Unassociated Document
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UNITED
STATES
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OMB
APPROVAL
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SECURITIES
AND EXCHANGE COMMISSION
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OMB
Number:
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3235-0059
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Expires:
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January
31, 2008
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SCHEDULE 14A
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Estimated
average burden hours
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per
response
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14
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Proxy
Statement Pursuant to Section 14(a) of the
Securities
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Exchange
Act of 1934
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Filed
by
the Registrant x Filed
by
a Party other than the Registrant o
Check
the
appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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COASTAL
CARIBBEAN OILS & MINERALS, LTD.
(Name
of
Registrant as Specified In Its Charter)
NOT
APPLICABLE
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction
applies:
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3)
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Per
unit price or other underlying value of transaction computed
pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was
determined):
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4)
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Proposed
maximum aggregate value of
transaction:
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Persons
who are to respond to the collection of information contained
in
this form are not required to respond unless the form displays a
currently
valid OMB control number.
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Fee
paid previously with preliminary
materials.
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Check
box if any part of the fee is offset as provided by Exchange
Act Rule
0-11(a)(2) and identify the filing for which the offsetting
fee was paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its
filing.
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1) |
Amount
Previously Paid:
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Form,
Schedule or Registration Statement
No.:
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COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Clarendon
House, Church Street
Hamilton,
Bermuda
NOTICE
OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
To
be Held on December 9, 2005
NOTICE
IS HEREBY GIVEN
that the
Annual General Meeting of Shareholders of COASTAL
CARIBBEAN OILS & MINERALS, LTD.
(the
"Company") will be held on Friday,
December 9, 2005, at 9:00 a.m., local time, at the offices of Conyers Dill
&
Pearman, Clarendon
House, Church Street, Hamilton, Bermuda, for the following
purposes:
To
receive the report of the independent auditors and the financial statements
for
the year ended
December 31, 2001, 2002, 2003, and 2004 and to vote on the
following:
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1.
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To
elect five members to the Board of
Directors;
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2.
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To
ratify the appointment of independent auditors of the Company for
the year
ending
December 31, 2005 and to authorize the Board of Directors to fix
the
remuneration
of such auditors;
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3. |
To
consider and vote upon the Company’s
2005 Incentive Stock Option Plan;
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4.
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To
approve the adjournment of the annual meeting in order to solicit
additional proxies;
and
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3.
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To
transact such other business as may properly come before the meeting
or
any adjournment
or postponement thereof.
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Because
the Company has not held an annual meeting since April 2001, this meeting will
also
serve as the Company’s annual meeting for the years 2002, 2003 and 2004.
This
notice and proxy statement and the enclosed form of proxy are being sent to
shareholders
of record as of October 26, 2005 to enable such holders to state their
instructions with
respect to the voting of their shares. Proxies should be returned to Proxy
Services Corporation,
PO Box 9001, Brentwood, NY 11717-9804 in the reply envelope
enclosed.
Dated:
November 3, 2005
By
Order
of the Board of Directors,
Robert
J.
Angerer, Jr.
Corporate
Secretary
SHAREHOLDERS
WHO ARE UNABLE TO ATTEND
THE ANNUAL GENERAL MEETING ARE
URGED TO VOTE BY PROMPTLY SIGNING, DATING, AND RETURNING
THE
ACCOMPANYING
PROXY IN THE REPLY ENVELOPE
PROVIDED.
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COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Clarendon
House, Church Street
Hamilton,
Bermuda
Dear
Shareholder:
The
last
several months have been a period of momentous change for your company.
After
struggling for years with the State of Florida to obtain permits to develop
our
offshore leases
we
were finally defeated by the Florida courts in our efforts to obtain any
drilling permits. The
courts found that the State could deny us drilling permits and do so without
having to compensate
us for destroying the value of our leases. This left us with no lease rights
to
operate on,
large
legal and other debts and no money with which to pay our ongoing obligations.
In
June
of this year, we were finally able to negotiate a settlement with the State
of
Florida
on behalf of our subsidiary Coastal Petroleum Company, its minority owners
and
the intervening
royalty owners in the amount of $12.5 million. From Coastal’s share of the
settlement
proceeds, and after all accumulated debts have been paid, we have approximately
$5 million
in cash and have regained 100% ownership of Coastal Petroleum along with
its tax
loss carry
forward of $14 million.
While
settlement negotiations were underway, your company redefined its focus and
has
moved
on,
with the goal to become an active oil exploration and production company.
Coastal Petroleum
has acquired mineral rights in North Dakota and Montana in the fertile oil
producing region
known as the Williston Basin. In Montana we have obtained the rights to explore
and acquire
acreage on a large tract in Valley and Blaine Counties. A number of prospects
have already
been identified and a permit to drill our first wildcat well has been granted
by
the State of Montana.
In
North
Dakota, we control the working interest on over 25,000 acres in Slope, Billings,
and
Stark
Counties, on which to date we have mapped 20 drillable prospects. Recent
discoveries in
this
same area have produced oil flows of over 2,000 barrels per day. The depth
of
wells in North
Dakota is deeper than in Montana (approximately 9,500 feet versus approximately
5,000 feet),
and thus the cost of drilling is higher. A typical North Dakota Lodgepole
wildcat well costs
about $1.5 million to drill. It is our intention to bring in partners to
share
the risk and investment
in wells we drill in North Dakota until we are in a stronger financial
position.
Five
million dollars is not a lot of money in the oil exploration business. For
example, it would
have taken about $8 million to drill a single well offshore Florida. In Montana,
a well to test
the
Lodgepole reefs (our primary target) will cost approximately $500,000. Our
agreements to
acquire the drilling prospects involved a minimal cash payment but come with
an
obligation to drill
a
well. After completion of the well and payout (complete return of our
investment) we have
the
option to continue and drill as many as 50 prospects. This will allow Coastal
to
become active
in
this oil play which has very good potential but with a small initial
investment.
As
previously described, our business strategy is to acquire and drill reasonably
priced prospects
that have good potential, whether in the Williston Basin or in other parts
of
the United States,
with the goal of turning Coastal Petroleum into a first class independent
oil
and gas firm. It
has
been a long journey, yet I believe that the path we are now on will lead
us to a
richly deserved
success.
It's
a
pleasure for us to extend to you a cordial invitation to attend the 2005
Annual
General
Meeting of Shareholders of Coastal Caribbean Oils & Minerals, Ltd. at the
offices of Conyers
Dill & Pearman, Clarendon House, Church Street, Hamilton, Bermuda on Friday,
December
9, 2005 at 9:00 a.m. local time. Because the Company has not held an annual
meeting since
April 2001, this meeting will also serve as the Company’s annual meeting for the
years 2002,
2003 and 2004.
While
we
are aware that most of our shareholders are unable to personally attend the
annual
meeting, proxies are solicited so that each shareholder has an opportunity
to
vote on all matters
that are scheduled to come before the meeting. Whether or not you plan to
attend, please take
a
few minutes now to vote, sign, date and return your proxy in the enclosed
postage-paid envelope.
Regardless of the number of shares you own, your vote is important.
In
addition to helping us conduct business at the annual meeting, there is another
reason for
you
to return your proxy card. Under the abandoned property law of some states,
a
shareholder
may be considered "missing" if that shareholder has failed to communicate
with
us in writing.
The return of your proxy card qualifies as written communication with
us.
The
Notice of Annual General Meeting and Proxy Statement accompanying this letter
describe
the business to be acted on at the meeting. In addition, the shareholders
will
receive the audited
financial statements from the Company’s auditors for the years ended December
31, 2001,
2002, and 2003, as well as for the year ended December 31, 2004 at this
meeting.
As
in the
past, members of management will review with you the Company's activities
and
future plans and will be available to respond to questions during the meeting.
For those of you
who
will not be able to attend, the enclosed Form 10-K Annual Report contains
information on
the
conclusion of the Florida litigation and related matters. We have also included
with this mailing
a
copy of the Company’s Form 10-Q report for the nine-month period ended September
30,
2005,
which provides information concerning our activities during this
period.
We
look
forward to seeing you at the meeting.
Sincerely,
Phillip
W. Ware
President
November
3, 2005
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COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Clarendon
House, Church Street
Hamilton,
Bermuda
PROXY
STATEMENT
2005
ANNUAL GENERAL MEETING
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General
Information
This
proxy statement is furnished to the shareholders of Coastal Caribbean Oils
&Minerals,
Ltd., a Bermuda company (“Coastal” or the “Company”), in connection with the
solicitation
of proxies on behalf of the Board of Directors to be voted at the 2005 General
Meeting
of Shareholders and any adjournment thereof. Because the Company has not held
an
annual
meeting since April 2001, this meeting will also serve as the Company’s annual
meeting for
the
years 2002, 2003 and 2004. Coastal’s 2001, 2002, and 2003 audited financial
statements, along
with our 2004 Annual Report on Securities and Exchange Commission Form 10-K,
which includes
audited financial statements for the fiscal year ended December 31, 2004, as
well as the Company’s
SEC Form 10-Q for the 9-month period ended September 30, 2005 accompanies this
proxy
statement. This Proxy Statement is first being mailed to shareholders on or
about November
3, 2005.
Date,
Time and Location
● Friday,
December 9, 2005
●
9:00 A.M., local time, and at any adjournments or postponements
thereof
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offices of Conyers Dill & Pearman, Clarendon House, Church Street,
Hamilton,
Bermuda
Solicitation
and Voting of Proxies
The
Company expects to solicit proxies primarily by mail. To the extent necessary
to
assure
sufficient representation of shares at the annual meeting, proxies may be
solicited by telephone
and in person. The Company will request brokers, banks and other nominees to
forward
copies of proxy material to beneficial owners or other persons for whom they
hold common
stock and to obtain authority for the execution and delivery of
proxies.
In
addition, the Company has retained Morrow & Company, Inc. to assist in the
distribution
and solicitation of proxy materials for an estimated fee of $6,500 plus
out-of-pocket expenses.
The only other expenses anticipated are the ordinary expenses incurred in
connection with
the
preparation, assembling, mailing and other distribution of the material. All
costs of the solicitation
will be borne by the Company.
The
record date for the determination of shareholders entitled to notice of and
to
vote at the
annual meeting has been fixed by the Board of Directors as the close of business
on October 26,
2005.
On that date there were 46,211,604 shares of common stock outstanding, which
were held
by
approximately 8,500 shareholders of record. The holders of twenty-five percent
of the total
number of shares entitled to be voted at the annual meeting, present in person
or by Proxy, shall
constitute a quorum for the transaction of business. Each outstanding share
is
entitled to one
vote
at the annual meeting. Abstentions and broker “non-votes”
are counted for purposes of establishing
a quorum. A broker “non-vote” occurs when a nominee (such as a broker) holding
shares
for a beneficial owner does not vote on a particular proposal because the
nominee does not have
discretionary voting power for that particular matter and has not received
instructions from the
beneficial owner.
Who
can attend our Annual Meeting?
If
you
own common stock of record, you may attend the annual meeting and vote in
person,
regardless of whether you have previously voted by Proxy. If you own common
stock through
a
brokerage account, you may attend the annual meeting, but in order to vote
your
shares at
the
annual meeting, you must obtain a “legal proxy” from the brokerage firm that
holds your shares.
You should contact your brokerage account representative to learn how to obtain
a legal proxy.
We
encourage you to vote your shares in advance of the annual meeting by returning
your Proxy
Card or authorizing your broker to execute your Proxy, even if you plan on
attending the annual
meeting, so we will be able to determine if a quorum is present. You may change
or revoke
your Proxy at the annual meeting in the manner described below even if you
have
already voted.
Revocation
of Proxy
Your
presence at the annual meeting will not automatically revoke your Proxy.
However, you
may
revoke a Proxy at any time prior to its exercise by:
● Delivering
a written notice of revocation to Coastal's Secretary
● Delivering
a duly executed Proxy bearing a later date to Coastal's Secretary;
or
● Attending
the annual meeting and voting in person.
Votes
required in order to Conduct Company Business
Our
Bye-Laws provide in part that a resolution must be passed by
both:
● a
simple
majority of votes cast by shareholders in person or by proxy; and
● a
simple
majority of the number of shareholders present at the meeting in person or
by
proxy,
EXCEPT, when
shares are held by members of another company, firm, partnership, association
or other business organization and such persons act in concert, as that term
is
defined
in our Bye-Laws or when shares are held by or for a group of shareholders who
act
in
concert, such persons shall be deemed to be one shareholder.
The
Company will determine whether shareholders have acted in concert, depending
on
the
circumstances and the evidence, if any, that shareholders were in fact so acting
and should therefore
be treated as one shareholder.
The
Company may require brokers, banks and other nominees holding shares for
beneficial
owners to furnish information with respect to such beneficial owners for the
purpose of
applying this provision. The Proxy delivered with this proxy statement includes
a representation
that the person signing the Proxy is not acting in concert as described
above.
Voting
Procedures
Each
share of common stock entitles its owner to one vote upon each matter to come
before
the annual meeting. In accordance with Bermuda law and our Bye-Laws, directors
will be elected
at the annual meeting by a simple majority of the votes cast and by a simple
majority of the
shareholders present at the annual meeting. Any other matter on which
shareholders vote at the
annual meeting will be determined by the same requirement.
A
shareholder may abstain or withhold a vote with respect to any item submitted
for shareholder
approval. Abstentions and withheld votes will be counted as being present for
purposes
of determining the existence of a quorum, but will be counted as not voting
in
favor of any
proposal brought before the annual meeting.
If
your
shares are held by a brokerage firm (e.g., shares held in “street
name”), under certain
circumstances the firm may vote your shares. Such entities have authority to
vote their customers’
shares on certain routine matters, including the election of directors. When
a
brokerage
firm votes its customers’ shares on routine matters, these shares are also
counted for purposes
of establishing a quorum to conduct business at the annual meeting. A brokerage
firm cannot
vote its customers’ shares on non-routine matters. Accordingly, such shares are
not counted
as votes against a non-routine matter, but rather not counted at all for these
matters. There
are
no non-routine matters to come before the annual meeting.
The
manner in which your shares may be voted depends on how your shares are held.
If
you
own
shares of record, meaning that your shares of common stock are represented
by
certificates
or book entries in your name so that you appear as a shareholder on the records
of our stock
transfer agent, a Proxy Card for voting those shares will be included with
this
Proxy Statement.
You may vote those shares by completing, signing and returning the Proxy Card
in
the enclosed
postage pre-paid, pre-addressed envelope. If you own shares through a brokerage
firm (e.g.,
shares held in “street
name”), you may instead receive a voting instruction form with this Proxy
Statement that you may use to instruct how your shares are to be voted. As
with
a Proxy Card,
you
may vote your shares by completing, signing and returning the voting instruction
form in
the
envelope provided. Many brokerage firms have arranged for internet or telephonic
voting of
shares
and provide instructions for using those services on the voting instruction
form.
Regardless
of the number of shares of common stock that you own, it is important that
your
shares be represented by proxy or that you be present at the annual meeting.
To
vote by proxy,
please indicate your vote in the spaces indicated on the enclosed Proxy Card
and
return it signed
and dated, in the enclosed postage-paid envelope. Proxies obtained by the Board
of Directors
will be voted in accordance with the directions given therein.
If
You Do Not Indicate on Your Proxy How Your Shares Should Be Voted,
Your
Shares
Will
Be Voted in Accordance with the Board of Directors’Recommendations.
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BOARD
OF DIRECTORS; COMMITTEES; ATTENDANCE
The
only
standing committee of the Board is the Audit Committee.
The
principal functions of the Audit Committee are: (1) to recommend the particular
persons
or firm to be employed by the Company as its independent auditors; (2) to
consult with the
persons or firm so chosen to be the independent auditors with regard to the
plan
of audit; (3) to
review, in consultation with the independent auditors, their report of audit,
or
proposed report of
audit,
and the accompanying management letter, if any; and (4) to consult with the
independent
auditors (periodically, as appropriate, out of the presence of management)
with
regard
to
the adequacy of internal controls. During 2004, the Audit Committee, which
was
comprised
of the Board of Directors, met two times.
The
Company does not presently have standing nominating or compensation committees
of
the
Board of Directors. The functions that would be performed by such committees
are
performed
by the Board of Directors.
There
were five meetings of the Board of Directors of the Company held during 2004.
During
2004, all of the directors attended at least 75% of the aggregate number of
meetings of the
Board
of Directors and Committees on which they serve.
REPORT
OF THE AUDIT COMMITTEE
The
Board
of Directors has adopted a formal, written charter for the Audit
Committee.
