 2020 which is expected to attract over 25 million visitors.

 

 

Sales and Marketing

LLC plans to undertake several wide ranging and continuous marketing and public relations campaigns in anticipation of its launch of residential and commercial properties for sale and to advertise and promote its forthcoming entertainment, hospitality and retail offerings.

 

The launch date for residential and commercial sales is presently planned to occur in early 2016. Management expects that the continuing recovery of the project finance and local real estate markets will contribute positively to LLC’s future prospects. Management expects LLC to benefit from Dubai’s hosting of EXPO 2020, and similarly from nearby Qatar’s hosting of the World Cup Games in 2022. The Omagine Project will be conveniently located one hour from Dubai by air and is easily accessible by a fine roadway system in both Oman and the U.A.E. It is a natural and logical addition to a Dubai visit.

 

Sale prices and rental rates for l in other integrated tourism projects in the Muscat area of Oman have recovered and are increasingly strengthening. The inventory of unsold housing in the secondary (re-sale) market (both outside of and within ITCs) has diminished due to recent robust, albeit quite price-sensitive, sales activity. New housing inventory, especially smaller apartments designed to hit perceived market price-points, has continued to come onto the local Muscat area market and the market absorption rates (number of market transactions) for such new residential housing is brisk and continues to improve.

 

The DA allows for sales and pre-sales of any of the residential or commercial buildings that will be developed and built on the Omagine Site.

 

Non-Omani persons (including but not limited to expatriates living and working in Oman) are forbidden by Omani law to purchase land, residences or commercial properties in Oman unless such land, residences or commercial properties are located within an ITC.

 

The DA stipulates the obligation of the Government to issue such Licenses and Permits as may be required for the development of the Omagine Project, including but not limited to issuing an Integrated Tourism Complex License (“ITC License”) designating the Omagine Project as an ITC. On June 26, 2014, the Government issued an ITC License to LLC designating the Omagine Project as an ITC.

 

Because it is now licensed as an ITC, the land, residences and commercial properties within the Omagine Project may be sold to any buyer worldwide - including any non-Omani buyer - and the freehold title to such land, residences and commercial properties may be transferred to such buyers.

 

The excellent location of the Omagine Site is recognized by local market participants and the significance of the provision of the Omagine Site via the Usufruct Agreement to LLC is substantial. The increase in the value over the last several years of the land constituting the Omagine Site is expected to have a positive effect on the valuation of the PIK and on revenue from the sale of residential and commercial properties. The value of the Omagine Site will be a primary driver of future LLC and Company revenue and the benefits accruing to LLC and the Company pursuant to LLC’s Usufruct Rights over the Omagine Site will be material and significant.

 

Pursuant to the DA and UA, LLC will pay the Government 25 Omani Rials (approximately $65) per square meter for the Project Land it sells to third party purchasers. LLC has recently retained expert real estate valuation firms to appraise and value the land constituting the Omagine Site. Two such internationally recognized land valuation firms have completed their valuation and the Company plans to disclose the valuation following the execution and Registration of the Usufruct Agreement at the Ministry of Housing. (See: “The Development Agreement and The Usufruct Agreement” and “The Payment-In-Kind (“PIK”) Valuation” above).

 

  

Omagine and JOL engaged in significant marketing, design, engineering, promotional and other activities with respect to the Omagine Project prior and subsequent to the DA being signed and have 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 and to potential investors. Although, as of the date hereof, Omagine continues to incur such costs, the vast majority of the Pre-Development Expense Amount was incurred before the DA was signed by the Government and LLC. 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 April 20, 2011 date of the Shareholder Agreement) incurred up to the October 2, 2014 Execution Date of the DA will be reimbursed to Omagine by LLC. Although expenses incurred by Omagine on behalf of LLC subsequent to the signing of the DA are not within the definition of Pre-Development Expenses, all such expenses are presently expected to be reimbursed to Omagine by LLC as well. (See: “Pre-Development Expenses / Success Fee” above).

 

Design, Engineering, Content Development and Construction

The Company does not presently own or directly operate any design, engineering, content development or construction companies or facilities. Because of our strategic emphasis on design however, the Company or LLC may, depending upon circumstances, establish its own design and/or design supervision entity and/or contract with or enter into joint ventures with firms providing such design and design supervision services. The Pre-Design Phase of the development of the Omagine Project is expected to constitute primarily the Initial Design Work and the Initial Construction Activities at the Omagine Site and its scope and budgeted cost is presently being reviewed and will be decided upon by LLC shortly after the availability of Pre-Design Phase Financing becomes clearer to management.

 

Subsequent to the OMAG Final Equity Investment of 210,000 Omani Rials ($546,000) being made, LLC will have the financial capacity to undertake certain limited initial planning and design activities, but for LLC to promptly undertake the more extensive Initial Design Work and Initial Construction Activities contemplated by the Pre-Design Phase Activities, it will have to sell additional equity or raise additional alternative financing (or a combination thereof) in order to finance such Pre-Design Phase Activities.

 

Otherwise LLC will have to wait until the closing of the first Syndicated Financing Agreement and the receipt of its first tranche of debt financing along with receipt from the New Shareholders of the $69,233,125 New Shareholder Deferred Cash Investment in order to have the financing necessary to perform the more extensive Initial Design Work and Initial Construction Activities contemplated by the presently desired larger scope of the Pre-Design Phase Activities. The DA was signed on October 2, 2014 and since that time LLC management has been exploring additional financing mechanisms and opportunities to provide LLC with the financing necessary for it to promptly undertake and execute the largest possible scope of the Pre-Design Phase Activities. Such contemplated financing mechanisms may, under certain circumstances, coincidently accelerate the occurrence of the Financing Agreement Date and thereby accelerate the receipt by LLC of the $69,233,125 New Shareholder Deferred Cash Investment. There cannot be any assurance that we will be able to obtain any financing. (See: “Financing / Pre-Design Phase Activities / The Financing Agreement Date” above).

 

Subject to the approval of its shareholders and to negotiating and agreeing to a contract, LLC presently intends to hire Michael Baker Corporation (“Baker”) as its Program Manager and Project Manager. Baker is in the business of providing program and project 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. Omagine has employed Baker through the feasibility and engineering study phases of the Omagine Project and presently anticipates that, subject to the approval of the LLC shareholders, LLC will execute an agreement with Baker. Omagine had a contingent obligation to pay Baker an additional fee of $72,000 for past services if and when the DA was signed by the Government and LLC and ratified by the MOF. The DA was signed on October 2, 2014, the Ratification occurred on March 11, 2015 (the “Effective Date”) and such contingent fee is now due and payable. 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 engineering and 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 Company believes it maintains a good working business relationship with Baker but recognizes that there are presently many such highly reputable program and project management companies available and operating in Oman. Baker was recently acquired by Integrated Mission Solutions LLC. What effect, if any, this acquisition will have on LLC’s or Baker’s plans to engage Baker as LLC’s Program Manager and Project Manager is unknown at this time. The Company is confident that Baker’s inability or unwillingness to perform or the loss of Baker’s services altogether, (none of which circumstances are presently anticipated by or known to the Company), would not have any adverse impact on its or LLC’s business or operations.

 

  

The interpretive design, entertainment content, and visitor experience design candidates to be hired by LLC have been narrowed to a short list of professional companies. One or more of such companies (”Content Developers”) will be engaged by LLC to design the transformation of Omagine’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.

 

Subject to the approval of its shareholders and to negotiating and agreeing to the CCC Oman Contract, LLC presently intends to hire CCC-Oman as the General Contractor for the construction of the Omagine Project. CCC-Oman is an LLC shareholder and one of the largest construction companies in Oman where it currently employs approximately 13,000 construction personnel. CCC-Oman is experienced in all aspects of the construction business and regularly constructs large scale projects of the magnitude of the Omagine Project. The Company presently expects that the First Draft Construction Contract will be completed in May 2015 and such CCC-Oman Contract will be approved by the LLC shareholders and signed by LLC and CCC-Oman before June 30, 2015. (See: “The CCC-Oman Contract”, above).

 

To date, Omagine 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 LLC or Omagine.

 

The DA was signed on October 2, 2014 and, subject to the appropriate financing being available to LLC, the Pre-Design Phase constituting the Initial Design, engineering and the Initial Construction Activities of the Omagine Project can now begin. No assurance can be given at this time that LLC will be successful in obtaining such financing.

 

Results of Operations:

Overview

The Company is not expected to generate revenue until after the development of the Omagine Project in Oman is well underway. The Company will need to generate revenue in order to attain profitability.

 

As the development program for the Omagine Project 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. LLC presently expects, based on the current assumptions underlying its updated development program, that the development costs (including the costs for design, construction, program management and construction management) for the Omagine Project will be between $2.1 and $2.5 billion dollars.

 

The costs of labor and materials as well as the selling prices and market absorption rates of new residential and commercial properties remain somewhat volatile in Oman and accurate forecasts for such future costs, selling prices or market absorption rates cannot be made at this time. (See: “Market Conditions” and “Sales and Marketing”, above).

 

 

LLC nevertheless presently expects, based on current assumptions and market activity that such residential selling prices during the Omagine Project’s planned multiple sales releases beginning in early 2016 will be at least equal to the prices that are presently budgeted by LLC.

 

In their opinion on our 2014 audited financial statements contained in this report, our auditors have expressed substantial doubt about our ability to continue as a going concern. Although we have entered into the 2014 SEDA and have recently raised additional capital via private placements of restricted Common Shares, we estimate that, absent our obtaining any additional working capital, we can continue as a going concern for approximately between eleven and fifteen months from the date of this report. On October 2, 2014, 250,000 Tempest Warrants were exercised for proceeds to Omagine of $327,500. In November 2014, Omagine sold an aggregate of 422,321 restricted Common Shares to investors for aggregate proceeds to Omagine of $845,000. In March 2015, Omagine sold an aggregate of 206,281 restricted Common Shares to investors for aggregate proceeds to Omagine of $220,000.

 

Our single most important strategic objective for the past many years was achieved when the DA was signed by Omagine LLC and the Government of Oman on October 2, 2014. Our foregoing estimate of between eleven and fifteen months is based on (i) our current cash balances, (ii) assuming no effect on the Company’s financing prospects from having signed a multi-billion dollar transaction, (iii) assuming no sales of Common Stock pursuant to the 2014 SEDA, private placements or exercise of Warrants, and (iv) our extensive prior experience in carefully managing our cash outlays. Although we have never failed over the past ten years to obtain the cash resources sufficient to fund our ongoing operations, we cannot guarantee that such financing for our continuing operations will be available in the future.

 

 

THREE MONTHS ENDED March 31, 2015 vs.

THREE MONTHS ENDED March 31, 2014

 

The Company did not generate any revenue or incur any cost of sales for the three months ended March 31, 2015 and 2014. The Company is relying on Omagine LLC's operations for the Company's future revenue generation. Management is presently examining other possible sources of revenue for the Company which, subject to the Development Agreement being executed by Omagine LLC and the Government on October 2, 2014, may be added to the Company’s operations.

 

Total selling, marketing, general and administrative operating expenses (“SG&A Expenses”) were $702,386 during the three months ended March 31, 2015 compared to $486,445 during the three months ended March 31, 2014. This $215,941 (44%) increase in SG&A Expenses was attributable to the following expense categories, travel ($122,563) consulting fees including stock based compensation ($101,647), other selling, general and administrative costs ($59,684), professional fees, including stock based compensation ($37,436), and occupancy costs ($1,116), offset by decreases in officers and directors compensation including stock based compensation ($106,505).