In
connection with the preparation and filing of the Company's audited financial
statements
for the year ended December 31, 2004 (the “audited
financial statements”), the Audit Committee
performed the following functions:
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The
Audit Committee reviewed and discussed the audited financial statements
with senior
management and James Moore & Company, the Company's independent
auditors.
The review included a discussion of the quality, not just the
acceptability, of the
accounting principles, the reasonableness of significant judgements;
and
the clarity
of disclosures in the forward looking
statements
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The
Audit Committee also discussed with James Moore & Company the matters
required
to be discussed by Statement on Auditing Standards No. 61 (Communication
With
Audit Committees).
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The
Audit Committee received the written disclosures and the letter from
James
Moore
& Company required by Independence Standards Board Standard No. 1
(Independence
Discussions With Audit Committees), and discussed with James Moore
& Company its independence from the Company and considered the
compatibility
of the auditors' non-audit services to the Company with the auditors'
independence.
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Based
upon the functions performed, the Audit Committee recommended to the Board
of
Directors,
and the Board approved, that the audited financial statements be included in
the
Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2004, for
filing with
the
U.S. Securities and Exchange Commission. The Audit Committee and the Board
have
also
recommended subject to shareholder approval, the selection of James Moore &
Company as the
Company's independent auditors, however, James Moore & Company has advised
the Board of
Directors that the firm will no longer provide audit services to public
companies. As a result, the
Board
of Directors has retained, subject to shareholder approval, the firm of Baumann,
Raymondo
& Company, P.A. of Tampa, Florida to act as the Company’s
independent auditors for
the
fiscal year ended December 31, 2005. The Board of Directors served as the Audit
Committee
during 2004.
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
Nominees
Our
Board
of Directors is presently comprised of two members. The Board has nominated
five persons to be elected to the Board at this annual meeting. The directors
will be elected
to staggered terms expiring at one-two-and three year intervals pursuant to
the
Bye-Laws of
the
Company. The Bye-Laws established three classes of directors to be elected
on a
rotating basis
at
each successive annual meeting of Shareholders, and in each case until their
respective successors
shall have been elected and duly qualified. The director who is elected to
a
one-year term
at
this meeting will stand for re-election at the 2006 annual meeting. The five
nominees have
all
indicated their willingness to stand for election and to serve as directors
if
elected. Should
a
director nominee become unable or unwilling to serve, proxies will be voted
for
the election
of such other person as the Board of Directors may choose to nominate.
The
Company is not aware of any arrangements or understandings between any of the
individuals
named above and any other person pursuant to which any of the individuals named
above
was
selected as a director and/or executive officer. Neither is the Company aware
of
any family
relationship among the officers and directors of the Company or its subsidiary,
other than the
relationship between Mr. Angerer and his son who serves as the
Company’s
Secretary.
The
named
Proxies will vote all properly executed proxies for the election of the persons
hereinafter
named in the following table unless directed otherwise.
Bye-Law
81(1) provides that in the event no candidate for one or more directorship
vacancies
receives the vote required to pass an ordinary resolution, as described in
Bye-Law 1 above,
then each person who receives the majority, in number, of the Members present
in
person or
by
proxy and voting thereon, shall be elected to fill such vacancies.
The
following table sets forth information concerning the nominees for the five
(5)
open director positions:
Name
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Director
Since
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Other
Offices Held
With
the Company
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Age
and Business Experience
For
the Past Five Years
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Nominees
For Three Year Term Expiring at the 2008 Annual
Meeting:
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Phillip
W. Ware
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1985
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President,
Chief Executive Officer and Principal Accounting Officer
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Mr.
Ware, age 55, has been employed by Coastal Petroleum Company since
1976.
He has served as President of Coastal Petroleum since April 1985.
Mr. Ware
is a 1975 graduate of the University of Florida and is a professional
geologist registered with the State of Florida.
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Robert
J. Angerer, Sr.
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2003
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Vice
President |
Mr.
Angerer, age 58, is a partner in Oil For America, an oil exploration
business formed in 2002, with operations primarily in North Dakota
and
Montana. He is a lawyer and an engineer and has been a member of
the
Florida Bar since 1974. He has been a partner in the Tallahassee
law firm
of Angerer & Angerer since 1994. He is a graduate of the University of
Michigan and of Florida State University College of Law. He has
served as
a director of Coastal Petroleum since 2003.
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Nominees
For Two Year Terms Expiring at the 2007 Annual Meeting
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Herbert
D. Haughton
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N/A
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None
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Mr.
Haughton, age 63, is a banking, corporate and securities lawyer.
He is a
shareholder in the Tallahassee, Florida law firm of Igler & Dougherty,
PA, where he has practiced law since 1994, following his admission
to the
Florida Bar. Prior to entering the practice of law, Mr. Haughton
spent
over 30 years in the banking industry serving as president and
chief
executive officer of three different community banks in Florida
from 1977
to 1991. He is a graduate of Cleary University and Florida State
University College of Law.
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Anthony
F. Randazzo, Ph.D.
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N/A
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None
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Dr.
Randazzo, age 64, is Professor Emeritus of Geological Sciences
at the
University of Florida where he has worked since 1967. He served
as
Chairman of the Department of Geology at the University of Florida
from
1988 to 1995. He is also currently a co-principal and President
of the
geotechnical consulting firm Geohazards, Inc. which he was instrumental
in
forming in1985. He earned his B.S. degree at The City College of
New York
in 1963, his M.S. from the University of North Carolina at Chapel
Hill
1965, and his Ph.D. from the University of North Carolina at Chapel
Hill
in 1968. He is a Registered Professional Geologist in the State
of Florida
and the State of Georgia.
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Nominee
For One Year Term Expiring at the 2006 Annual Meeting
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Matthew
D. Cannon
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N/A
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None
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Mr.
Cannon, age 61, is currently a partner in the Cannon Trading Partnership,
which he formed in 1993. From 1991 to 1992 he served as a partner
in
Seisma Drilling Corporation. From 1988 to 1991 he served as vice
president
and director of Hilb, Rogal and Hamilton Company, an insurance
agency
located in Gainesville, Florida which specialized in underwriting,
rating,
sales, collections and claims associated with commercial lines
insurance
policies. Prior to that he served as vice president and director
of the
Cannon-Treweek insurance agency from 1968
to1988.
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The
Board of Directors Recommends That Shareholders
Vote
for the Election of the
Nominees.
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EXECUTIVE
COMPENSATION
The
following table sets forth certain summary information concerning the
compensation of
the
President of the Company for the three years ending with 2004. No other company
employee
received $100,000 or more in total compensation.
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Summary
Compensation Table
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Annual
Compensation
|
|
|
|
Long-Term
Compensation
|
|
Name
and
Principal
Position
|
|
Year
|
|
Salary
|
|
Bonus
(1)
|
|
Other
Annual Compensation (2)(6)
|
|
Stock
Options
(3)
|
|
Phillip
W. Ware
|
|
|
2004
|
|
$
|
92,000
|
(4)
|
|
None
|
|
$
|
13,800
|
|
|
None
|
|
President
and Chief Executive
Officer
|
|
|
2003
|
|
|
92,000
|
(5)
|
|
None
|
|
|
13,800
|
|
|
None
|
|
|
|
|
2002
|
|
|
92,000
|
|
|
None
|
|
|
13,800
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
Wares
current base salary is $125,000.
(1)
|
Annual
Cash Bonus Award - Annual incentive awards, which were paid during
the
year or immediately following the year
indicated.
|
(2)
|
Other
Annual Compensation - All additional forms of cash and non-cash
compensation paid, awarded or earned, including automobile allowances,
401(k) Plan matching contributions, and club membership
costs.
|
(3)
|
Stock
Options - Grants of stock options made under the Company=s
1995 Stock Option Plan. These options, along with all other outstanding
options, were terminated as part of the settlement with the State
of
Florida.
|
(4)
|
This
amount was accrued in 2004 and paid in
2005.
|
(5)
|
Of
this amount $23,000 was paid in 2003 and $69,000 was accrued and
paid in
2005.
|
(6)
|
Payment
to SEP-IRA pension plan (all of which was deferred and paid in
2005).
|
Compensation
of Directors
No
director received any fees for the year 2004, however the company accrued
$71,250 in directors fees for the year 2004, which were paid in 2005. Beginning
with the year 2005 the Company pays each director an annual fee of $25,000
for
director service.
Compensation
Committee Interlocks and Insider Participation
The
entire Board of Directors constitutes the compensation committee. Phillip
W.
Ware is a director and President, respectively, of both Coastal and Coastal
Petroleum.
Compensation
Committee Report on Executive Compensation
The
Compensation Committee, consisting of the entire Board of Directors in 2004,
submits the following report for 2004:
The
Board
of Directors does not maintain specific compensation policies applicable
to the
Company's executive officers, and the Board has established no specific
relationship between corporate performance and executive compensation.
Compensation has been determined based on the skills, experience and leadership
the executive officers have brought or will bring to the Company,
their individual performance of their duties, and on their ability to protect,
defend and pursue the Company's ability to realize value on the Company's
exploration leases.
Phillip
W. Ware Robert
J.
Angerer, Sr.
Stock
Options
No
Stock
Options were granted during the year ended December 31, 2004. All of the
Company=s
outstanding stock options outstanding on December 31, 2004 have either expired
or were terminated in June 2005 by agreement as part of the settlement with
the
State of Florida.
Stock
Performance Chart
The
chart
and graph below compare the cumulative total returns, including reinvestment
of
dividends, if applicable, of our common stock with the companies in the NASDAQ
Market Index and a Peer Group Index (Peer Group) comprised of selected U.S.
small companies engaged in crude oil and natural gas operations. The companies
were selected from a group of companies included in the small oil and gas
company index maintained by Ernst & Young in its Energy Center in Houston,
Texas available through EnergySmart. The comparable companies are:
COMPANY
|
|
SYMBOL
|
|
COMPANY
|
|
SYMBOL
|
Berry
Petroleum Company
|
|
BRY
|
|
The
Meridian Resource Corp
|
|
TMR
|
Comstock
Resources, Inc.
|
|
CRK
|
|
Penn
Virginia Corporation
|
|
PRA
|
Denbury
Resources, Inc.
|
|
DNR
|
|
Quicksilver
Resources, Inc.
|
|
KWK
|
Harvest
Natural Resources, Inc.
|
|
HNR
|
|
Remington
Oil and Gas Corp
|
|
REM
|
KCS
Energy, Inc.
|
|
KCS
|
|
St
Mary Land & Exploration Co.
|
|
SM
|
These
companies were chosen because they are generally engaged in the same activities
as Coastal.
These
charts are presented in accordance with SEC requirements. Shareholders are
cautioned against drawing any conclusions from the data contained therein,
as
past results are not necessarily indicative of future performance. The
chart
and graph each assume an initial investment of $100 on December 31, 1999
and
dividends, if any are reinvested on the ex-dividend dates.
|
|
Period
Ending
|
|
Index
|
|
12/31/99
|
|
12/31/00
|
|
12/31/01
|
|
12/31/02
|
|
12/31/03
|
|
12/31/04
|
|
Coastal
Caribbean Oils & Minerals
|
|
|
100.00
|
|
|
96.84
|
|
|
52.21
|
|
|
13.47
|
|
|
22.74
|
|
|
8.42
|
|
NASDAQ
Market Index
|
|
|
100.00
|
|
|
54.63
|
|
|
37.11
|
|
|
41.36
|
|
|
52.43
|
|
|
53.01
|
|
Selected
Peer Group Companies
|
|
|
100.00
|
|
|
144.78
|
|
|
-5.15
|
|
|
30.94
|
|
|
141.76
|
|
|
51.18
|
|
Security
Ownership of Certain Beneficial Owners and Management
The
following table contains information regarding the current beneficial ownership
of our common stock of each director nominee as of the record date. The number
and percentage of shares held by each person reflects the number of shares
that
person currently owns, plus the number of shares that person has the right
to
acquire through the exercise of stock options which are exercisable within
the
next 60 days.
Name
|
|
Number
of
Shares
Owned
(1)
|
|
Right
to
Acquire
(2)
|
|
%
of
Beneficial
Ownership
(3)
|
|
Phillip
W. Ware
|
|
|
104,121
|
|
|
300,000
|
|
|
0.87
|
%
|
Robert
J. Angerer, Sr
|
|
|
2,206,914
|
|
|
None
|
|
|
4.77
|
%
|
Herbert
D. Haughton
|
|
|
25,000
|
|
|
None
|
|
|
0.01
|
%
|
Anthony
F. Randazzo, Ph.D.
|
|
|
None
|
|
|
None
|
|
|
0.00
|
|
Matthew
D. Cannon
|
|
|
25,000
|
|
|
None
|
|
|
0.01
|
|
All
directors as a group
|
|
|
2,361,035
|
|
|
300,000
|
|
|
5.72
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes
shares for which the named person:
|
|
$
|
|
has
sole voting and investment power;
|
|
$
|
|
has
shared voting and investment power,
or
|
|
$
|
|
holds
in an IRA or other retirement plan program, unless otherwise indicated
in
these footnotes.
|
(2)
|
Includes
options that are exercisable within 60 days of the date of this
Proxy
Statement. Options to purchase 250,000 shares are subject to shareholders
approval of the 2005 Employee Stock Option
Plan.
|
(3)
|
Assumes
only the indicated individual or group member exercises his options.
Based
upon 46,211,604 shares outstanding.
|
Certain
Business Relationships
On
July
15, 2005 Coastal Petroleum acquired the rights to drill a 5,100 foot well
to
test a Mississippian Lodgepole Reef in Valley County, in northeast Montana
at an
estimated cost of $500,000. Coastal Petroleum acquired these rights for $50,000
from Oil For America, a partnership in which Robert J. Angerer, Sr. is a
partner. Included in the agreement is the right to drill additional prospects
in
the Valley County area.
Coastal
Petroleum also acquired leases from Oil For America to the deeper rights
in
25,000 acres in and near Slope County, North Dakota for an additional $50,000.
The Company has the option to drill the remaining Lodgepole Reef prospects
on
these leases.
The
leases were acquired on terms and under circumstances that are substantially
the
same or at least as favorable as those prevailing at the time for comparable
transactions with or involving other non-affiliated companies.
In
the
ordinary course of business Coastal may use the services of companies,
partnerships or firms of which Company directors are officers, partners,
directors or owners. The Company has two director nominees whose firms provided
legal services to the Company during 2004. Mr. Angerer, has served as general
counsel and litigation counsel to the Company for nearly thirty years and
his
firm has done so for more than a decade. During 2004, the firm prepared and
filed rehearing papers with the First District Court of Appeal, prepared
and
filed certiorari papers and materials with the U.S. Supreme Court and provided
various other corporate legal and litigation services for the Company throughout
the year. The firm billed the Company $288,000 for legal services provided
during 2004, which were paid in 2005. Mr. Haughton=s
firm,
which serves as securities counsel to the Company, received $7,725 for the
year
ended December 31, 2004, for corporate and regulatory legal services.
The
terms
of the services provided by each of these firms were at least as favorable
to
the Company as could be obtained from unrelated third parties.
PROPOSAL
NO. II
RATIFICATION
OF APPOINTMENT
OF
INDEPENDENT AUDITORS
The
Board
of Directors has retained Baumann, Raymondo & Company, P.A. of Tampa,
Florida to act as the Company=s
independent auditors for the fiscal year ended December 31, 2005.
Representatives of Baumann, Raymondo & Company are not expected to be
present at the annual meeting. The Proxy permits voting for or against, or
abstaining from voting for the ratification of the appointment of auditors.
Unless otherwise indicated, the shares will be voted in favor of ratifying
the
appointment of Baumann, Raymondo & Company and to authorize the Board of
Directors to fix the remuneration of such auditors. Fees paid to James Moore
& Company, Coastal=s
previous auditors, for the year ended December 31, 2004 were as
follows:
|
|
|
|
|
Audit
Fees
|
|
$
|
22,817
|
|
All
Other Fees
|
|
|
1,200
|
|
Total
|
|
$
|
24,017
|
|
|
|
|
|
|
Coastal
has received a proposal from Baumann, Raymondo & Company to provide auditing
services for the remainder of the 2005 year for approximately
$23,500.
The
Board of Directors Recommends that Shareholders Vote AFor@
the Ratification of Baumann, Raymondo & Company as the
Company=s
Independent
Auditors for the year ended December 31, 2005.
|
PROPOSAL
NO. III
APPROVAL
OF THE 2005 EMPLOYEES=
INCENTIVE
STOCK
OPTION AND LIMITED RIGHTS PLAN
On
September 27, 2005, the Board adopted the 2005 Employees=
Stock
Option and Limited Rights Plan (AEmployees=
Plan@)
for the
benefit of officers and other key employees of Coastal and Coastal Caribbean.