 

The Company sustained a net loss of $689,974 for the three months ended March 31, 2015 compared to a net loss of $495,142 for the three months ended March 31, 2014. This $194,832 (39%) increase in the Company's net loss for the three months ended March 31, 2015 compared to its net loss for the three months ended March 31, 2014 was principally attributable to the $215,941 increase in SG&A Expenses mentioned above, a $57 increase in interest expense, and a $7,418 increase in amortization of debt discount offset by the $28,584 increase in net loss attributable to noncontrolling interests in Omagine LLC.

 

Liquidity and Capital Resources

The Company incurred net losses of $689,974 and $495,142 in the three months ended March 31, 2015 and 2014, respectively. During the three month period ended March 31, 2015, the Company had a decrease in cash of $583,951 resulting from the negative cash flow of $688,951 from its operating activities being offset by the positive cash flow of $105,000 from its financing activities. Financing activities during the three months ended March 31, 2015 consisted of sales by Omagine, Inc. of shares of its Common Stock for proceeds of $220,000, offset by three monthly installments totaling $115,000 paid on the $500,000 Note.

 

The Company had no capital expenditures for the three months ended March 31, 2015.

 

  

At March 31, 2015, the Company had $563,638 in current assets, consisting of $529,728 of cash and $33,910 of prepaid expenses. The Company's current liabilities at March 31, 2015 totaled $1,500,732 consisting of $377,209 of convertible notes payable and accrued interest, $108,551 of note payable and accrued interest, $429,842 of accounts payable and accrued expenses and $585,130 in accrued officers’ payroll at March 31, 2015. At March 31, 2015 the Company had a working capital deficit of $937,094 compared to a working capital deficit of $520,738 at December 31, 2014. Fifty-three percent (53%) of the $1,500,732 of current liabilities at March 31, 2015 ($808,059) is due and owing to officers and/or directors.

 

The $416,356 increase in the Company's working capital deficit at March 31, 2015 compared to December 31, 2014 is attributable to a $28,130 increase in prepaid items, a $583,951 decrease in cash, and a $139,465 decrease in current liabilities. The Company’s liabilities at March 31, 2015 decreased compared to December 31, 2014 due to decreases of $106,227 in notes payable and accrued interest and decreases of $52,792 in accrued officers payroll offset by increases of $12,774 in accounts payable and accrued expenses and other current liabilities and by increases of $6,780 on accrued interest on convertible notes payable.

 

As discussed in Note 2 to such consolidated financial statements, the Company's present financial condition 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 relating to the recoverability and classification of recorded assets or the amounts or classification of liabilities that might be necessary in the event the Company cannot continue in existence. The continued existence of the Company is dependent upon its ability to obtain additional financing, execute its business plan and attain profitable operations.

 

Warrants

As of the date hereof, Omagine has 6,932,124 Common Stock purchase warrants (“Warrants”) issued and outstanding, as follows:

1.

6,422,124 Warrants, 3,211,062 of which are exercisable for the purchase of one Common Share at a per Common Share exercise price of $5.00 and 3,211,062 of which are exercisable for the purchase of one Common Share at a per Common Share exercise price of $10.00 (collectively, the “Strategic Warrants”), and

 

2.

510,000 Warrants which are exercisable for the purchase of one restricted Common Share at a per Common Share exercise price equal to the greater of (a) $1.00 per Common Share, or (b) eighty percent (80%) of the closing sale price for a Common Share on the trading day immediately preceding the relevant exercise date (the “Tempest Warrants”).

Management is hopeful that the 6,422,124 outstanding Strategic Warrants will eventually become “in the money” and will be exercised.

In accordance with their terms, the Tempest Warrants are by definition always “in the money”. On August 15, 2014, 240,000 Tempest Warrants were exercised at $1.40 per share and on October 2, 2014, a further 250,000 Tempest Warrants were exercised at $1.31 per share but no assurance can be given that any of the 510,000 remaining outstanding Tempest Warrants will be exercised.

Management is hopeful that the Warrants will provide a future source of additional financing for Omagine.

Strategic Warrants

Of the 6,422,124 Strategic Warrants distributed, 3,211,062 are exercisable at $5 per Common Share and 3,211,062 are exercisable at $10 per Common Share. On August 13, 2013, Omagine filed a Post-Effective Amendment on Form S-1 to the Warrant Registration (Commission File No. 333-183852) to update the Warrant Registration to include all 6,422,124 then issued and outstanding Strategic Warrants and the 6,422,124 Common Shares underlying such Strategic Warrants (the “Updated Warrant Registration”). The SEC declared the Updated Warrant Registration to be effective as of August 26, 2013 which effective status had expired. Post-Effective Amendments No. 2 and No. 3 to the Warrant Registration were filed with the SEC on January 28, 2015 and February 11, 2015, respectively, in order to further update the Warrant Registration and to re-instate its effective status. The SEC declared the Warrant Registration effective February 13, 2015. All Strategic Warrants expire on December 31, 2015 unless redeemed earlier by Omagine upon 30 days prior written notice to the Strategic Warrant holders.

 

Tempest Warrants

On June 24, 2014, Omagine issued the Tempest Warrants to an investor. (See: Exhibit 4.4). Both the Tempest Warrants and the Common Shares issuable upon exercise of the Tempest Warrants are “restricted securities” as that term is defined in the Securities Law. Omagine has no obligation nor present intention to register with the SEC either the Tempest Warrants or the Common Shares underlying the Tempest Warrants. The Tempest Warrants expire on June 23, 2016 and are not redeemable by Omagine.

Standby Equity Distribution Agreements:

Between 2009 and 2011, Omagine had a Stand-By Equity Distribution Agreement with an affiliate of YA (the “2009 SEDA”). Omagine and YA were parties to a second Stand-By Equity Distribution Agreement (the “2011 SEDA”) which was terminated on July 21, 2014. The 2009 SEDA and the 2011 SEDA are collectively referred to herein as the “Prior SEDAs”.

 

On April 22, 2014, Omagine and YA entered into a new Standby Equity Distribution Agreement which was amended on October 10, 2014 (the “2014 SEDA”). The 2014 SEDA is generally on the same terms as the 2011 SEDA.

 

Since the DA is now signed, any use by Omagine of the 2014 SEDA will be guided by several factors, including but not limited to: (i) the availability and cost of alternative financing, (ii) our ability to rapidly access required financing, (iii) the liquidity and market price of our Common Stock, (iv) the exercise, if any, of Warrants, (v) the likelihood (or actuality) of the success of our present efforts to arrange (a) new equity investments into Omagine and (b) new debt and/or equity investments into LLC, (vi) the likelihood (or actuality) of LLC having the financial capacity to pay Omagine the $10 million Success Fee and the Pre-Development Expense Amount in excess of $9 million. (See: “Warrants, Financial Advisor, and The Shareholder Agreement / LLC Capital Structure, Pre-Development Expenses / Success Fee”, above), and (vii) our then current cash requirements.

 

Because the market for our Common Stock has historically exhibited low liquidity levels, we may not be able to take full advantage of the 2014 SEDA if such liquidity levels do not improve as a result of the recent DA signing. If the market for our Common Shares is exhibiting low liquidity levels at the time we give YA an Advance Notice (a “Put”) and if YA sells Common Shares into the public market during the five Trading Day Pricing Period subsequent to our Put (as is YA’s customary practice), it is likely that the price of our Common Shares will decline. Any such price decline will immediately increase the number of Common Shares we would otherwise be required absent such price decline to deliver to YA subsequent to the Pricing Period in satisfaction of such Put. If this pattern continued to happen with subsequent Puts by us, it is likely that we would issue and sell to YA the maximum 3,000,000 shares available under the 2014 SEDA before reaching the aggregate sales price of $5 million available under the 2014 SEDA.

 

LLC is now obligated to design, develop and construct the $2.5 billion Omagine Project. Given the size and scope of the Omagine Project, it is expected that LLC will require a minimum of $300 million (possibly up to $500 million) of debt financing - the Construction Financing - over various times during the next 4 to 5 years. This Construction Financing requirement will not be addressed by utilizing the 2014 SEDA (See: “Financial Advisor”, above). Notwithstanding that fact, the Company expects to have substantial and rapidly forthcoming working capital requirements other than the Construction Financing.

 

Given the considerable resources we will be required to bring to bear to execute the Omagine Project, we presently expect that we will fully utilize the entire $5 million amount available to us under the 2014 SEDA. Such post-DA use of the 2014 SEDA will of course be guided by the price, liquidity and volatility of our Common Stock as we move forward. We cannot presently predict what other future sources of financing might become available to us to cause us to utilize less than the full $5 million available under the 2014 SEDA and our present assessment is that, we will surely need and will ultimately receive the full $5 million available under the 2014 SEDA. The Prior SEDAs indisputably provided the Company the lifeline needed to achieve the DA signing and the 2014 SEDA will likely provide some of the supplementary working capital the Company will need going forward.

 

  

Prior SEDAs

 

The 2009 SEDA expired in 2011. The 2011 SEDA was due to expire on September 1, 2014 but was terminated on July 21, 2014 by the mutual consent of the parties (See: Exhibit 10.11).

 

In connection with the 2011 SEDA, Omagine filed with the SEC a registration statement (the “2011 SEDA Registration Statement”) on Form S-1 (Commission File No. 333-175168) pursuant to which 3,244,216 Common Shares were registered (including 244,216 Common Shares issued to YA in May and June 2011 in satisfaction of the $300,000 commitment fees due under the 2011 SEDA). Between August 24, 2011 and May 6, 2014, YA purchased 561,690 Common Shares from Omagine under the 2011 SEDA for an aggregate Purchase Price of $835,000 and YA did not thereafter purchase any Common Shares from Omagine under the 2011 SEDA. On July 21, 2014 Omagine filed a post-effective amendment to the 2011 SEDA Registration Statement de-registering the previously registered 2,438,310 Common Shares which were not issued or sold to YA pursuant to the 2011 SEDA. Such post-effective amendment to the 2011 SEDA Registration Statement was declared effective by the SEC on July 25, 2014.

 

The 2014 SEDA

On April 22, 2014, Omagine and YA entered into a new Standby Equity Distribution Agreement which was amended on October 10, 2014 (the “2014 SEDA”). The 2014 SEDA is generally on the same terms as the 2011 SEDA. Unless earlier terminated in accordance with its terms, the 2014 SEDA shall automatically expire on the earlier of (i) the first day of the month next following the 24-month anniversary of the “Registration Effective Date” (as hereinafter defined), or (ii) the date on which YA shall have made payment of Advances pursuant to the 2014 SEDA in the aggregate amount of $5,000,000. In satisfaction of a $150,000 commitment fee due pursuant to the 2014 SEDA, Omagine issued 85,822 restricted Common Shares to YA Global II SPV, LLC which is an affiliate of YA.

 

Pursuant to the terms of the 2014 SEDA, Omagine may in its sole discretion, and upon giving written notice to YA (an “Advance Notice”), periodically sell Common Shares to YA (“Shares”) at a per Share price (“Purchase Price”) equal to 95% of the lowest daily volume weighted average price (the “VWAP”) for a Common Share as quoted by Bloomberg, L.P. during the five (5) consecutive Trading Days (as such term is defined in the 2014 SEDA) immediately subsequent to the date of the relevant Advance Notice (the “Pricing Period”).