A
copy of the Employees=
Plan is
attached hereto as Appendix
A.
The
following is a summary of the material features of the Employees=
Plan,
which is qualified in its entirety by reference to the complete provisions
of
the attached Employees=
Plan.
The Employees=
Plan
provides for 2,300,000 shares of Coastal common stock to be reserved for
future
issuance pursuant to the exercise of stock options. This represents 5% of
the
total number of shares of the Company=s
outstanding common stock. Employees of Coastal or Coastal Petroleum may be
granted options to purchase shares of common stock, as determined by the
Board
in its sole discretion.
Options
granted under the Program will be Aincentive
stock options@
within
the meaning of section 422A of the Internal Revenue Code of 1986, as amended,
which are designed to result in beneficial tax treatment to the employee
but no
tax deduction to Coastal.
The
per
share exercise price at which the shares of common stock may be purchased
upon
exercise of a granted option will be equal to or greater than the Fair Market
Value of a share of common stock as of the date of grant. Fair Market Value
of a
share of common stock is defined in the Employees=
Plan. At
no time will Coastal have total cumulative stock options outstanding to acquire
more than 15% of the outstanding common stock of Coastal under all of its
plans.
At
the
discretion of the Board, limited rights may be granted in tandem with any
options granted under the Employees=
Plan.
Limited rights may only be exercised six months after the date of their grant
and will terminate upon the exercise or termination of their underlying option.
A limited right entitles the holder thereof to a cash payment from the Company
equal to the difference of the option exercise price and the Fair Market
Value
on the date of exercise.
The
Board
of Directors may set any vesting schedule for options granted under the
Employees=
Plan.
All stock options and limited rights held under the Employees=
Plan
will be immediately canceled when the holder is terminated for Acause@
(as that
term is defined in the Employees=
Plan).
In the event of the death or disability of a participant, all options and
limited rights held under the Employees=
Plan,
whether or not then exercisable, shall be exercisable (by the participant
or his
or her legal representative) for a period of 12 months following such death
or
disability. In the event a participant retires, any options or limited rights
held under the Employees=
Plan,
whether or not then exercisable, shall be exercisable for a period of three
months after such retirement.
Our
Board
of Directors believes the Employees=
Plan is
a necessary non-cash compensation benefit for Coastal and Coastal
Petroleum=s
key
employees to be competitive and to be able to attract and retain competent
management.
The
Employees=
Plan is
subject to approval of the holders of a majority of the outstanding common
stock
at the annual meeting. The Board of Directors has granted Phillip W. Ware
an
option to acquire 250,000 shares pursuant to the Plan. All options granted
before shareholder approval of the Employees=
Plan are
contingent upon receipt of such approval.
The
Board of Directors Recommends that Shareholders Vote AFor@
the
Approval of the 2005 Employees=
Stock Option and Limited Rights
Plan.
|
PROPOSAL
NO. IV
ADJOURNMENT
OF ANNUAL MEETING
The
Board
of Directors seeks your approval to adjourn the annual meeting in the event
that
there are not a sufficient number of votes to approve Proposals I, II or
III at
the annual meeting. In order to permit proxies that have been timely received
by
Coastal to be voted for an adjournment, we are submitting this item as a
separate matter for your consideration. If it is necessary to adjourn the
annual
meeting and the adjournment is for a period of less than 30 days, no notice
of
the time or place of the reconvened meeting will be given to shareholders,
other
than an announcement made at the annual meeting.
The
Board of Directors Recommends that Shareholders Vote AFor@
the
Approval of the Adjournment of the Annual Meeting.
|
COMPLIANCE
WITH SECTION 16(A)
Section
16(a) of the Securities Exchange Act of 1934 requires the Company's executive
officers, directors and persons who beneficially own more than 10% of the
Company's common stock to file initial reports of beneficial ownership and
reports of changes in beneficial ownership with the Securities and Exchange
Commission. Such persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms filed by such persons. Based solely
on
its copies of forms received by it, or written representations from certain
reporting persons that no Form 5's were required for those persons, the Company
believes that during the just completed fiscal year, its executive officers,
directors, and greater than 10% beneficial owners complied with all applicable
filing requirements.
OTHER
MATTERS
The
Board
of Directors knows of no other matters that will be presented for consideration
at the annual meeting, other than those matters referred to in this Proxy
Statement.
SHAREHOLDER
PROPOSALS
General
Proposals Not Related To The Election of Directors
The
2006
Annual General Meeting of shareholders is expected to occur in late April
2006.
Shareholders who intend to have a proposal included in the notice of annual
meeting and related proxy statement, relating to the Company's 2006 Annual
General Meeting of Shareholders, must submit the proposal by November 30,
2005.
All such proposals must be in compliance with the provisions contained in
Securities and Exchange Commission Rule 14a-8 and the Company=s
Bye-Laws.
If
a
Shareholder wishes to present a proposal at the Company's 2006 Annual General
Meeting of Shareholders and the proposal is not intended to be included in
the
Company's proxy statement and form of proxy relating to that meeting, the
Shareholder must give advance notice to the Company prior
to one of two deadlines set
forth
in the Company's Bye-Laws. All such proposals must be in compliance with
both
the provisions contained in SEC Rule 14a-8 and the Company=s
Bye-Laws.
|
!
|
If
a shareholder's proposal relates to business other than the nomination
of
persons for election to the Board of Directors, a Shareholder's
notice
must be received by the Company on or before January 27, 2006,
which is
the date not less than 90 days prior to the anticipated date of
the 2006
year's Annual General Meeting of Shareholders.
|
|
!
|
If
a shareholder's proposal relates to the nomination of persons for
election
to the Board of Directors, a shareholder's notice must be delivered
to or
mailed and received at the principal executive offices of the Company
not
less than sixty (60) days nor more than ninety (90) days prior
to the
meeting; provided, however, that in the event that less than seventy
(70)
days' notice or prior public disclosure of the date of the meeting
is
given or made to Members, notice by the shareholder must be received
not
later than the close of business on the 10th day following the
day on
which such notice of the date of the meeting was mailed or public
disclosure was made.
|
Shareholder
proposals relating to the Company's 2006 Annual General Meeting of Shareholders
must be submitted to the Company at its office, c/o Conyers Dill & Pearman,
Clarendon House, Hamilton, Bermuda. The fact that a shareholder proposal
is
received in a timely manner does not insure its inclusion in the Company's
proxy
materials since there are other requirements in the Company's Bye-laws and
the
proxy rules relating to such inclusion.
[
Intentionally left blank ]
AVAILABILITY
OF OTHER INFORMATION
Accompanying
this Proxy Statement is our 2004 Annual Report on Form 10-K, which includes
our
audited financial statements. The Annual Report and other corporate information
is also available on our corporate website, http://www.coastalcarib.com.
Additional printed copies of our Annual Report are available to shareholders
at
no charge. Any shareholder who would like an additional copy may
contact:
Robert
J. Angerer, Jr
Corporate
Secretary
P.O.
Box 10468
Tallahassee,
Florida 32302
(850)
576-5982- telephone number
We
currently file periodic reports (including Form 10-Ks and Form 10-Qs) with
the
Securities and Exchange Commission. These periodic reports are filed
electronically via EDGAR and can be inspected and copied at the public reference
facilities maintained by the Securities and Exchange Commission at its Public
Reference Section, 450 Fifth Street, NW, Washington, DC 20549. The Securities
and Exchange Commission maintains a website that contains registration
statements, reports, proxy and information statements and other information
regarding registrants that file electronically. Information filed by Coastal
is
also available for review on this website at www.sec.gov.
The
contents and the sending of this Proxy Statement have been approved by the
Directors of the Company.
It
Is Important That Proxies Be Returned Promptly. Therefore, Shareholders
Who Do Not Expect to Attend the Annual Meeting in
Person
Are Urged to Sign, Date, and Return the Enclosed Proxy in the Reply
Envelope Provided.
|
By
Order
of the Board of Directors,
Robert
J.
Angerer, Jr.
Secretary
Dated:
November 3, 2005
APPENDIX
A
COASTAL
CARIBBEAN OIL & MINERALS, LTD.
2005
EMPLOYEES’ INCENTIVE STOCK OPTION AND LIMITED RIGHTS PLAN
The
purpose of Coastal Caribbean Oil & Minerals, Ltd. ("Company") 2005
Employees’ Incentive Stock Option and Limited Rights Plan ("Employees’ Plan") is
to advance the interests of the Company, its subsidiaries and its shareholders
by providing the employees of the Company or its wholly-owned subsidiaries,
("Subsidiaries"), upon whose judgment, initiative and oversight the successful
conduct of the business of the Company depends, with an additional incentive
to
serve as employees for the Company or its Subsidiaries, as well as, to attract
people of experience and ability to serve as employees in the
future.
|
(a) |
"Board
of Directors” or Board " means
the Board of Directors of the
Company.
|
|
(b)
|
"Award"
means an Award of Qualified Stock Options (“Stock Option” or “Option”)
and/or Limited Rights granted under the provisions of the Employees’
Plan.
|
|
(c)
|
"Committee"
means the Board of Directors or a stock option committee thereof
established by the Board.
|
|
(d)
|
"Employees’
Plan Year or Years"
means a calendar year or years commencing on or after January 1,
2005.
|
|
(e)
|
"Date
of Grant"
means the actual date on which an Award is granted by the
Committee.
|
|
(f)
|
"Common
Stock"
means the common stock of the Company, par value, $0.12 per
share.
|
|
(g)
|
"Fair
Market Value"
means, when used in connection with the Common Stock on a certain
date,
the reported closing price of the Common Stock as reported by the
National
Association of Securities Dealers Automated Quotation System (“NASDAQ”) as
published by the Wall Street Journal on the day prior to such date;
or if
the Common Stock was not traded on such date, on the next preceding
day on
which the Common Stock was traded thereon. If the Common Stock
is not
traded on a national market reported by the NASDAQ, the Fair Market
Value
means the average of the closing bid and asked sale prices for
the
previous 15 days during which a sale is reported in an over-the-counter
transaction. In the absence of any over-the-counter transactions,
the Fair
Market Value means the average price at which the stock has sold
in an
arms length transaction during the 30 days immediately preceding
the grant
date. In the absence of an arms length transaction during such
30 days,
Fair Market Value means the book value of the common
stock.
|
|
(h)
|
"Limited
Right"
means the right to receive an amount of cash based upon the terms
set
forth in Section 8.
|
|
(i)
|
"Termination
for Cause"
means the termination resulting from an intentional failure to
perform
stated duties, breach of a fiduciary duty involving personal dishonesty,
incompetence, misconduct or conduct which negatively reflects upon
the
Company, or willful violation of any law, rule or regulation (other
than
traffic violations or similar
offenses).
|
|
(j)
|
"Participant"
for the Plan means an employee of the Company or its Subsidiaries
chosen
by the Committee to participate in the Employees’
Plan.
|
|
(k)
|
"Change
in Control"
of
the Company means a change in control that would be required to
be
reported in response to Item 6(e) of Schedule 14A of Regulation
14A
promulgated under the Securities Exchange Act of 1934, as amended
(“Exchange Act”) or any successor disclosure item; provided that, without
limitation, such a Change in Control shall be deemed to have occurred
if
any person (as such term is used in Sections 13[d] and 14[d] of
the
Exchange Act in effect on the date first written above), other
than any
person who on the date hereof is a director or officer of the Company,
(i)
directly or indirectly, or acting through one or more other persons,
owns,
controls or has power to vote 25% or more of any class of the then
outstanding voting securities of the Company; or (ii) controls
in any
manner the election of the directors of the Company. For purposes
of this
Agreement, a “Change in Control” shall be deemed not to have occurred in
connection with a reorganization, e.g. consolidation or merger
of the
Company where the stockholders of the Company, immediately before
the
consummation of the transaction, will own at least 50% of the total
combined voting power of all classes of stock entitled to vote
of the
surviving entity immediately after the transaction.
|
|
(l) |
“Initial
Employees”
means those employees of the Company or one of its Subsidiaries
as of
August 31, 2005.
|
The
Employees’ Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Employees’ Plan, to establish such
rules and regulations as it deems necessary for the proper administration
of the
Employees’ Plan and to make whatever determinations and interpretations in
connection with the Employees’ Plan it deems as necessary or advisable. All
determinations and interpretations made by the Committee shall be binding
and
conclusive on all Participants in the Employees’ Plan and on their legal
representatives and beneficiaries.
Awards
under the Employees’ Plan may be granted in any one or a combination of the
following, as defined below in Sections 7 and 8 of the Employees’
Plan:
|
(a) |
Qualified
Stock Options; and
|
5. |
STOCK
SUBJECT TO THE EMPLOYEES’
PLAN
|
Subject
to adjustment as provided in Section 12, the maximum number of shares reserved
for issuance under the Employees’ Plan is 2,300,000 shares of Common Stock
outstanding (sometimes referred to herein as “Option Shares”). To the extent
that Stock Options or rights granted under the Employees’ Plan are exercised,
the shares covered will be unavailable for future grants under the Employees’
Plan; to the extent that options together with any related rights granted
under
the Employees’ Plan terminate, expire or are canceled without having been
exercised or, in the case of Limited Rights exercised for cash, such Option
shares shall be added back to the pool of available Option shares, and new
Awards may be made with respect to these shares.
The
Employees of the Company and its Subsidiaries (“Employees”) shall be eligible to
receive Stock Options and/or Limited Rights under the Employees’
Plan.
7. |
GRANT
OF STOCK OPTIONS
|
The
Committee may, from time to time, grant Stock Options to Employees. Stock
Options granted under this Employees’ Plan are subject to the following terms
and conditions:
The
purchase price per share of Common Stock deliverable upon the exercise of
each
Stock Option shall not be less than the Fair Market Value of the Common Stock
on
the date the option is granted. Shares may be purchased only upon full payment
of the purchase price. Payment of the purchase price may be made, in whole
or in
part, through the surrender of shares of the Common Stock of the Company
at the
Fair Market Value of such shares on the surrender date determined in the
manner
described in Section 2(g).
The
term
during which each Non-Statutory Stock Option may be exercised shall be
determined by the Committee, but in no event shall a Stock Option be exercisable
in whole or in part more than 10 years from the Date of Grant.
The
Committee shall determine whether such Stock Options shall be exercised in
installments and set the date on which each Stock Option shall become
exercisable. Any required vesting period shall commence on the Date of Grant.
The shares comprising any installment may be purchased in whole or in part
at
any time after such installment becomes exercisable. The Committee may, in
its
sole discretion, accelerate the time at which any Stock Option may be exercised
in whole or in part. Notwithstanding the above, in the event of a Change
in
Control of the Company, or the death of a Director, all Stock Options shall
become immediately exercisable.
|
(d) |
Termination
of Service.
|
In
the
event of termination for cause, all rights under his Stock Options shall
expire
upon termination. Upon the termination of a Employees’ service for any reason
other than retirement, death or disability or termination for cause, his
or her
Stock Options shall be exercisable only as to those shares which were
immediately purchasable by him at the date of termination and only for a
period
of one-month following termination. In the event of retirement, such shares
shall be exercisable only for a period of three-months following retirement.
In
the event of the death or disability of an Employee, all Stock Options held
by
the Employee, whether or not exercisable at such time, shall be exercisable
by
the Employee, or the Employee’s legal representatives or beneficiaries for
one-year following the date of his death or disability; provided that in
no
event shall the period extend beyond the expiration of the Stock Option
term.
8. |
GRANT
OF LIMITED RIGHTS
|
The
Committee may grant a Limited Right simultaneously with the grant of any
Option,
with respect to all or some of the shares covered by such Option. Limited
Rights
granted under the Employees’ Plan are subject to the following terms and
conditions:
In
no
event shall a Limited Right be exercisable in whole or in part before the
expiration of six months from the date of grant of the Limited Right. A Limited
Right may be exercised only upon the occurrence of all of the following
conditions: (i) a Change in Control of the Company; and (ii) the Fair Market
Value of the underlying shares on the day of exercise is greater than the
exercise price of the related Option.
Upon
exercise of a Limited Right, the related Option shall cease to be exercisable.
Upon exercise or termination of an Option, any related Limited Rights shall
terminate. Upon exercise, the Limited Rights may be for no more than 100%
of the
difference between the exercise price and the Fair Market Value of the Common
Stock subject to the underlying option pursuant to Section 2(g) herein. The
Limited Right is transferable only when the underlying option is transferable
and under the same conditions.
Upon
exercise of a Limited Right, the holder shall promptly receive from the Company
an amount of cash equal to the difference between the Fair Market Value on
the
Date of Grant of the related Option and the Fair Market Value of the underlying
shares on the date the Limited Right is exercised, multiplied by the number
of
shares with respect to which such Limited Right is being exercised.
|
(c) |
Termination
of Service.
|
In
the
event of Termination for Cause, all Limited Rights shall expire upon
termination. Upon the termination of an Employees’ service for any reason other
than retirement, death or disability or termination for cause, any Limited
Rights held by him shall be exercisable only as to those shares of the related
Option which were immediately purchasable by him at the date of termination
and
only for a period of one-month following termination. In the event of
retirement, the limited rights may be exercisable for a period of three-months
following retirement. In the event of termination of service for reason of
death
or disability, all Limited Rights held by the employee, whether or not
exercisable at such time, shall be exercisable by the employee or his/her
legal
representatives or beneficiaries for one-year following the date of his/her
death or disability; provided that in no event shall the period extend beyond
the expiration of the related Stock Option term.
9. |
RIGHTS
OF A SHAREHOLDER:
NONTRANSFERABILITY
|
An
optionee shall have no rights as a shareholder with respect to any shares
covered by a Stock Option until the date of issuance of a stock certificate
for
such shares. Nothing in the Employees’ Plan or in any Award granted confers on
any person any right to serve as an Employee for the Company or its
Subsidiaries.
No
Award
under the Employees’ Plan shall be transferable by the optionee other than by
will or the laws of descent and distribution and may only be exercised during
his lifetime by the optionee, or by a guardian or legal representative or
result
in Options for fractional shares.
10. |
AGREEMENT
WITH PARTICIPANTS
|
Each
Award of Options and/or Limited Rights will be evidenced by a written agreement,
executed by the Company which describes the conditions for receiving the
Awards
including the date of Award, the purchase price, applicable periods, and
any
other terms and conditions as may be required by the Board of Directors or
applicable securities law.
11. |
PER
YEAR FIRST EXERCISABLE LIMITATION
|
The
maximum fair market value of incentive stock options exercisable for the
first
time by any Participant during any calendar year under all Company incentive
stock option plans is $100,000.
12. |
DESIGNATION
OF BENEFICIARY
|
A
Participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of death, any Stock Option or Limited Rights
Award to which he would then be entitled. Such designation will be made upon
forms supplied by and delivered to the Company and may be revoked in writing.
If
a Participant fails effectively to designate a beneficiary, then his estate
will
be deemed to be the beneficiary.
13. |
DILUTION
AND OTHER ADJUSTMENTS
|
In
the
event of any change in the outstanding shares of Common Stock of the Company
by
reason of any stock dividend, split, recapitalization, merger, consolidation,
spin-off, reorganization, combination or exchange of shares, or other similar
corporate change, the Committee will make such adjustments to previously
granted
Awards as necessary, to prevent dilution or enlargement of the rights of
the
Participant, including any or all of the following:
|
(a) |
adjustments
in the aggregate number or kind of shares of Common Stock which
may be
awarded under the Employees’ Plan;
|
|
(b) |
adjustments
in the aggregate number or kind of shares of Common Stock covered
by
Awards already made under the Employees’
Plan;
|
|
(c) |
adjustments
in the purchase price of outstanding Stock Options, or any Limited
Rights
attached to such Options.
|
No
such
adjustments may, however, materially change the value of benefits available
to a
Participant under a previously granted Award.
There
will be deducted from each distribution of cash and/or Common Stock under
the
Employees’ Plan the amount of tax required to be withheld by any governmental
authority, if any.
15. |
AMENDMENT
OF THE EMPLOYEES’ PLAN
|
The
Board
of Directors may at any time, and from time to time, modify or amend the
Employees’ Plan in any respect; provided however, that if necessary to continue
to qualify the Employees’ Plan under the Securities and Exchange Commission Rule
16(b)-3, shareholder approval would be required for any such modification
or
amendments which:
|
(a)
|
increases
the maximum number of shares for which options may be granted under
the
Employees’ Plan (subject, however, to the provisions of Section 12
hereof);
|
|
(b) |
changes
the persons eligible to participate in the Employees’
Plan.
|
Failure
to ratify or approve amendments or modifications to Subsections (a) and/or
(b)
of this Section by shareholders shall be effective only as to the specific
amendment or modification requiring such ratification. Other provisions,
sections, and subsections of this Employees’ Plan will remain in full force and
effect.
No
such termination, modification or amendment may affect the rights of a
Participant under an outstanding Award.
16. |
EFFECTIVE
DATE OF EMPLOYEES’ PLAN
|
The
Employees’ Plan shall be adopted by the Board of Directors and shall become
effective upon such date of adoption, or other date as determined by the
Board
(“Effective Date”). Following the Effective Date of the Employees’ Plan, the
Employees’ Plan shall be submitted to the Company’s shareholders for approval.
If the Employees’ Plan is not approved by shareholders, the Employees’ Plan and
any Awards granted there under shall be null and void.
17. |
TERMINATION
OF EMPLOYEES’ PLAN
|
The
right
to grant Awards under the Employees’ Plan will terminate upon the earlier of 10
years after the Effective Date of the Employees’ Plan or the exercise of Options
or related rights equaling the maximum number of shares reserved under the
Employees’ Plan as set forth in Section 5. The Board of Directors has the right
to suspend or terminate the Employees’ Plan for any reason, provided that no
such action will, without the consent of a Participant, adversely affect
his
rights under a previously granted Award.
The
Employees’ Plan will be administered in accordance with the laws of the United
States and the State of Florida.
Adopted
this 27th
day of
September, 2005 by the Board of Directors of the Company.
|
|
|
|
|
|
|
|
/s/ Robert
J. Angerer, Jr. |
|
|
|
Robert
J. Angerer, Jr., Corporate Secretary |
|
|
Adopted
on the ___ day of ____________, 2005 by the Company’s shareholders.
|
|
|
|
|
|
|
|
|
Chairman
of the Board of Directors of the
Company |
REVOCABLE
PROXY
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
2005
ANNUAL GENERAL MEETING OF SHAREHOLDERS
The
undersigned hereby appoints the Board of Directors, and each director,
with full
powers of substitution, to act as proxy for, and attorney-in-fact, with
full
power to vote all shares of the common stock of Coastal Caribbean Oils
&
Minerals, Ltd.., which the undersigned may be entitled to vote at the Annual
General Meeting of Shareholders to be held at the offices of Conyers Dill
&
Pearman, Clarendon House, Church Street, Hamilton, Bermuda, on December
9, 2005,
at 9:00 a.m., local time and at any adjournment or postponement thereof
in the
following manner.
The
undersigned may revoke this Proxy at any time before it is voted by either
delivering a written notice of revocation, delivering a duly executed Proxy
bearing a later date, or by attending the Annual Meeting and voting in
person.
1.
The election of five members of the Board of Directors to serve
for
staggered terms:
|
|
FOR
o
|
|
WITHHOLD
AUTHORITY
o
|
|
INSTRUCTION.
To withhold your vote for any individual nominee, strike a line
in the
nominee=s
name listed below.
|
Robert
J. Angerer, Sr. 3- years; Phillip W. Ware 3-years; Herbert D.
Haughton 2-
years;
Anthony
F. Randazzo 2- years; Matthew D. Cannon
one-year
|
2.
Approval of the 2005 Employees Incentive Stock Option and Limited
Rights
Plan
|
|
FOR
o
|
|
AGAINST
o
|
|
ABSTAIN
o
|
|
|
|
|
|
|
|
3.
Ratification of the appointment of Baumann, Raymondo & Company, as the
independent auditors of Coastal Caribbean Oils & Minerals, Ltd. for
the fiscal year ending December 31, 2005.
|
|
FOR
o
|
|
AGAINST
o
|
|
ABSTAIN
o
|
|
|
|
|
|
|
|
4.
The adjournment of the Annual Meeting to solicit additional proxies
in the
event that there are not sufficient votes to approve any one
or more of
the Proposals.
|
|
FOR
o
|
|
AGAINST
o
|
|
ABSTAIN
o
|
|
IN
THEIR DISCRETION, THE PROXY HOLDERS ARE AUTHORIZED TO TRANSACT
AND TO VOTE
UPON SUCH OTHER BUSINESS
as
may properly come before the Annual General Meeting or any adjournments
thereof, unless indicated otherwise by marking this box. G
|
NOTE:
When properly executed, this Proxy will be voted in the manner
directed by
the shareholder. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE
PROPOSALS
LISTED. |
STICKER
|
|
When
shares are held by joint tenants, both should sign. When signing
as
attorney, executor, administrator, agent, trustee or guardian,
please give
full title. If shareholder is a corporation, please sign in full
corporate
name by president or other authorized officer. If shareholder
is a
partnership, please sign in partnership name by authorized
person. |
|
The
signor acknowledges receipt from Coastal Caribbean Oils & Minerals,
Ltd., prior to the execution of the Proxy, a Notice of Annual
Meeting, a
Proxy Statement dated November 3 , 2005, Financial Statements
for the
years ended December 31, 2001, 2002, and 2003 and a 2004 Annual
Report on
Form 10-K. |
Unless
otherwise indicated on this Proxy Form or by accompanying letter,
the
undersigned represents that in executing and delivering his Proxy
he is
not acting in concert with any other person as defined in the
Company=s
Bye-Laws. |
X__________________________________
Signature
X___________________________________
Signature
if held jointly
|
No.
of
Common Shares Voting:___________ Date:____________
Please
check this box if you intend to attend the Annual Meeting in person
o
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
(Mark
One)
x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
For
the fiscal year ended December
31, 2004 |
OR
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
For
the transition period from ________________ to_________________ |
Commission
file number 001-04668
COASTAL
CARIBBEAN
OILS & MINERALS, LTD.
|
(Exact
name of registrant as specified in its
charter)
|
BERMUDA
|
|
NONE
|
State
or other jurisdiction of incorporation
or organization
|
|
(I.R.S.
Employer Identification
No.)
|
|
|
|
Clarendon
House
|
|
|
Church
Street
|
|
|
Hamilton,
Bermuda
|
|
HM
11
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
Registrant’s
telephone number, including area code
|
(850)
421-2024
|
Securities
registered pursuant to Section 12(b) of the Act:
|
|
Name
of each exchange on
|
Title
of each class
|
|
which
registered
|
NONE
|
|
|
Securities
registered pursuant to Section 12(g) of the Act:
Common
stock, par value $.12 per share
|
(Title
of Class)
|
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. x
Yes o
No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K §229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. x
Indicate
by check mark whether the registrant is an accelerated filer (as defined in
Rule
12b-2 of the Act). o Yes x
No
The
aggregate market value of the common stock held by non-affiliates of the
registrant was approximately $3,074,073 (U.S.) at April 1, 2005.
Indicate
the number of shares outstanding of each of the registrant's classes of common
stock, as of the latest practicable date:
Common
stock, par value $.12 per share, 46,211,604 shares outstanding as of May 31,
2005.
DOCUMENTS
INCORPORATED BY REFERENCE
None
|
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Page
|
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PART
I
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4
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7
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11
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13
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16
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PART
II
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17
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19
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20
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22
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23
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41
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41
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PART
III
|
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41
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43
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44
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45
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46
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PART
IV
|
|
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46
|
All
monetary figures set forth are expressed in United States currency.
PART I
An
investment in the Company’s common stock involves a high degree of risk. You
should carefully consider the following risk factors and other information
in
this Form 10-K and the documents incorporated by reference in evaluating the
Company. If any of the following risks actually occur, the Company’s business,
financial condition or results of operations could be materially adversely
affected.
After
years of litigation against the State of Florida (the “State”) in an effort to
secure drilling permits to use its Leases or to secure compensation for the
taking of those Leases, the Company, along with its majority owned subsidiary
Coastal Petroleum Company and royalty holders, has entered into an agreement
(the Agreement) with the State through which the Company will surrender the
Leases and the Company will receive compensation from the State. Recent court
decisions against the Company and its subsidiary and the State’s continuing
anti-drilling policies have made it clear that Coastal Petroleum will not be
allowed to drill on its Leases and, despite that fact, the courts have not
found
that the Leases were taken and have not awarded the Company compensation. The
Company has also been unable to raise additional funds to continue operations
and has only survived this last year on loans from officers of the Company.
Under the Agreement with the State, the Company will receive and distribute
the
following:
|
|
|
|
|
Agreement
with the State
|
|
$
|
12,500,000
|
|
|
|
|
|
|
To
Lykes Mineral Corporation
|
|
|
1,390,000
|
|
To
Outside Royalty Holders
|
|
|
2,225,000
|
|
|
|
|
|
|
To
the Company and its Subsidiary
|
|
|
8,885,000
|
|
|
|
|
|
|
To
Settlement Consultant
|
|
|
465,000
|
|
To
Company Creditors (as of April 30, 2005)
|
|
|
|
|
CCO
|
|
|
230,000
|
|
CPC
|
|
|
2,265,000
|
|
Amount
to Company and Subsidiary |
|
|
|
|
After
payment to Creditors
|
|
$
|
5,925,000
|
|
The
other
shareholders of Coastal Petroleum have agreed to sell their shares back to
Coastal Petroleum for a total of $801,923.03 out of the remaining funds in
the
subsidiary. Coastal will then own 100% of the subsidiary.
RISKS
RELATED TO OUR BUSINESS AND THE LITIGATION
We
may be forced to wind up the Company or forced into insolvent
liquidation.
The
Company’s current liabilities exceed its current assets. Certain creditors of
the Company have deferred payment of amounts owed to them. There is no assurance
that those creditors will continue to permit the Company to defer payments
of
amounts owed.
The
Company has limited funds to continue its operations. In the event the Agreement
is not finally consummated and unless the Company is able to raise adequate
additional funds to continue its business, the Company may be required to wind
up the Company or forced into insolvent liquidation under the laws of Bermuda
within the next several months.
We
have a history of losses and anticipate further losses, which could cause us
to
discontinue our business.
Our
business has never had substantial revenues and has operated at a loss in each
year since our inception in 1953. We recorded a loss of $673,000 for the year
ended December 31, 2004, a loss of $1,008,000 for the year 2003 and a loss
of
$2,448,000 for the year 2002. In the event the Agreement is not finally
consummated and if we continue to sustain losses and are unable to achieve
profitability, we may not be able to continue our business and may have to
curtail, suspend or cease operations.
Our
auditors have expressed the view that our negative working capital,
stockholders' deficit and capital deficiencies raise substantial doubt about
our
ability to continue as a going concern.
Our
auditors have included an explanatory paragraph in their report for the year
ended December 31, 2004, indicating there is substantial doubt regarding our
ability to continue as a going concern. The financial statements included
elsewhere in this prospectus do not include any adjustments to asset values
or
recorded liability amounts that might be required in the event we are unable
to
continue as a going concern. You should also see Note 1 to our financial
statements regarding the uncertainty as to our ability to continue as a going
concern.
Without
additional financing, we only have enough liquid assets on hand to continue
to
operate the Company for part of the year 2005.
If
the
Agreement is consummated, we believe that funds on hand will be sufficient
to
permit us to continue to operate through 2005. However, in the event the
Agreement is not finally consummated, we may have to suspend or cease operations
unless and until we can secure additional financing or privately sell additional
shares of our stock. We currently do not have any commitments for additional
financing. We may be unable to obtain additional financing in the future on
acceptable terms or at all.
We
believe that our funds on hand and certain loan committements from our directors
will be sufficient to permit us to continue to operate through June of 2005.
After that time, we may have to suspend or cease operations unless and until
we
can secure additional financing. In 2004 certain of our directors, officers,
legal counsel and administrative consultants agreed to continue deferring the
payment of their salaries and fees. At December 31, 2004, the amount of salaries
and fees deferred totaled approximately $1,594,000. We currently do not have
any
commitments for additional financing. We may be unable to obtain additional
financing in the future on acceptable terms or at all.
|
The
State of Florida has far greater resources than we do to prosecute
the
litigation.
|
The
State
of Florida utilizes lawyers from the Florida Attorney General's Office, the
Department of Environmental Protection and at least two private law firms to
represent its interests in the litigation still pending. In the event that
the
Agreement is not finally consummated and our funds exhausted before the
conclusion of the litigation, we may be unable to conclude the litigation and
might be required to cease business.