 

Omagine is not obligated to sell any Shares to YA but may, over the term of the 2014 SEDA and in its sole discretion, sell to YA that number of Shares valued at the Purchase Price from time to time in effect that equals up to five million dollars ($5,000,000) in the aggregate. YA is obligated under the 2014 SEDA to purchase such Shares from Omagine subject to certain conditions including (i) Omagine filing a registration statement with the SEC to register the resale by YA of the Shares sold to YA under the 2014 SEDA (“Registration Statement”), (ii) the SEC declaring such Registration Statement effective (the date of such declaration by the SEC being the “Registration Effective Date”), (iii) Omagine certifying to YA at the time of each Advance Notice that Omagine has performed all covenants and agreements to be performed and has complied with all obligations and conditions contained in the 2014 SEDA, (iv) periodic sales of Shares to YA must be separated by a time period of at least five Trading Days, and (v) the dollar value of any individual periodic sale of Shares designated by Omagine in any Advance Notice may not exceed the greater of (a) two hundred thousand dollars ($200,000), or (b) the average of the "Daily Value Traded" for each of the five (5) Trading Days immediately preceding the date of the relevant Advance Notice where Daily Value Traded is the product obtained by multiplying the number representing the daily trading volume of Common Shares for such Trading Day by the VWAP for Common Share on such Trading Day.

 

Pursuant to the 2014 SEDA in no event shall the number of Common Shares issuable to YA pursuant to an Advance cause the aggregate number of Common Shares beneficially owned (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended), by YA and its affiliates to exceed 9.99% of the then outstanding common stock of the Company. In addition this 9.99% ownership cap may not be waived by YA or Omagine and since such ownership cap includes all Common Shares owned by any YA affiliate, such cap cannot be avoided by transferring Common Shares to an affiliate of YA.

 

In connection with the 2014 SEDA, on October 15, 2014 Omagine filed the Registration Statement on Form S-1 to register the 3,085,822 Common Shares covered by the 2014 SEDA. On January 8, 2015, Omagine filed an amendment to that Registration Statement and such amendment to the 2014 SEDA Registration Statement was declared effective by the SEC on January 22, 2015.

 

 

The foregoing summaries of the terms of the Prior SEDAs and of the 2014 SEDA do not purport to be complete and are qualified in their entirety by reference to the full texts of the Prior SEDAs and the 2014 SEDA, copies of which are attached hereto as Exhibits 10.6, 10.7, and 10.10.

 

Sales of Common Shares to YA pursuant to the Prior SEDAs totaled 561,690 Common Shares for an aggregate Purchase Price of $835,000. Management believes that it has been judicious and conservative in its use to date of the Prior SEDAs, but nonetheless our periodic sales of Common Shares to YA or its affiliate pursuant to the Prior SEDAs have been dilutive to all shareholders and the subsequent resales by YA of such Common Shares into the public market have from time to time inflicted downward pressure on our stock price. Omagine intends to utilize the 2014 SEDA to fund its ongoing operations as and if necessary but as of the date of this Report, no Common Shares were sold to YA pursuant to the 2014 SEDA.

 

The YA Loan Agreements

Omagine and YA, the investment fund which is a party with Omagine to the 2014 SEDA, entered into an unsecured loan agreement dated July 26, 2013 (the “2013 YA Loan Agreement”). Pursuant to the 2013 YA Loan Agreement, Omagine borrowed two hundred thousand dollars ($200,000) from YA (the “2013 YA Loan”) for a term of one year at an annual interest rate of 10%. The 2013 YA Loan Agreement called for a 10% monitoring and management fee equal to $20,000 to be escrowed and paid to Yorkville Advisors thereby making the net proceeds from the 2013 YA Loan to Omagine equal to $180,000. Such $180,000 of proceeds was received by Omagine on September 3, 2013. The 2013 YA Loan Agreement also extended the expiration date of the 2011 SEDA. The foregoing summary of the terms of the 2013 YA Loan does not purport to be complete and is qualified in its entirety by reference to the full text of the 2013 YA Loan Agreement attached hereto as Exhibit 10.12.

 

On April 22, 2014, Omagine and YA entered into another unsecured loan agreement (the “2014 YA Loan Agreement”) whereby Omagine borrowed five hundred thousand dollars ($500,000) from YA (the “2014 YA Loan”) for a term of one year at an annual interest rate of 10%. Pursuant to the 2014 YA Loan Agreement, on April 22, 2014, through deduction from the $500,000 principal balance of the 2014 YA Loan, Omagine (i) paid the $110,680 balance then due under the 2013 YA Loan Agreement, (ii) paid a $39,000 commitment fee with respect to the 2014 YA Loan, and (iii) prepaid the $1,096 of interest due on the 2014 YA Loan for the period April 23, 2014 through April 30, 2014. The $349,224 net proceeds of the 2014 YA Loan was received by Omagine on April 23, 2014. The foregoing summary of the terms of the 2014 YA Loan does not purport to be complete and is qualified in its entirety by reference to the full text of the YA Note Purchase Agreement, the YA Note and the YA Closing Statement attached hereto as Exhibits 10.13; 10.14; and 10.15 respectively.

 

As of the date of this Report, Omagine has fully repaid the 2014 YA Loan.

 

There can be no assurance given that Omagine will be able to successfully utilize the Warrants or the 2014 SEDA to secure the significant amount of financing necessary for it to execute its business plan as presently conceived.

 

Omagine LLC

LLC presently has limited and strained resources.