If
the amount of money we recover from the State of Florida is inadequate to cover
our costs, we may be forced to cease operations.
The
State
of Florida utilizes lawyers from the Florida Attorney General's Office, the
Department of Environmental Protection and at least two private law firms to
represent its interests in the litigation still pending. In the event that
the
agreement is not finally consummated and our funds are exhausted before the
conclusion of the litigation, we may be unable to conclude the litigation and
might be required to cease business.
Coastal
Caribbean is currently a passive foreign investment company, or PFIC, for U.
S.
Federal income tax purposes, which could result in negative tax consequences
to
you.
If,
for
any taxable year, our passive income or our assets that produce passive income
exceed levels provided by U.S. law, we would be a "passive foreign investment
company," or PFIC, for U.S. federal income tax purposes. For the years 1987
through 2004, Coastal Caribbean's passive income and assets that produce passive
income exceeded those levels and for those years Coastal Caribbean constituted
a
PFIC. Based upon Coastal Caribbean's current passive income, it is likely that
Coastal Caribbean will be classified as a PFIC in 2005. If Coastal Caribbean
is
a PFIC for any taxable year, then our U.S. shareholders potentially would be
subject to adverse U.S. tax consequences of holding and disposing of shares
of
our common stock for that year and for future tax years. Any gain from the
sale
of, and certain distributions with respect to, shares of our common stock,
would
cause a U.S. holder to become liable for U.S. federal income tax under Code
section 1291 (the interest charge regime). The tax is computed by allocating
the
amount of the gain on the sale or the amount of the distribution, as the case
may be, to each day in the U.S. shareholder’s holding period. To the extent that
the amount is allocated to a year, other than the year of the disposition or
distribution, in which the corporation was treated as a PFIC with respect to
the
U.S. holder, the income will be taxed as ordinary income at the highest rate
in
effect for that year, plus an interest charge.
Please
see a discussion of these consequences below in Item 5. Market for the Company’s
Common Stock and Related Stockholder Matters. We encourage you to consult with
a
personal tax advisor for advice relating to the potential adverse tax
consequences related to an investment in our common shares.
Our
Bye-Laws contain provisions which may limit a shareholder's efforts to influence
our policies and prevent or delay a change in control of our
Company.
Bye-Law
1
provides that any matter to be voted on at any meeting of shareholders must
be
approved not only by a simple majority of the shares voted at such meeting,
but
also by a majority of the shareholders present in person or by proxy and
entitled to vote at the meeting. This provision may have the effect of making
it
more difficult to take corporate action than customary "one share one vote"
provisions, because it may not be possible to obtain the necessary majority
of
both votes. As a consequence, Bye-Law 1 may make it more difficult that a
takeover of the company will be consummated, which could prevent the company's
shareholders from receiving a premium for their shares. In addition, an owner
of
a substantial number of shares of our common stock may be unable to influence
our policies and operations through the shareholder voting process (e.g., to
elect directors).
Our
Bye-Laws also require the approval of 75% of the voting shareholders and of
the
voting shares for the consummation of any business combination (such as a
merger, amalgamation or acquisition proposal) involving our company. This higher
vote requirement may deter business combination proposals which shareholders
may
consider favorable.
We
are unable to pay dividends.
We
have
never declared or paid dividends on our common stock and do not anticipate
declaring or paying any dividends in the foreseeable future. We plan to retain
any future earnings to reduce our deficit accumulated during the development
stage of $40,124,000 at December 31, 2004 and to finance our
operations.
Any
dividends would be subject to a 30% withholding tax.
We
are a
Bermuda corporation. Bermuda currently imposes no taxes on corporate income
or
capital gains realized outside of Bermuda. However, any dividends we receive
from Coastal Petroleum are subject to a 30% United States withholding
tax.
RISKS
RELATED TO OUR INDUSTRY
|
Compliance
with environmental and other governmental regulations could be
costly.
|
Our
operations and right to obtain interests in and hold properties or to conduct
our business might be affected to an unpredictable extent by limitations imposed
by the laws and regulations which are now in effect or which might be adopted
by
the jurisdictions in which we carry on our business.
Further
measures that have been or might be imposed include increased bond requirements,
conservation, proration, curtailment, cessation or other forms of limiting
or
controlling production of hydrocarbons or minerals, as well as price controls
or
rationing or other similar restrictions. In particular, environmental control
and energy conservation laws and regulations adopted by federal, state and
local
authorities may have to be complied with.
|
We
face strong competition from larger oil and gas companies that may
impair
our ability to carry on
operations.
|
We
plan
to operate in the highly competitive areas of oil and gas exploration,
development and production. We might not be able to compete with, or enter
into
cooperative relationships with, our potential competitors, which include major
integrated oil companies, substantial independent energy companies, affiliates
of major interstate and intrastate pipelines and national and local gas
gatherers. If we were unable to establish and maintain competitiveness, our
business would be threatened.
Many
of
our competitors possess greater financial, technical and other resources than
we
do. Factors which affect our ability to successfully compete in the marketplace
include:
· |
the
financial resources of our
competitors;
|
· |
the
availability of alternate fuel sources;
and
|
· |
the
costs related to the extraction and transportation of oil and
gas.
|
Cautionary
Statement About Forward-Looking Statements
In
this
Form 10-K and the documents that we incorporate by reference, we make statements
that relate to our future plans, objectives, expectations and intentions that
involve risks and uncertainties. We have based these statements on our current
expectations and projections about future events. These statements may be
identified by the use of words such as "expect," "anticipate," "intend," "plan,"
"believe" and "estimate" and similar expressions. Any statements that refer
to
expectations, projections or other characterizations of future events or
circumstances are forward-looking statements.
Forward-looking
statements necessarily involve risks and uncertainties. Our actual results
could
differ materially from those discussed in, or implied by, these forward-looking
statements. Factors that could contribute to such differences include, but
are
not limited to, those discussed in the "Risk Factors" section above and
elsewhere in this Form 10-K. The factors set forth in the Risk Factors section
and other cautionary statements made in this Form 10-K should be read and
understood as being applicable to all related forward-looking statements
wherever they appear in this Form 10-K.
All
subsequent written and oral forward-looking statements attributable to us are
expressly qualified in their entirety by the cautionary statements. You are
cautioned not to place undue reliance on these forward-looking statements,
which
speak only as of their dates. We undertake no obligation to publicly update
or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
(a) |
General Development of Business.
|
Coastal
Caribbean Oils & Minerals, Ltd. (Company or Coastal Caribbean), a Bermuda
corporation, has been engaged, through its majority owned subsidiary, Coastal
Petroleum Company (Coastal Petroleum), in the exploration for oil and gas
reserves. At December 31, 2004, Coastal Caribbean's principal asset was its
58.84% interest in its subsidiary Coastal Petroleum. Coastal Petroleum's
principal assets are its nonproducing oil, gas and mineral leases and royalty
interests in the State of Florida. Coastal Petroleum is the lessee under State
of Florida leases relating to the exploration for and production of oil, gas
and
minerals on approximately 3,700,000 acres of submerged lands along the Gulf
Coast and under certain inland lakes and rivers. The leases provide for a
working interest in approximately 1,250,000 acres and a royalty interest in
approximately 2,450,000 acres covered by the leases.
Coastal
Petroleum has made no commercial discoveries on its leaseholds and for more
than
15 years, the State has prevented Coastal from using its leases. Since the
late
1980’s the State has used laws, policies and permit denials to prevent and
prohibit drilling and production of oil and gas offshore Florida and to deny
Coastal the use of its leases. The Company has vigorously litigated to be able
to use its leases or to be compensated for the State’s taking of them. During
2004, the Company continued its legal battle by asking the United States Supreme
Court to hear its case. However,
on June 14, 2004, the United States Supreme Court denied the Writ of Certiorari
and no further appeal of that claim can be taken. See Item 3. “Legal
Proceedings”.
After
the
United States Supreme Court refused to hear the case and the Company’s legal
options were limited, the State of Florida contacted the Company regarding
a
possible buyback of the Company’s leases. With limited financial resources to
continue the legal fight, which was constrained by the recent court decisions,
the Company continued discussions with the State and ultimately, on June 1,
2005
entered an agreement to surrender the leases back to the State of Florida in
exchange for compensation as set out below. The Agreement will allow the Company
to end all of its current litigation and will provide it the capital to move
forward with drilling opportunities in other locations. The Agreement is
contingent upon approval of funding by the State, and the Company and other
parties to the Agreement providing releases and certain other documents to
the
State.
A
condition of the Agreement is that Coastal Petroleum and the royalty holders
be
joined in one agreement. Under the Agreement, the State will repurchase Coastal
Petroleum’s Leases and the royalties held by various individuals and Coastal
Caribbean, for a total of $12.5 million. The parties will also sign mutual
releases and will dismiss pending actions against each other. The money received
from the State will be divided between the parties in interest. Under the
Agreement with the State, the Company will receive and distribute the
following:
|
|
|
|
Agreement
with the State
|
|
$
|
12,500,000
|
|
|
|
|
|
|
To
Lykes Mineral Corporation
|
|
|
1,390,000
|
|
To
Outside Royalty Holders
|
|
|
2,225,000
|
|
|
|
|
|
|
To
the Company and its Subsidiary
|
|
|
8,885,000
|
|
|
|
|
|
|
To
Settlement Consultant
|
|
|
465,000
|
|
To
Company Creditors (as of April 30, 2005)
|
|
|
|
|
CCO
|
|
|
230,000
|
|
CPC
|
|
|
2,265,000
|
|
|
|
|
|
|
Amount
to Company and Subsidiary After payment to Creditors
|
|
$
|
5,925,000
|
|
The
other
shareholders of Coastal Petroleum have agreed to sell their shares back to
Coastal Petroleum for a total of $801,923.03 out of the remaining funds in
the
subsidiary. This would leave Coastal Caribbean, which has 46,211,604 shares
outstanding, owning 100% of Coastal Petroleum Company. A copy of the Agreement
is attached hereto as Exhibit 10.(h).
The
Florida Legislature addressed the funding of this Agreement by the State in
the
recent legislative session which began in March of this year. The Governor
and
Cabinet, sitting as the Board of Trustees of the Internal Improvement Trust
Fund, approved the Agreement on June 1, 2005. Upon approval of the Legislative
Budget Commission, the Company expects to receive the funds after July 1 of
this
year. The date of closing will also be determined by the time it takes for
the
parties to collect and exchange with the State the releases and other documents
set out in the Agreement. The Company will continue to develop plans for its
continued operations.
In
recent
years the Company has described the valuable prospects that, based upon expert
advice, management believes lie offshore Florida on the Company’s leases.
However, without a permit to drill those prospects, their value can never be
realized. For years the Company litigated against the State of Florida and
provided it with every piece of information it requested, in an effort to obtain
a permit to drill. That process for a single location took years and cost the
Company more than $1 million. The end result was that the State denied the
permit based upon a balancing process that gave greater weight to its
anti-offshore drilling policy and the environment than to rights of the Company.
That process and decision was affirmed on appeal, but the court decision left
open the possibility that the State would have to pay compensation for its
denial of the use of the leases. The Company filed a claim for compensation
for
the denial of the use of its lease, but the trial court found that the State
did
not have to pay compensation, based, in part, upon the nature of the Company’s
lease interest. The State has filed motions seeking to extend the Court’s
reasoning to the entirety of Coastal’s leases.
In
light
of the recent decisions, the high cost and futility of pursuing another permit
and the Company’s financial condition, management believes that every stone has
been turned in efforts to drill on its leases and that the Agreement is in
the
best interest of the Company and its shareholders. Recent efforts to raise
funds
have not been successful. The Company has been sustained on loans from officers
and grace from some of its creditors. The position of the State of Florida
regarding offshore drilling and the enormous cost and toll of litigation
required to overcome that position to be able to drill on the leases has
discouraged interest in the leases by other operating oil and gas companies.
In
the past, major oil companies have encountered similar problems and have been
unable to explore or develop their leases offshore Florida. As described in
this
document, a potential option for the Company is dissolution which would take
place under Bermuda laws. Based upon advice regarding Bermuda insolvency law,
such an insolvency process would have a less favorable result for the Company
and shareholders than would the Agreement.
(b) |
Financial
Information About Industry Segments.
|
Because
the Company has been engaged in only one industry, namely, oil, gas and mineral
exploration and development, this item is not applicable to the Company. See
Item 8 for general financial information concerning the Company.
(c) |
Narrative
Description of the Business.
|
Coastal
Caribbean was organized in Bermuda on February 14, 1962. The Company is the
successor to Coastal Caribbean Oils, Inc., a Panamanian corporation organized
on
January 31, 1953 to be the holding company for Coastal Petroleum
Company.
Coastal
Petroleum caused oil and gas exploration to take place on its leases prior
to
the beginning of litigation in 1968 but has conducted more limited exploration
since that time. Coastal Petroleum believes all drilling and exploration
obligations imposed by its leases have been satisfied to date. No commercial
oil
or gas discoveries have been made on these properties; therefore, the Company
has no proved reserves of oil and gas and has had no production. See Item 2.
“Properties.”
Not
applicable.
|
(ii) |
Status
of Product or Segment.
|
Not
applicable.
Not
applicable.
|
(iv) |
Patents,
Licenses, Franchises and Concessions Held.
|
See
Item
2. “Properties."
The
acreage covered by Coastal Petroleum’s leases is located for the most part along
offshore areas on the Gulf Coast of Florida and in submerged and unsubmerged
lands under certain bays, inlets, riverbeds and lakes, of which Lake Okeechobee
is the largest. Coastal Petroleum historically made an annual lease payment
of
$59,247 to the State of Florida. These lease payments were not made during
2004,
pending the outcome of the Agreement with the State of Florida.
See
Item
1(a)
General Development of Business above for a more complete discussion of the
Agreement with the State.
|
(v) |
Seasonality
of Business.
|
The
Company's business is not seasonal.
|
(vi) |
Working
Capital Items.
|
The
Company has substantially no current assets and a working capital deficit of
approximately $2.4 million at December 31, 2004. See Item 8. “Financial
Statements and Supplementary Data.”
Not
applicable.
Not
applicable.
|
(ix) |
Renegotiation
of Profits or Termination of Contracts or Subcontracts at the Election
of
the Government.
|
Not
applicable.
|
(x) |
Competitive
Conditions in the Business.
|
Competition
in the oil and gas industry is intense. The Company must compete with companies
which have substantially greater resources available to them. In addition,
the
industry as a whole must compete with other industries in supplying the energy
needs of commerce and the general public. Furthermore, competitive conditions
may be substantially affected by energy legislation which may be adopted in
the
future.
|
(xi) |
Research and Development.
|
Not
applicable.
|
(xii) |
Environmental Regulation.
|
The
operations of Coastal Caribbean and its right to obtain interests in and hold
properties or to do business may be affected to an unpredictable extent by
limitations imposed by the laws and regulations which are now in effect or
which
may be adopted by the jurisdictions in which the Company carries on its
business. Further measures that have been or might be imposed include increased
bond requirements, conservation, proration, curtailment, cessation or other
forms of limiting or controlling production of hydrocarbons or minerals, as
well
as price controls or rationing or other similar restrictions. In particular,
environmental control and energy conservation laws and regulations adopted
by
federal, state and local authorities may have to be complied with.
|
(xiii) |
Number
of Persons Employed by Registrant.
|
The
Company currently has one employee. The Company relies heavily on consultants
for legal, accounting, geological and administrative services. The Company
uses
consultants because it believes it is more cost effective than employing a
larger full time staff.
(d) |
Financial
Information About Foreign and Domestic Operations and
Export Sales.
|
All
of
the Company's assets are located in the United States. See Item 1(a) “General
Development of Business.”
Since
the
Company is a development stage company, the balance of the information required
under this paragraph is not applicable to the Company. See Item 8.
“Financial Statements and Supplementary Data.”
|
(2) |
Risks
Attendant to Foreign Operations.
|
Not
applicable.
|
(3) |
Data
which are not Indicative of Current or Future Operations.
|
Not
applicable.
Properties
The
discussion herein relating to the Company’s properties is qualified in its
entirety by the discussion in Item. 3 “Legal Proceedings” relating to the
Florida Litigation especially in repect to the Agreement with the State which,
if it is finally completed, will result in the Leases discussed below being
surrendered to the State of Florida in return for funds that will be used to
carry on operations elsewhere. We have not paid the 2004 annual lease payments,
pending the final outcome of the Agreement with the State of
Florida.
Coastal
Petroleum, a Florida corporation, holds certain working interests in
nonproducing oil, gas and mineral leases covering approximately 1,250,000 acres,
and a royalty interest in approximately 2,450,000 acres, in and offshore the
State of Florida. No commercial oil or gas discoveries have been made on the
properties covered by these leases and Coastal Petroleum has no proved reserves
of oil or gas and has had no significant production.
In
1941,
Arnold Oil Explorations, Inc., renamed Coastal Petroleum Company in 1947,
entered into a contract with the Trustees of the Internal Improvement Trust
Fund
of the State of Florida (Trustees), in whom title to publicly owned lands in
the
State of Florida, including bottoms of salt and fresh waters, is irrevocably
vested, for the exploration of oil, gas and minerals on such lands. Pursuant
to
an option to lease in this contract, the Trustees and Coastal Petroleum entered
into three leases between 1944 and 1946. The acreage covered by these leases
is
located for the most part along offshore areas on the Gulf Coast of Florida
and
in submerged lands under certain bays, inlets, riverbeds and lakes, of which
Lake Okeechobee is the largest.
In
1968,
Coastal Petroleum sued the Secretary of the Army of the United States in a
dispute regarding certain mineral rights. In 1969, as part of that litigation,
the Trustees claimed that the leases were invalid and had been forfeited.
Coastal Petroleum and the Trustees settled their disagreement in
1976.
Under
the
terms of the 1976 settlement agreement, the two leases (224-A and 224-B)
bordering the Gulf Coast were divided into three areas, each running the entire
length of the coastline from Apalachicola Bay to the Naples area: (1) The inner
area, including rivers, bays, and harbors, extends seaward from the Florida
shoreline a distance of 4.36 statute miles (5,280 feet per statute mile) into
the Gulf, covers approximately 2.25 million acres, and is subject to a royalty
interest payable to Coastal Petroleum. This interest is a 6¼% royalty on the
wellhead value of all oil and gas, 25 cents per long ton on sulfur,
receivable in cash or in kind at Coastal Petroleum's option, and a 5% royalty
on
production or the market value of other minerals. (2) The middle area, three
statute miles wide and covering more than 800,000 acres, was released by Coastal
Petroleum to the Trustees, and Coastal Petroleum has no further interest in
the
area. (3) Coastal Petroleum presently owns a 100% working interest in the
outside area, which extends seaward an additional three statute miles and
borders federal offshore acreage. This area, exceeding 800,000 acres, remains
subject to royalties payable to the State of Florida of 12½% on oil and gas,
$.50 per long ton of sulfur and 10% on other minerals. The Florida legislature
has enacted statutes designed to protect the Big Bend Seagrass Aquatic Preserve,
an area covering approximately one quarter of Coastal Petroleum's working
interest area. However, the legislation and legislative history recognize and
preserve Coastal Petroleum's prior rights as granted by the leases.
Coastal
Petroleum retains a 100% working interest in 450,000-acre Lake Okeechobee which
is a part of Lease 248 and which is also subject to royalties payable to the
State of Florida of 12½% on oil and gas, $.50 per long ton of sulfur and 10% on
other minerals. Pursuant to its settlement with the State of Florida in 1976,
Coastal Petroleum agreed not to conduct exploration, drilling or mining
operations on Lake Okeechobee without the prior approval of the State. As to
the
balance of this lease, covering approximately 200,000 acres, Coastal Petroleum
retains royalty interests of 6¼% on oil, gas and sulfur and 5% on other
minerals.
Under
the
1976 settlement agreement with the Trustees, the three leases have a term of
40
years beginning from January 6, 1976 and require the payment of an annual rental
of $59,247, if oil, gas or minerals are being produced in economically
sustainable quantities at January 6, 2016, these operations will be allowed
to
continue until they become uneconomic. Further, the settlement agreement
provides that the drilling requirements shall be governed by Chapter 20680,
Laws
of Florida, Acts of 1941, and that all other drilling requirements are waived.
Under the 1941 Act, a lessee is required to drill at least one test well on
lands leased in each five-year period under the term of the lease. Coastal
Petroleum believes it is current in fulfilling its drilling requirements. The
State of Florida has refused Coastal Petroleum the right to drill on Lease
248
since August 10, 1986.
The
following charts reflect the acreage and annual rental obligations resulting
from the 1976 settlement agreement with the Trustees and the approximate acreage
under lease at December 31, 2004:
|
|
Current
|
|
Current
|
|
Current
|
|
|
|
Working
|
|
Royalty
|
|
Annual
|
|
Lease
|
|
Interest
|
|
Interest
|
|
Rental
|
|
224-A
and 224-B
|
|
|
800,000
|
|
|
2,250,000
|
|
$
|
39,261
|
|
248
|
|
|
450,000
|
|
|
200,000
|
|
|
19,986
|
|
|
|
|
1,250,000
|
|
|
2,450,000
|
|
$
|
59,247
|
|
Acreage under lease at December
31, 2004
|
|
|
|
|
|
|
|
|
|
Gross
Acres (*)
|
|
Net
Acres (**)
|
|
|
|
Undeveloped
|
|
Developed
|
|
Undeveloped
|
|
Developed
|
|
Working
interest
|
|
|
1,250,000
|
|
|
-0-
|
|
|
1,250,000
|
|
|
-0-
|
|
Royalty
interest
|
|
|
2,450,000
|
|
|
-0-
|
|
|
153,125
|
|
|
-0-
|
|
Total
|
|
|
3,700,000
|
|
|
-0-
|
|
|
1,403,125
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
A
gross acre is an acre in which a working interest is
owned.
|
|
**
|
A
net acre is deemed to exist when the sum of fractional ownership
working
interests in gross acres equals one. The number of net acres is the
sum of
the fractional working interests owned in gross acres expressed as
whole
numbers and fractions thereof.
|
Disclosure
Concerning Oil and Gas Operations.
Since
the
properties in which the Company has interests are undeveloped and nonproducing,
items 2 through 4 of Securities Exchange Act Industry Guide 2 are not
applicable.
The
Company's undeveloped acreage as of December 31, 2004 was as
follows:
|
|
Gross Acres
|
|
Net Acres
|
|
Working
Interest
|
|
|
1,250,000
|
|
|
1,250,000
|
|
Royalty
Interest
|
|
|
2,450,000
|
|
|
153,125
|
|
Total
|
|
|
3,700,000
|
|
|
1,403,125
|
|
None
None
(8) |
Delivery
Commitments.
|
None
Royalties
and Other Interests
In
addition to royalties payable to the State of Florida as set forth above,
Coastal Petroleum's leases are subject to several royalties and other interests.
The leases are presently subject to overriding royalties aggregating 1/16 as
to
oil, gas and sulphur and 13/600ths as to minerals other than oil, gas and
sulphur.
We
also
have granted to certain officers, directors, counsel and consultants of Coastal
Petroleum and Coastal Caribbean the right to receive a percentage of the net
recoveries from the Florida Litigation. The costs and fees for the years
involved in the Florida litigation exceed the amount of the funds Coastal
Petroleum will receive under the Agreement with the State. Therefore, if the
Agreement is finally consummated, there is no net recovery and no contingency
fees due under the contingent interests granted to officers, directors and
counsel. See Item 3. "Legal Proceedings" and Item 13. "Certain Relationships
and
Related Transactions."
Mineral
Rights
Coastal
Petroleum's Leases 224-A, 224-B and 248 were determined by a Florida State
court
in 1960 to cover not only oil, gas and sulphur, but also all other minerals.
Subsequent litigation has held that these other minerals do not embrace certain
deposits of shell accumulated on water bottoms which had not yet become mineral,
and that Lake Hancock is not within the area covered by Lease 224-B. Under
the
1976 settlement agreement with the State of Florida, Coastal Petroleum retains
a
5% royalty with respect to mineral production. However, it cannot conduct mining
operations in 450,000-acre Lake Okeechobee without the prior approval
of the State of Florida. Although
Coastal Petroleum had conducted limited mineral exploration activities on its
leases, the courts during the 1980's limited its rights to mine minerals.
Coastal Petroleum has no independent knowledge of commercial deposits
on
its leases. If the Agreement with the State becomes final, as described in
Item
1(a)
General Development of Business above,
these
rights will be surrendered to the State of Florida in exchange for
compensation.
Agreement
with the State of Florida
For
years
Coastal Petroleum has litigated against the State in an effort to secure
drilling permits and drill for oil off the coast of Florida. The State has
denied Coastal Petroleum permission to drill on its Leases, a decision that
has
been upheld by a Florida court. Florida courts have also denied Coastal
Petroleum compensation for a taking of the Leases. Since that time, efforts
to
secure funding to continue operations have not been successful. Furthermore,
the
longstanding State policy against any drilling for oil or gas offshore of
Florida remains in place with no indication that it will change. In fact, the
policy reflects the Florida Statutes which ban drilling for oil and gas in
Florida state waters. Given the policy and court decisions, any additional
attempt by Coastal Petroleum to secure a permit to drill its Leases is seen
by
Management as futile.
After
the
United States Supreme Court refused to hear Coastal Petroleum’s taking case in
2004 and the Company’s legal options were limited, the State of Florida
contacted Coastal Petroleum regarding a possible buyback of its leases. With
limited financial resources to continue a legal fight which was further
frustrated with recent court decisions, Coastal Petroleum continued discussions
with the State and ultimately, on June 1, 2005 was joined by Coastal Caribbean
in
accepting an offer by the State of Florida to repurchase Coastal Petroleum’s
Florida Leases. The
Company will receive $5.9 million after payment to all creditors. The
Agreement will allow the Company to end all of its litigation, including the
State’s action for costs against the Company arising from the inverse
condemnation trial on Lease 224-A, and will provide it the capital to move
forward with drilling opportunities in other locations. The Agreement is
conditioned upon approval of funding by the State, and the Company and other
parties to the Agreement providing certain documents to the State as outlined
above in Item 1(a) General Development of Business. Since the finalization
of
the Agreement has not yet occurred and is contingent, the following descriptions
remain applicable until such finalization does occur.
Florida
Litigation
Coastal
Petroleum has been involved in various lawsuits for many years. Coastal
Petroleum's recent litigation has involved one basic claim: whether the State’s
offshore drilling policy and its denial of a permit constitute a taking of
Coastal Petroleum’s property. In addition, Coastal Caribbean is a party to
another action in which Coastal Caribbean claims that certain of its royalty
interests have been confiscated by the State.
Drilling
Permit Litigation - Lease
Taking Case (Lease 224-A)
Since
1992,
Coastal Petroleum has sought a permit from the Florida Department of
Environmental Protection (the “DEP”) to drill an exploratory oil and gas well
off Apalachicola, Florida. The permit has been repeatedly denied leaving Coastal
without a permit and the alternative of seeking compensation for the taking
of
its lease.
During
the past year, Coastal Petroleum continued its legal battle in an attempt to
obtain compensation for the taking of its lease. Previously, the trial court
ruled that the State’s denial of a permit to drill on Lease 224-A did not
constitute an unlawful taking of Coastal Petroleum’s property and that decision
was affirmed by the Florida First District Court of Appeal. On April 8, 2004,
Coastal Petroleum filed a Petition for Writ of Certiorari with the United States
Supreme Court asking the Court to accept jurisdiction to consider the action
taken by the trial court as affirmed by the appellate court. The State’s Answer
Brief and Coastal’s subsequent Reply Brief were filed by May 21, 2004. On June
14, 2004, the United States Supreme Court denied the Writ of Certiorari, leaving
no further avenue of appeal for this claim.
Meanwhile,
after the trial in 2002, the State filed a motion for an order by the trial
court by which the State seeks to recover $178,315 from Coastal Petroleum,
including expert witness fees, deposition costs and copying costs. Coastal
Petroleum has filed objections and responses to the State’s motion, objecting to
the costs and requesting an evidentiary hearing. On April 9, 2003, the State
agreed not to pursue its motion until after conclusion of the appeal in this
case and the motion has not been set for hearing. Under the Agreement with
the
State, this claim would be dismissed.
Ancillary
Matters to Lease Taking Case (Lease 224-A)
In
2001,
certain holders of royalties, which aggregate approximately 4%, were allowed
to
intervene on a limited basis in the Lease 224-A takings lawsuit. Counsel
for the appealing royalty holders advised Coastal Petroleum that the royalty
holders' position is that their interest is worth substantially more than 4%
of
whatever judgment may be awarded to Coastal Petroleum in the litigation and
that
they intend to make a claim against any recovery Coastal Petroleum may obtain
in
the litigation. Coastal Petroleum informed the Circuit Court and counsel for
the
royalty holders that Coastal Petroleum was not making any claim in the
litigation on behalf of any interest the royalty holders may have.
Other
Permit Applications
In
order
to more fully permit the Apalachicola Reef Play, which includes the St. George
Island prospect, on October 29, 1998, Coastal Petroleum filed four additional
permit applications (1310-1313). The DEP requested additional data for these
applications and as
of June
1, 2005, Coastal Petroleum had not yet submitted the requested data.
Although
these applications are still pending, Coastal Petroleum does not believe the
DEP
will ever grant these permits. Upon the finalization of the Agreement with
the
State, these permits will be withdrawn.
Coastal
Caribbean Royalty Litigation
The
offshore areas covered by Coastal Petroleum's original leases (prior to the
1976
settlement agreement) are subject to certain other royalty interests held by
third parties, including Coastal Caribbean. In 1994, several of those third
parties, including Coastal Caribbean, which has approximately a 12% interest
in
any recovery for the royalty, instituted a separate lawsuit against the State
of
Florida. In that lawsuit the royalty holders claim their interests have been
confiscated as a result of the State's actions discussed above and that they
are
entitled to compensation for that taking. The royalty holders were not parties
to the 1976 settlement agreement, and the royalty holders contend that the
terms
of the settlement agreement do not protect the State from taking claims by
those
royalty holders. The case is still pending in the 2nd
Judicial
Circuit in Tallahassee, Leon County, Florida. Discovery
is proceeding and the
State
has filed a motion for summary judgment. A hearing on the motion originally
set
for April 26, 2005 was cancelled in light of the pending Agreement with the
State described above. Any recovery made in the royalty holders’ lawsuit would
be shared among the various plaintiffs in that lawsuit, including Coastal
Caribbean, but not Coastal Petroleum. Upon the finalization of the Agreement
with the State, this lawsuit will be dismissed by Coastal Caribbean and the
other royalty holders.
Lease
Taking Case (Lease 224-B)
In
Coastal Petroleum’s case in the Leon County Circuit Court, Florida seeking
compensation for the State of Florida’s alleged taking of its property rights to
explore for oil and gas within its State Lease 224-B remains pending. During
the
past year the State filed a motion for summary judgment in this case seeking
to
end this case. Coastal filed a response and the motion was argued in the Second
Judicial Circuit Court for Leon County, Florida on November 10, 2004. The judge
did not rule at the hearing, but took the matter under advisement for further
consideration. To date there has been no ruling in the case. The judge may
grant
summary judgment, deny it or partially grant it. A grant of summary judgment
on
part or all of the case would be a decision by the court on those issues leaving
Coastal the option of an appeal to try to have the summary judgment reversed
and
those matters considered after the trial court receives evidence on those
issues. If summary judgment is denied, the case will proceed through discovery
and on to trial. Upon the finalization of the Agreement with the State, this
lawsuit will be dismissed by the Company.
Counsel
The
Tampa, Florida law firm of Gaylord Merlin Ludovici Diaz & Bain was Coastal
Petroleum’s principal trial counsel in Coastal Petroleum’s inverse condemnation
claim against the State of Florida in Florida Circuit Court (Lease 224-A).
Mr.
Cary Gaylord was the lead attorney for Gaylord Merlin. Mr. Gaylord has extensive
experience in eminent domain and property rights matters. He is a 1969 graduate
of the United States Military Academy and a 1974 graduate of the University
of
Florida Law School.
In
addition, Mr. Robert J. Angerer of the law firm of Angerer & Angerer of
Tallahassee, Florida assisted Gaylord Merlin in the litigation. Mr. Angerer,
age
58, is a 1969 graduate of the University of Michigan and received his law degree
with high honors from Florida State University in 1974. Mr. Angerer was elected
a member of the Board of Directors of Coastal Caribbean and of Coastal Petroleum
on January 30, 2003 and a Vice President of Coastal Caribbean and Coastal
Petroleum on February 28, 2003. Angerer & Angerer is the principal counsel
in Coastal Petroleum’s inverse condemnation claim regarding Lease
224-B.