 

Omagine and JOL invested the 20,000 Omani Rial ($52,000) OMAG Initial Equity Investment into LLC in 2009. A further 130,000 Omani Rial ($338,000) aggregate investment was made into LLC by Omagine and the New Shareholders pursuant to the Shareholder Agreement and LLC is presently capitalized at 150,000 Omani Rials ($390,000). Expenses incurred to date have depleted LLC’s resources and as of the date hereof Omagine has advanced to LLC 110,000 Omani Rials ($286,000) of the OMAG Final Equity Investment in order to maintain LLC’s liquidity.

 

Omagine will make the 210,000 Omani Rial ($546,000) OMAG Final Investment into LLC on a date between the date hereof and the Financing Agreement Date. The New Shareholders are obligated to make the 26,628,125 Omani Rial ($69,233,125) New Shareholder Deferred Cash Investment into LLC promptly after the Financing Agreement Date occurs.

 

  

The Company is considering several financing methods which would trigger the Financing Agreement Date and thereby also trigger the obligation of the New Shareholders to invest the 26,628,125 Omani Rial ($69,233,125) New Shareholder Deferred Cash Investment into LLC. Financing structures under consideration to facilitate the execution of the maximum scope of Pre-Design Phase Activities include, but are not limited to, the sale to non-U.S. investors of (i) unsecured mandatory-convertible LLC promissory notes and/or (ii) shares of LLC presently owned by Omagine followed by a loan from Omagine to LLC. The Company does not have any definitive agreements with respect to the aforementioned financing methods and there cannot be any assurance that the Company will be able to obtain any financing. (See: “Financing / Pre-Design Phase Activities / The Financing Agreement Date” above).

 

The PIK investment by RCA into LLC will be perfected concurrent with the Registration of the Usufruct Agreement at the Ministry of Housing. The valuation of the PIK has been determined by two specialist real-estate valuation companies engaged by LLC in accordance with the requirements of the RICS. The capital of LLC will likely be increased further when the non-cash valuation of the PIK is recorded as a capital investment into LLC.

 

The continuation of LLC’s business to date has to a large extent been financed by Omagine. The DA has been signed and LLC will now have to arrange a significant amount of Construction Financing in order to execute its plan to design and develop the Omagine Project (See: “Financial Advisor”). The Company is relying for revenue growth upon the future business of LLC.

 

Omagine Inc.

The continuation of Omagine’s operations is dependent upon Omagine’s ability to secure financing for its and LLC’s operations until such time as the Financing Agreement Date occurs and LLC begins paying Omagine the $10 million Success Fee and the approximately $9 million (as of April 2011) of Pre-Development Expenses. (See: “Pre-Development Expenses / Success Fee” above).

 

In order to generate the cash needed to sustain the Company’s ongoing operations, Omagine has over the past many years relied on the proceeds from the YA Loans and from sales of Common Shares made pursuant to the Prior SEDAs and the 2012 rights offering as well as from sales of restricted Common Shares made pursuant to private placements. Management is hopeful that the Warrants will provide a future source of additional financing.

 

Subject to the necessary financial resources being available to it, Omagine intends to make a secured loan to LLC in order to finance the Pre-Design Phase Activities and trigger the Financing Agreement Date, thereby also triggering the investment into LLC by the New Shareholders of the 26,628,125 Omani Rials ($69,233,125) New Shareholder Deferred Cash Investment.

 

Investors and shareholders should be aware that we have had no revenue for the past several years and we do not expect to generate any revenue until after the development of the Omagine Project is well underway. The failure to ultimately secure project financing via the closing of a Syndicated Financing Agreement will have a materially significant negative effect on the Company’s ability to continue operations.

 

Capital Expenditures and Construction Financing

The Company incurred $3,434 for capital expenditures in fiscal year 2014. Since the DA is now signed, we expect that (i) the Company will incur significant expenses related to capital expenditures, and (ii) LLC will incur substantial debt associated with the Construction Financing for the Omagine Project.

 

We presently expect that such capital expenditures will be largely concentrated at LLC and will largely comprise the purchase by LLC and Omagine of the quantities of office equipment, furniture, vehicles, computer hardware and software and telecommunications equipment which will be necessary to service the expanded staff and offices required at both LLC and Omagine to manage the ramping up of our business operations in Oman and the U.S. now that the DA has been signed.

 

 

 

We presently expect that such capital expenditures will be financed:

 

i.

at Omagine via the proceeds from sales of Common Shares via the 2014 SEDA, the exercise of Warrants, private placement sales of restricted Common Shares, possible private placement sales of LLC Shares and the payments received from LLC with respect to the Success Fee and the Pre-Development Expense Amount, and

 

ii.

at LLC through a combination of invested capital, Pre-Design Phase Financing, syndicated bank financing, loans from Omagine and the sale or sales of additional LLC equity or debt instruments (See: “The Shareholder Agreement / LLC Capital Structure” and “Financing/Pre-Design Phase Activities / The Financing Agreement Date”).

 

No assurance can be given that such financing will be available to the Company at either Omagine or LLC.

 

We presently expect that LLC's Construction Financing requirements will be financed via Syndicated Financing Agreements with several regional and international banks as arranged by LLC and its Financial Adviser. LLC’s requirement for Construction 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. Recent trends in the Omani market subsequent to the recent worldwide financial crisis however have indicated 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. . (See: “Financial Advisor” and “Market Conditions” and “Sales & Marketing”).

 

Off-Balance Sheet Arrangements

We have not entered into and have no present intention of entering into any off-balance sheet financing arrangements. We have not formed and have no present intention of forming any special purpose entities.

Item 3- Quantitative and Qualitative Disclosures about Market Risk

Information required under this caption is not required for the Registrant since it is a smaller reporting company.