Contingency
Fees
In
1990,
Coastal Petroleum considered that the following firms or individuals were
important to the success of the litigation against the State of Florida and
agreed to pay them an aggregate of 7.9% in contingent fees based on any net
recovery from execution on or satisfaction of judgment or from settlement of
the
Florida litigation:
|
|
|
|
|
|
Holder
|
|
Relationship
to
Coastal
Petroleum
at
Date of Grant
|
|
Net
Recovery
Percentage
|
|
Reasoner,
Davis & Fox
|
|
|
Special
Counsel
|
|
|
2.00
|
|
Robert
J. Angerer
|
|
|
Litigation
Counsel
|
|
|
1.50
|
|
Benjamin
W. Heath
|
|
|
Chairman
of the Board
|
|
|
1.25
|
|
Phillip
W. Ware
|
|
|
President
|
|
|
1.25
|
|
Murtha
Cullina LLP
|
|
|
Securities
Counsel to Coastal Caribbean
|
|
|
1.00
|
|
James
R. Joyce
|
|
|
Assistant
Treasurer
|
|
|
.30
|
|
Arthur
B. O'Donnell
|
|
|
Vice
President/Treasurer
|
|
|
.30
|
|
James
J. Gaughran
|
|
|
Secretary
|
|
|
.30
|
|
Total
|
|
|
|
|
|
7.9
|
|
In
2004,
a contingency fee in favor of Ausley & McMullen, P.A. originally granted in
1996 expired.
The
costs
and fees for the years involved in the Florida litigation exceed the amount
of
the funds Coastal Petroleum will receive under the Agreement with the State.
Therefore, if the Agreement is finallly consummated, there is no net recovery
and no contingency fees due under the contingent interests granted as discussed
above.
In
addition, Coastal Petroleum has agreed to pay Gaylord Merlin a contingent fee
in
connection with compensation awarded to Coastal Petroleum for the taking of
Lease 224-A, Lease 224-B and Lease 248. Gaylord Merlin has agreed to accept
payment of its current accumulated fees and expenses, $783,423, and release
any
claim to a contingency fee in light of the Agreement with the
State.
As
part
of the process undertaken in arriving at an agreement with the State to
repurchase Coastal Petroleum’s Leases, an agreement was entered between the
Company and John Aurell authorizing Mr. Aurell to represent the Company as
a
settlement consultant in discussions with the State. Under the agreement with
Mr. Aurell, he will be paid $465,000 if the Agreement with the State is
finalized as it is currently structured.
Uncertainty
/ No Assurances
The
Agreement with the State is conditioned upon approval of the funding and
submission of documents. If the Agreement does not proceed to finalization,
Coastal Petroleum and/or Coastal Caribbean may not prevail on any of the issues
set forth above and may not recover compensation for any of their claims. In
addition, even if Coastal Petroleum were to prevail on any or all of the issues
to be decided, Coastal Caribbean or Coastal Petroleum may not have sufficient
financial resources to survive until such decisions become final. In the
unlikely event that the State of Florida were to grant a permit to drill any
wells for which applications have been filed, the wells drilled may not be
successful and may not lead to production of any oil or gas in commercial
quantities.
Item
4. |
Submission
of Matters to a Vote of Security
Holders
|
None.
PART II
Item
5. |
Market
for the Company's Common Stock, Related Stockholder Matters
and Issurer Purchases of Equity
Securities
|
The
principal market for the Company's common stock is in the over-the-counter
market on the "Electronic Bulletin Board" of the National Association of
Securities Dealers, Inc. under the symbol COCBE.OB.
The
quarterly high and low closing prices on the Electronic Bulletin Board during
the last two years were as follows:
On
February 13, 2003, Coastal Caribbean’ shares of common stock were delisted from
trading on the Boston Stock Exchange because the Company’s shareholders’ equity
was less than the $1,000,000 minimum amount required by the
Exchange.
2003
|
|
1st quarter
|
|
2nd quarter
|
|
3rd quarter
|
|
4th quarter
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
.25
|
|
|
.16
|
|
|
.51
|
|
|
.45
|
|
Low
|
|
|
.10
|
|
|
.09
|
|
|
.16
|
|
|
.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
1st
quarter
|
|
|
2nd
quarter
|
|
|
3rd
quarter
|
|
|
4th
quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
.09
|
|
|
.27
|
|
|
.26
|
|
|
.15
|
|
Low
|
|
|
.05
|
|
|
.06
|
|
|
.10
|
|
|
.05
|
|
The
approximate number of record holders of the Company's common stock at May 31,
2005 was 8,200.
The
Company has never declared or paid dividends on its common stock and it does
not
anticipate declaring or paying any dividends in the foreseeable future. The
Company plans to retain any future earnings to reduce the deficit accumulated
during the development stage of $40,124,000 at December 31, 2004 and to finance
its operations.
The
Company's Memorandum of Association and Bye-laws do not permit the Company
to
repurchase or redeem shares of its common stock.
Foreign Exchange Control Regulations
The
Company is subject to the applicable laws of The Islands of Bermuda relating
to
exchange control, but has the permission of the Foreign Exchange Control of
Bermuda to carry on business in, to receive, disburse and hold United States
dollars and dollar securities under its designation as an External Account
Company. The Company has been advised that, although as a matter of law it
is
possible for such designation to be revoked, there is little precedent for
revocation under Bermuda law.
Income
and Withholding Taxes
Coastal
Caribbean is a Bermuda corporation. Bermuda currently imposes no taxes on
corporate income or capital gains realized outside of Bermuda. Any amounts
received by Coastal Caribbean from United States sources as dividends, interest,
or other fixed or determinable annual or periodic gains, profits and income,
will be subject to a 30% United States withholding tax. In addition, any
dividends from its domestic subsidiary, Coastal Petroleum, will not be eligible
for the 100% dividends received deduction, which is allowable in the case of
a
United States parent corporation. Shares of the Company held by persons who
are
citizens or residents of the United States are subject to federal estate and
gift and local inheritance taxation. Any dividends received by such persons
will
also be subject to federal, State and local income taxation. The foregoing
rules
are of general application only, and reflect law in force as of the date of
this
report.
A
convention between Bermuda and the United States relating to mutual assistance
on tax matters became operative in 1988.
Passive
Foreign Investment Company Rules
The
Internal Revenue Code of 1986, as amended, provides special rules for
distributions received by U.S. holders on stock of a passive foreign investment
company (PFIC), as well as amounts received from the sale or other disposition
of PFIC stock.
Under
the
PFIC rules, a non-U.S. corporation will be classified as a PFIC for U.S. federal
income tax purposes in any taxable year in which, after applying certain
look-through rules, either (1) at least 75 percent of its gross income is
passive income or (2) at least 50 percent of the gross value of its assets
is
attributable to assets that produce passive income or are held for the
production of passive income.
Passive
income for this purpose generally includes dividends, interest, royalties,
rents, and gains from commodities and securities transactions. Special rules
apply in cases where a foreign corporation owns directly or indirectly at least
a 25 percent interest in a subsidiary, measured by value. In this case, the
foreign corporation is treated as holding its proportionate share of the assets
of the subsidiary and receiving directly its proportionate share of the income
of the subsidiary when determining whether it is a PFIC. Thus, Coastal Caribbean
would be deemed to receive its pro rata share of the income and to hold its
pro
rata share of the assets, of Coastal Petroleum.
Based
on
certain estimates of its gross income and gross assets and the nature of its
business, Coastal Caribbean would be classified as a PFIC for the years 1987
through 2004. Once an entity is considered a PFIC for a taxable year, it will
be
treated as such for all subsequent years with respect to owners holding the
stock in a year that it was classified as a PFIC under the income or asset
test
described above. Whether the Company will be a PFIC under either of these tests
in future years will be difficult to determine because the tests are applied
annually. Based upon Coastal Caribbean's current passive income, it is likely
that Coastal Caribbean will be classified as a PFIC in 2005.
If
Coastal Caribbean is classified as a PFIC with respect to a U.S. holder any
gain
from the sale of, and certain distributions with respect to, shares of our
common stock, would cause a U.S. holder to become liable for U.S. federal income
tax under Code section 1291 (the interest charge regime). The tax is computed
by
allocating the amount of the gain on the sale or the amount of the distribution,
as the case may be, to each day in the U.S. shareholder’s holding period. To the
extent that the amount is allocated to a year, other than the year of the
disposition or distribution, in which the corporation was treated as a PFIC
with
respect to the U.S. holder, the income will be taxed as ordinary income at
the
highest rate in effect for that year, plus an interest charge. The interest
charge would generally be calculated as if the distribution or gain had been
recognized ratably over the U.S. holder's holding period (for PFIC purposes)
for
the shares. To the extent an amount is allocated to the year of the disposition
or distribution, or to a year before the first year in which the corporation
qualified as a PFIC, the amount so allocated is included as additional gross
income for the year of the disposition or distribution. A U.S. holder also
would
be required to make an annual return on IRS Form 8621 that describes any
distributions received with respect to our shares and any gain realized on
the
sale or other disposition of our shares.
As
an
alternative to taxation under the interest charge regime, a U.S. holder
generally can elect, subject to certain limitations, to annually take into
gross
income the appreciation or depreciation in our common shares' value during
the
tax year (mark-to-market election). If a U.S. holder makes the mark-to-market
election, the U.S. holder will not be subject to the above-described rule.
Instead, if a U.S. holder makes the mark-to-market election, the U.S. holder
recognizes each year an amount equal to the difference as of the close of the
taxable year between the U.S. holder's fair market value of the common shares
and the adjusted basis in the common shares. Losses would be allowed only to
the
extent of net gain previously included by the U.S. holder under the
mark-to-market election for prior taxable years. Amounts included in or deducted
from income under the mark-to-market election and actual gains and losses
realized upon the sale or disposition of the common shares, subject to certain
limitations, will be treated as ordinary gains or losses. If the mark-to-market
election is made for a year other than the first year in the U.S. holder’s
holding period in which the corporation was a PFIC, the first year’s
mark-to-market inclusion, if any, is taxed as if it were a distribution subject
to the interest charge regime discussed above.
Another
alternative election which would allow a U.S. holder to elect to take its pro
rata share of Coastal Caribbean's undistributed income into gross income as
it
is earned by Coastal Caribbean (QEF election) would only be available to a
U.S.
holder if Coastal Caribbean provided certain information to the shareholders
of
Coastal Caribbean. Coastal Caribbean has had no undistributed income for the
years 1987 through 2004. If the QEF election is made in a year other than the
first year of the U.S. holder’s holding period in which the foreign corporation
is a PFIC, both the QEF regime and interest charge regime can apply, unless
a
special election is made. Under this special election, the taxpayer is treated
as if it disposed of its PFIC stock in a transaction subject to the interest
charge rules to the extent gain is deemed to be recognized. Once this election
is made, the holder will be subject only to the QEF regime.
Recent
Sales of Unregistered Securities
None
Purchases
of Equity Securities by the Issuer and Affiliated
Purchasers
None
Item
6. |
Selected
Consolidated Financial
Information
|
The
following selected consolidated financial information (in thousands except
for
per share amounts) for the Company insofar as it relates to each of the five
years in the period ended December 31, 2004 has been extracted from the
Company's consolidated financial statements.
|
|
Years
ended December 31,
|
|
|
|
2004
|
|
2003
|
|
2002
|
|
2001
|
|
2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(673
|
)
|
$
|
(1,008
|
)
|
$
|
(2,448
|
)
|
$
|
(6,585
|
)
|
$
|
(1,386
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share (basic and diluted)
|
|
|
(.01
|
)
|
|
(.02
|
)
|
|
(.05
|
)
|
|
(.15
|
)
|
|
(.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents and marketable securities
|
|
|
–
|
|
|
3
|
|
|
292
|
|
|
609
|
|
|
2,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unproved
oil, gas and, mineral properties (full cost method)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
17
|
|
|
91
|
|
|
707
|
|
|
1,077
|
|
|
7,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
(deficit) equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
5,545
|
|
|
5,545
|
|
|
5,545
|
|
|
5,216
|
|
|
5,216
|
|
Capital
in excess of par value
|
|
|
32,138
|
|
|
32,138
|
|
|
32,068
|
|
|
31,498
|
|
|
31,498
|
|
Deficit
accumulated during the development stage
|
|
|
(40,124
|
)
|
|
(39,451
|
)
|
|
(38,443
|
)
|
|
(35,996
|
)
|
|
(29,410
|
)
|
Total
shareholders’ (deficit) equity
|
|
|
(2,441
|
)
|
|
(1,768
|
)
|
|
(830
|
)
|
|
718
|
|
|
7,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock shares outstanding (weighted average)
|
|
|
44,212
|
|
|
44,212
|
|
|
44,734
|
|
|
43,468
|
|
|
40,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item
7. |
Management's
Discussion and Analysis of Financial Condition and
Results of
Operations
|
Statements
included in Management's Discussion and Analysis of Financial Condition and
Results of Operations which are not historical in nature are intended to be
forward looking statements. The Company cautions readers that forward looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those indicated in the forward looking
statements. For a discussion of certain risk factors affecting the Company,
please see “Risk Factors” above.
Critical
Accounting Policies
The
Company follows the full cost method of accounting for its oil and gas
properties. All costs associated with property acquisition, exploration and
development activities whether successful or unsuccessful are capitalized.
Since
the
Company’s properties were undeveloped and nonproducing and the subject of
litigation, capitalized costs were not being amortized, however, as more fully
described in Note 3, these costs were written off in 2001.
The
capitalized costs are subject to a ceiling test which basically limits such
costs to the aggregate of the estimated present value discounted at a 10% rate
of future net revenues from proved reserves, based on current economic and
operating conditions, plus the lower of cost or fair market value of unproved
properties. The Company assesses whether its unproved properties are impaired
on
a periodic basis. This assessment is based upon work completed on the properties
to date, the expiration date of its leases and technical data from the
properties and adjacent areas. These properties are subject to extensive
litigation with the State of Florida.
During
the
year
2001, the Company concluded that its leases had been taken and its property
interests were impaired by the actions taken by the State of Florida and
therefore, had recorded an impairment charge to reflect the write off of the
costs of unproved oil, gas and minerals properties.
See Note
4. Litigation. All costs incurred since 2001 in connection with the Company’s
Florida leases have been expensed as incurred.
|
(1) |
Liquidity
and Capital Resources
|
Statements
included in Management’s Discussion and Analysis of Financial Condition and
Results of Operations which are not historical in nature are forward looking
statements. The Company cautions readers that forward looking statements are
subject to certain risks and uncertainties that could cause actual results
to
differ materially from those indicated in the forward looking statements. Among
the risks and uncertainties are:
|
1. |
the
uncertainty of any decision favorable to Coastal Petroleum in its
litigation against the State of
Florida;
|
|
2. |
the
substantial cost of continuing the
litigation;
|
|
3. |
the
successful consummation of the Agreement between the Company and
the State
to surrender the leases in exchange for
compensation.
|
As
more
fully described in Notes 1 and 4 to the consolidated financial statements,
we
have a working capital deficiency, have incurred recurring losses and have
a
deficit accumulated during the development stage. We have been and continue
to
be involved in several legal proceedings against the State of Florida which
has
limited our ability to commence development activities on our unproven oil
and
gas properties or obtain compensation for certain property rights we believe
have been taken. These situations raise substantial doubt about our ability
to
continue as a going concern.
If
the
Agreement with the State, as described in Item 1(a) General Development of
Business, is finalized, the Company will have sufficient funds to pay bills
as
they come due and to continue operations. Under the Agreement with the State,
the Company will receive and distribute the following:
|
|
|
|
|
Agreement
with the State
|
|
$
|
12,500,000
|
|
|
|
|
|
|
To
Lykes Mineral Corporation
|
|
|
1,390,000
|
|
To
Outside Royalty Holders
|
|
|
2,225,000
|
|
|
|
|
|
|
To
the Company and its Subsidiary
|
|
|
8,885,000
|
|
|
|
|
|
|
To
Settlement Consultant
|
|
|
465,000
|
|
To
Company Creditors (as of April 30, 2005)
|
|
|
|
|
CCO
|
|
|
230,000
|
|
CPC
|
|
|
2,265,000
|
|
|
|
|
|
|
Amount
to Company and Subsidiary After payment to Creditors
|
|
$
|
5,925,000
|
|
The
other
shareholders of Coastal Petroleum have agreed to sell their shares back to
Coastal Petroleum for a total of $801,923.03 out of the remaining funds in
the
subsidiary. Coastal will then own 100% of the subsidiary.
Our
consolidated financial statements do not include any adjustments to reflect
the
possible future effects on the recoverability and classification of assets
or
amounts and classification of liabilities which may result from the outcome
of
these uncertainties.