Item 4- Controls and Procedures

Management’s Evaluation of Disclosure Controls and Procedures

The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in this report is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.  Such controls also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the Registrant’s management, including its principal executive and principal financial officers or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of management, including the Registrant's chief executive and financial officer, the Company carried out an evaluation of the effectiveness of the design and operation of such disclosure controls and procedures as of the end of the period covered by this report (the “DCP Evaluation”).

Based on this DCP Evaluation, the Registrant’s principal executive and principal financial officer has concluded that our disclosure controls and procedures were effective as of March 31, 2015.

Changes in Internal Control Over Financial Reporting

There were no changes during the Company’s last fiscal quarter that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

 

PART II – OTHER INFORMATION

Item 1- Legal Proceedings

The Company is not a party to any legal proceedings which would have a material adverse effect on it or its operations.

Item 1A- Risk Factors

There have been no material changes to the Risk Factors as previously disclosed under Item 1A to Part 1 of our annual report on Form 10-K for the fiscal year ended December 31, 2014 filed with the SEC.

Item 2- Unregistered Sales of Equity Securities and Use of Proceeds

In connection with the Prior SEDAs and with the issuance by us of the Tempest Warrant and the Common Shares listed below, we relied upon the exemption from securities registration afforded by Section 4(2) of the Securities Act. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, business associates of our Company or executive officers or directors of our Company and transfer was restricted by our Company in accordance with the requirements of the Securities Act. In addition to representations by the below-referenced persons, we made independent determinations that all of the below-referenced persons were accredited or sophisticated investors, that they were capable of analyzing the merits and risks of their investment and that they understood the speculative nature of their investment. Furthermore, all of the below-referenced persons were provided with access to our SEC filings.

 

On March 24, 2015, Omagine sold 200,000 restricted Common Shares to a non-U.S. person who is an accredited investor and an executive of Consolidated Contractors Co. Oman LLC for proceeds of $210,000.

 

On March 16, 2015, Omagine sold 6,281 restricted Common Shares to an accredited investor for proceeds of $10,000.

 

On February 23, 2015, Omagine paid a consultant for services rendered by issuing such consultant 5,000 restricted Common Shares valued at $9,545.

 

On January 5, 2015, Omagine contributed an aggregate of 36,483 restricted Common Shares valued at $76,250 to all eligible employees of the Omagine, Inc. 401(k) Plan.

 

Use of Proceeds

The proceeds of the abovementioned sales of securities were used by the Company for general corporate working capital purposes.

Issuer Purchases of Equity Securities

The Company did not purchase any of Omagine’s issued and outstanding Common Shares during the three month period ended March 31, 2015.

Item 3- Defaults upon Senior Securities

None

Item 4- Mine Safety Disclosures

Not Applicable

Item 5- Other Information

None

Item 6- Exhibits

The following exhibits are included as part of this Form 10-Q. References to “Omagine” in this Exhibit List means Omagine, Inc., a Delaware U.S. corporation.

Exhibits numbered in accordance with Item 601(a) of Regulation S-K.

Exhibit
Numbers		Description
3(i)		Restated Certificate of Incorporation of Omagine dated June 2, 2010 (7)
3(ii)		By-laws of Omagine (1)
4.1		The Subscription and Warrant Agent Agreement dated January 31, 2012 between Omagine and Continental Stock Transfer & Trust Company (11)
4.2		Specimen of $5 Warrant Certificate (11)
4.3		Specimen of $10 Warrant Certificate (11)
4.4		The Tempest Warrants (17)
10.1		The December 9, 2007 CCIC and CCC Agreement (3)
10.2		The March 19, 2007 Hamdan Agreement (2)
10.3		The December 2013 amendment extending the March 19, 2007 Hamdan Agreement (19)
10.4		The December 2014 amendment extending the March 19, 2007 Hamdan Agreement (23)
10.5		The April 20, 2011 Shareholder Agreement (9)
10.6		The December 8, 2008 SEDA Agreement between Omagine and YA (4)
10.7		The May 4, 2011 SEDA Agreement between Omagine and YA (8)
10.8		The June 21, 2011 Amendment Agreement to the May 4, 2011 SEDA Agreement (10)
10.9		The May 22, 2012 Waiver Letter dated re: the May 4, 2011 SEDA Agreement  (13)
10.10		The April 22, 2014 SEDA Agreement between Omagine and YA (18)
10.11		The July 16, 2014 Termination Agreement terminating the May 4, 2011 SEDA Agreement (17)
10.12		The 2013 YA Note Purchase Agreement and Amended Schedule III thereto (16)
10.13		The 2014 YA Note Purchase Agreement dated April 22, 2014 (18)
10.14		The April 22, 2014 Omagine $500,000 Promissory Note in favor of YA (18)
10.15		The April 22, 2014 Closing Statement signed by Omagine and YA (18)
10.16		Lease expiring December 31, 2015 between Omagine and the Empire State Building LLC (15)
10.17		Convertible Promissory Note No. 1 payable to Louis Lombardo (14)
10.18		Convertible Promissory Note No. 2 payable to Louis Lombardo (14)
10.19		The Amended Omagine Inc. 2003 Stock Option Plan (6)
10.20		The Omagine Inc. 2014 Stock Option Plan (19)
10.21		The Omagine Inc. 401(k) Adoption Agreement (5)
10.22		Convertible Promissory Note payable to Frank J. Drohan (14)
10.23		Convertible Promissory Note payable to Charles P. Kuczynski (14)
10.24		The Development Agreement dated October 2, 2014 (20)
10.25		Reference Copy of Exhibit 10.24 (21)
10.26		The October 10, 2014 SEDA Amendment (22)
10.27		The December 2014 amendment extending the March 19, 2007 Hamdan Agreement (23)
14		The Code of Ethics (3)
21		Subsidiaries of the Registrant (14)
31		Sarbanes-Oxley 302 certification *
32		Sarbanes-Oxley 1350 certification *
EX-101.INS		XBRL INSTANCE DOCUMENT*
EX-101.SCH		XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT*
EX-101.CAL		XBRL TAXONOMY EXTENSION CALCULATION DOCUMENT*
EX-101.DEF		XBRL TAXONOMY EXTENSION DEFINITION DOCUMENT*
EX-101.LAB		XBRL TAXONOMY EXTENSION LABELS DOCUMENT*
EX-101.PRE		XBRL TAXONOMY EXTENSION PRESENTATION DOCUMENT*

* Filed herewith

 

(1)	Previously filed with the SEC on November 18, 2005 as an exhibit to Omagine’s quarterly Report on Form 10-QSB for the period ended September 30, 2005 and incorporated herein by reference thereto.
(2)	Previously filed with the SEC on April 17, 2007 as an exhibit to the Company’s Report on Form 10-KSB for the fiscal year ended December 31, 2006 and incorporated herein by reference thereto.
(3)	Previously filed with the SEC on April 14, 2008 as an exhibit to Omagine’s Report on Form 10-KSB for the fiscal year ended December 31, 2007 and incorporated herein by reference thereto.
(4)	Previously filed with the SEC on December 31, 2008 as an exhibit to Omagine’s current Report on Form 8-K and incorporated herein by reference thereto.
(5)	Previously filed with the SEC on February 25, 2009 as an exhibit to Omagine’s Report on Form 10-K for the fiscal year ended December 31, 2008 and incorporated herein by reference thereto.
(6)	Previously filed with the SEC on April 14, 2010 as an exhibit to Omagine’s Report on Form 10-K for the fiscal year ended December 31, 2009 and incorporated herein by reference thereto.
(7)	Previously filed with the SEC on July 20, 2010 as an exhibit to Omagine’s Report on Form 10-Q for the period ended June 30, 2010 and incorporated herein by reference thereto.
(8)	Previously filed with the SEC on May 5, 2011 as an exhibit to Omagine’s current Report on Form 8-K and incorporated herein by reference thereto.
(9)	Previously filed with the SEC on November 8, 2011 as an exhibit to Omagine’s quarterly Report on Form 10-Q for the period ended September 30, 2011 and incorporated herein by reference thereto and a reference copy was filed as an exhibit to Omagine’s current Report on Form 8-K filed with the SEC on May 31, 2011.
(10)	Previously filed with the SEC on June 21, 2011 as an exhibit to Omagine’s current Report on Form 8-K and incorporated herein by reference thereto.
(11)	Previously filed with the SEC on February 7, 2012 as an exhibit to Omagine’s registration statement on Form S-1/A (File No. 333-179040) and incorporated herein by reference thereto.
(12)	Previously filed with the SEC on January 17, 2012 as an exhibit to Omagine’s registration statement on Form S-1 (Commission File No. 333-179040) and incorporated herein by reference thereto.
(13)	Previously filed with the SEC on September 12, 2012 as an exhibit to Omagine’s Post-Effective Amendment No. 2 to its registration statement on Form S-1 (File No. 333-175168) and incorporated herein by reference thereto.
(14)	Previously filed with the SEC on January 22, 2013 as an exhibit to Omagine’s Amendment Number 2 on Form 10-K/A amending (a) Omagine’s Report on Form 10-K filed with the SEC on April 16, 2012 for the fiscal year ended December 31, 2011 (the “Original Filing”), and (b) Amendment No. 1 to the Original Filing filed on Form 10-K/A with the SEC on May 17, 2012, and incorporated herein by reference thereto.
(15)	Previously filed with the SEC on April 1, 2013 as an exhibit to Omagine’s Report on Form 10-K for the fiscal year ended December 31, 2012 and incorporated herein by reference thereto.
(16)	Previously filed the 2013 YA Note Purchase Agreement with the SEC on August 5, 2013 as an exhibit to the Company's quarterly Report on Form 10-Q for the period ended June 30, 2013 and it is incorporated herein by reference thereto; and previously filed the Amended Schedule III to the 2013 YA Note Purchase Agreement with the SEC on November 19, 2013 as an exhibit to the Company's quarterly Report on Form 10-Q for the period ended September 30, 2013 and it is incorporated herein by reference thereto.
(17)	Previously filed with the SEC on July 31, 2014 as an exhibit to Omagine’s quarterly Report on Form 10-Q for the period ended June 30, 2014 and incorporated herein by reference thereto.
(18)	Previously filed with the SEC on April 28, 2014 as an exhibit to the Company's current Report on Form 8-K and incorporated herein by reference thereto.
(19)	Previously filed with the SEC on April 15, 2014 as an exhibit to the Company’s Report on Form 10-K for the fiscal year ended December 31, 2013 and incorporated herein by reference thereto.
(20)	Previously filed with the SEC on October 2, 2014 as an exhibit to Omagine’s current Report on Form 8-K and incorporated herein by reference thereto.
(21)	Previously filed with the SEC on October 2, 2014 as a reference copy exhibit to Omagine’s current Report on Form 8-K.
(22)	Previously filed with the SEC on October 10, 2014 as an exhibit to Omagine’s current Report on Form 8-K.
(23)	Previously filed with the SEC on January 8, 2015 as an exhibit to Omagine’s registration statement on Form S-1/A (File No. 333-199383) and incorporated herein by reference thereto.

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	OMAGINE, INC. (Registrant)
Dated: May 13, 2015	By:	/s/ Frank J. Drohan
		FRANK J. DROHAN, Chairman
		of the Board of Directors, President and Chief Executive and Financial Officer (Principal Executive Officer and Principal Financial Officer)
Dated: May 13, 2015	By:	/s/ William Hanley
		WILLIAM HANLEY
		Controller and Principal
		Accounting Officer

 

 

 

 

48

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