Liquidity
The
Company currently has a working capital deficiency, has a limited amount of
cash, has incurred recurring losses and has a deficit accumulated during the
development stage. We have been and continue to be involved in several legal
proceedings against the State of Florida which has limited our ability to
commence development activities on our unproven oil and gas properties or obtain
compensation for certain property rights we believe have been taken. The cost
of
that litigation has been substantial, which requires the Company to continually
obtain additional capital.
At
December 31, 2004, Coastal Caribbean had no cash available. The Company has
received a commitment from some of its Officers to loan the Company funds during
2005 which management believes should be sufficient to fund the Company’s
operations through June 2005, provided that payments to the Company’s litigation
counsel and to the Company’s salaried employee are deferred and provided further
that payments to other Company counsel are also deferred.
These
loans totaled approximately $80,000 through December 31, 2004. There can be
no
assurances that management will continue to make loans to the Company or that
these loans will allow the Company to continue operations for any significant
length of time.
Certain
directors, officers, legal counsel and administrative consultants have agreed
to
defer the payment of their salaries and fees. At December 31, 2004, the amount
of salaries and fees being deferred totaled approximately
$1,590,000.
The
payment due dates for the Company’s annual rental payments on its Florida leases
of approximately $59,000 have been extended during the time the State and
Coastal have been in discussions and they are currently not due. No
amounts have been accrued related to these leases in the current year. The
Company may have to suspend or cease operations and may have to wind up the
company or be forced into insolvent liquidation under the laws of Bermuda unless
and until the Company can secure additional funds for
operations.
Coastal
Caribbean and Coastal Petroleum have attempted to raise funds from the other
shareholders of Coastal Petroleum and from others. Since March 2003, Management
has been unsuccessful at raising additional funds.
These
situations raise substantial doubt about the Company’s ability to continue as a
going concern. However, if the Agreement with the State, as described in Item
1(a) General Development of Business, is finalized, the Company will have
sufficient funds to pay bills as they come due and to continue operations.
The
consolidated financial statements do not include any adjustments to reflect
the
possible future effects on the recoverability and classification of assets
or
amounts and classification of liabilities, which may result from the outcome
of
this uncertainty.
|
(2) |
Results
of Operations
|
The
Company, a development stage enterprise, has never had substantial revenues
and
has operated at a loss each year since its inception in 1953. During
the three years ended December 31, 2004, the Company spent approximately
$2,219,000 on legal expenses primarily for the lawsuits against the State of
Florida relating to drilling permits and royalty interests.
2004
vs. 2003
The
Company incurred a loss of $673,000
for the
year 2004, compared to a loss of $1,008,000 for the year 2003.
Interest
income and other income decreased 100%
in 2004
to $-0- from $1,000 in 2003 because less funds were available for
investment.
Legal
fees and costs decreased 4%
in 2004
to $327,000 from $342,000 in 2003. Legal fees and costs decreased in 2004 as
compared with 2003 due to a reduction in expenditures for legal fees and
geological experts related to Company's lawsuit against the State of Florida
seeking compensation for the State's alleged taking of its property rights
to
explore for oil and gas within its state Lease 224-A.
Administrative
expenses decreased 55% in
2004
to $208,000 from $458,000 in 2003 primarily because of a reduction in Accounting
and administrative expenses and other corporate expenses.
Salaries
expense decreased 5% in
2004
to $113,000 from $119,000 in 2003 due to the reduction in personnel from two
individuals to one for the entire year.
Shareholder
communications decreased 19% in
2004
from $25,000 compared to $31,000 in 2003. These costs remain low because there
was no annual meeting of shareholders held in 2004 or 2003.
Write
off of unproved properties decreased 100% in
2004
from $-0- compared to $59,000 in 2003 as the Company has continued to conclude
that the value of its leases had been taken and its property interests had
been
impaired by actions taken by the State of Florida. All
costs
incurred in 2003 in connection with the Company’s Florida leases have been
expensed as incurred. No amounts were paid in 2004 for these leases as the
payment dates have been extended during discussion with the State of
Florida.
2003
vs. 2002
The
Company incurred a loss of $1,008,000
for the
year 2003, compared to a loss of $2,488,000 for the year 2002.
Interest
income and other income decreased 86%
from
$7,000 in 2002 to $1,000 in 2003 because less funds were available for
investment and in part due to lower interest rates.
Legal
fees and costs decreased 78%
to
$342,000 for 2003 from $1,549,000 in 2002. Legal fees and costs decreased in
2003 as compared with 2002 due to a reduction in expenditures for legal fees
and
fees paid to geological experts related to the trial of the Company's lawsuit
against the State of Florida seeking compensation for the State's alleged taking
of its property rights to explore for oil and gas within its state Lease
224-A.
Administrative
expenses decreased 31% in 2003
to
$458,000 from $662,000 in 2002 primarily because of a reduction in the cost
of
liability insurance and a reduction in Accounting and Administrative costs
resulting from the closing of the Company’s New Jersey office in
2003.
Salaries
decreased 22% in 2003 to
$119,000 from $152,000 in 2002 as the Company reduced its staff from two to
one
employee.
Shareholder
communications costs decreased
to $31,000 in 2003 compared to $32,000 in 2002. These costs remain low because
there was no annual meeting of shareholders held in 2003 or 2002.
Write
off of unproved properties totaled $59,000 in 2003 and 2002.
All
costs
incurred in 2003 and 2002 in connection with the Company’s Florida leases have
been and all future costs will be expensed as incurred.
Item
7A. |
Quantitative
and Qualitative Disclosure About Market
Risk
|
The
Company does not have any significant exposure to market risk as the only market
risk sensitive instruments are its investments in marketable securities. At
December 31, 2004, the carrying value of such investments (including those
classified as cash and cash equivalents) was approximately $179, the fair value
was $179 and the face value was $179. Since the Company expects to hold the
investments to maturity, the maturity value should be realized.
Item
8. |
Financial
Statements and Supplementary
Data
|
The
Board
of Directors
Coastal
Caribbean Oils & Minerals, Ltd.
We
have
audited the accompanying consolidated statements of operations, cash flows,
and
common stock and capital in excess of par value of Coastal Caribbean Oils &
Minerals, Ltd. (a development stage company) for the year ended December 31,
2002. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform
an
audit of the Company’s internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of Coastal Caribbean Oils & Minerals, Ltd. for the year ended December 31,
2002 in conformity with U.S. generally accepted accounting principles.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. As more fully described in Notes
1
and 4 to the consolidated financial statements, the Company has a working
capital deficiency, has incurred recurring losses and has a deficit accumulated
during the development stage. In addition, the Company has been and continues
to
be involved in several legal proceedings against the State of Florida which
have
limited the Company's ability to commence development activities on its unproved
oil and gas properties or obtain compensation for certain property rights it
believes have been confiscated. These situations raise substantial doubt about
the Company's ability to continue as a going concern. The consolidated financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or amounts and classification
of liabilities that may result from the outcome of these uncertainties.
/s/
Ernst
& Young LLP
February
12, 2003
Stamford,
Connecticut
REPORT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors,
Coastal
Caribbean Oils & Minerals, Ltd.:
We
have
audited the accompanying consolidated balance sheets of Coastal Caribbean Oils
& Minerals, Ltd. (a development stage company) as of December 31, 2004 and
2003, and the related consolidated statements of operations, cash flows and
common stock and capital in excess of par value for the years ended December
31,
2004 and 2003 and for the period from January 31, 1953 (inception) to December
31, 2004. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements based
on
our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform
an
audit of the Company’s internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Coastal
Caribbean Oils & Minerals, Ltd. as of December 31, 2004 and 2003, and
the consolidated results of its operations and cash flows for the year ended
December 31, 2004 and 2003 and for the period from January 31, 1953 (inception)
to December 31, 2004, in conformity with accounting principles generally
accepted in the United States of America.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. As more fully described in Notes
1
and 4 to the consolidated financial statements, the Company had a working
capital deficiency, has incurred recurring losses and has a deficit accumulated
during the development stage. In addition, the Company has been and continues
to
be involved in several legal proceedings against the State of Florida which
have
limited the Company’s ability to commence development activities on its unproved
oil or gas properties or obtain compensation for certain property rights it
believes have been confiscated. These situations raise substantial doubt about
the Company’s ability to continue as a going concern. The consolidated financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or amounts and
classifications or liabilities that may result from the outcome of these
uncertainties.
/s/
James
Moore & Co., P.L.
March
17,
2005, except for Note 10,
as
to
which the date is May 16, 2005
Gainesville,
Florida
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
(A
Bermuda Corporation)
A
Development Stage Company
(Expressed
in U.S. dollars)
|
|
|
|
|
|
December
31,
|
|
|
|
2004
|
|
2003
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
179
|
|
$
|
2,875
|
|
Prepaid
expenses and other
|
|
|
16,322
|
|
|
87,947
|
|
Total
current assets
|
|
|
16,501
|
|
|
90,822
|
|
|
|
|
|
|
|
|
|
Contingent
litigation claim (Note 4)
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
16,501
|
|
$
|
90,822
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders’(Deficit)
Equity
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
863,127
|
|
$
|
805,110
|
|
Amounts
due to related parties
|
|
|
1,594,369
|
|
|
1,053,800
|
|
Total
current liabilities
|
|
|
2,457,496
|
|
|
1,858,910
|
|
|
|
|
|
|
|
|
|
Minority
interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
(deficit) equity:
|
|
|
|
|
|
|
|
Common
stock, par value $.12 per share:
|
|
|
|
|
|
|
|
Authorized
- 250,000,000 shares
Outstanding
- 46,211,604 shares, respectively
|
|
|
5,545,392
|
|
|
5,545,392
|
|
Capital
in excess of par value
|
|
|
32,137,811
|
|
|
32,137,811
|
|
|
|
|
37,683,203
|
|
|
37,683,203
|
|
Deficit
accumulated during the development stage
|
|
|
(40,124,198
|
)
|
|
(39,451,291
|
)
|
Total
shareholders’ (deficit) equity
|
|
|
(2,440,995
|
)
|
|
(1,768,088
|
)
|
Total
liabilities and shareholders’ (deficit) equity
|
|
$
|
16,501
|
|
$
|
90,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
(A
Bermuda Corporation)
A
Development Stage Company
(Expressed
in U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the period
from
|
|
|
|
|
|
|
|
|
|
Jan.
31, 1953
|
|
|
|
|
|
|
|
|
|
(inception)
|
|
|
|
Years
ended December 31,
|
|
to
|
|
|
|
2004
|
|
2003
|
|
2002
|
|
Dec.
31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and other income
|
|
$
|
1
|
|
$
|
658
|
|
$
|
7,357
|
|
$
|
3,877,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal
fees and costs
|
|
|
327,091
|
|
|
342,451
|
|
|
1,549,178
|
|
|
16,899,679
|
|
Administrative
expenses
|
|
|
208,414
|
|
|
457,649
|
|
|
662,390
|
|
|
9,735,693
|
|
Salaries
|
|
|
112,838
|
|
|
118,745
|
|
|
151,800
|
|
|
3,755,811
|
|
Shareholder
communications
|
|
|
24,565
|
|
|
30,746
|
|
|
32,286
|
|
|
3,973,092
|
|
Write
off of unproved properties
|
|
|
–
|
|
|
59,247
|
|
|
59,247
|
|
|
5,560,494
|
|
Exploration
costs
|
|
|
|
|
|
|
|
|
|
|
|
247,465
|
|
Lawsuit
judgments
|
|
|
|
|
|
|
|
|
|
|
|
1,941,916
|
|
Minority
interests
|
|
|
|
|
|
|
|
|
|
|
|
(632,974
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
364,865
|
|
Contractual
services
|
|
|
|
|
|
|
|
|
|
|
|
2,155,728
|
|
|
|
|
672,908
|
|
|
1,008,838
|
|
|
2,454,901
|
|
|
44,001,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(672,907
|
)
|
$
|
(1,008,180
|
)
|
$
|
(2,447,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
accumulated during the development stage
|
|
|
|
|
|
|
|
|
|
|
$
|
(40,124,198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share based on weighted average number of shares outstanding
during the period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted EPS
|
|
$
|
(.01
|
)
|
$
|
(.02
|
)
|
$
|
(.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding (basic and diluted)
|
|
|
46,211,604
|
|
|
46,211,604
|
|
|
44,734,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
(A
Bermuda Corporation)
A
Development Stage Company
(Expressed
in U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the period from
|
|
|
|
|
|
|
|
|
|
Jan.
31, 1953
|
|
|
|
|
|
|
|
|
|
(inception)
|
|
|
|
Years
ended December 31,
|
|
To
|
|
|
|
2004
|
|
2003
|
|
2002
|
|
Dec.
31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(672,907
|
)
|
$
|
(1,008,180
|
)
|
$
|
(2,447,544
|
)
|
$
|
(40,124,199
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
–
|
|
|
|
|
|
|
|
|
(632,974
|
)
|
Write
off of unproved properties
|
|
|
|
|
|
59,247
|
|
|
59,247
|
|
|
5,619,741
|
|
Common
stock issued for services
|
|
|
|
|
|
|
|
|
|
|
|
119,500
|
|
Compensation
recognized for stock option grant
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
Recoveries
from previously written off properties
|
|
|
|
|
|
|
|
|
|
|
|
252,173
|
|
Net
change in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses and other
|
|
|
71,625
|
|
|
326,752
|
|
|
(52,500
|
)
|
|
(16,323
|
)
|
Accrued
liabilities
|
|
|
518,296
|
|
|
322,208
|
|
|
1,178,082
|
|
|
2,377,208
|
|
Other
assets
|
|
|
|
|
|
|
|
|
90,391
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(82,986
|
)
|
|
(299,973
|
)
|
|
(1,172,324
|
)
|
|
(32,329,874
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
to oil, gas, and mineral properties net of assets acquired form
common
stock and reimbursement
|
|
|
|
|
|
(59,247
|
)
|
|
(59,247
|
)
|
|
(3,740,182
|
)
|
Proceeds
from relinquishment of surface rights
|
|
|
|
|
|
|
|
|
|
|
|
246,733
|
|
Notes
receivable
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
Purchase
of fixed assets
|
|
|
|
|
|
|
|
|
|
|
|
(61,649
|
)
|
Net
cash provided by (used in) investing activities
|
|
|
|
|
|
(59,247
|
)
|
|
(44,247
|
)
|
|
(3,555,098
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
from Officers
|
|
|
80,290
|
|
|
|
|
|
|
|
|
80,290
|
|
Sale
of common stock, net of expenses
|
|
|
|
|
|
|
|
|
899,642
|
|
|
30,380,612
|
|
Shares
issued upon exercise of options
|
|
|
|
|
|
|
|
|
|
|
|
884,249
|
|
Sale
of shares by subsidiary
|
|
|
|
|
|
70,000
|
|
|
|
|
|
820,000
|
|
Sale
of subsidiary shares
|
|
|
|
|
|
|
|
|
|
|
|
3,720,000
|
|
Net
cash provided by financing activities
|
|
|
80,290
|
|
|
70,000
|
|
|
899,642
|
|
|
35,885,151
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(2,696
|
)
|
|
(289,220
|
)
|
|
(316,929
|
)
|
|
179
|
|
Cash
and cash equivalents at beginning of period
|
|
|
2,875
|
|
|
292,095
|
|
|
609,024
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
179
|
|
$
|
2,875
|
|
$
|
292,095
|
|
$
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
(A
Bermuda Corporation)
A
Development Stage Company
CONSOLIDATED
STATEMENT OF COMMON STOCK
(Expressed
in U.S. dollars)
For
the
period from January 31, 1953 (inception) to December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
in
|
|
|
|
Number
of
|
|
Common
|
|
Excess
|
|
|
|
Shares
|
|
Stock
|
|
of
Par Value
|
|
|
|
|
|
|
|
|
|
Shares
issued for net assets and unrecovered costs at inception
|
|
|
5,790,210
|
|
$
|
579,021
|
|
$
|
1,542,868
|
|
Sales
of common stock
|
|
|
26,829,486
|
|
|
3,224,014
|
|
|
16,818,844
|
|
Shares
issued upon exercise of stock options
|
|
|
510,000
|
|
|
59,739
|
|
|
799,760
|
|
Market
value ($2.375 per share) of shares issued in 1953 to acquire an
investment
|
|
|
54,538
|
|
|
5,454
|
|
|
124,074
|
|
Shares
issued in 1953 in exchange for 1/3rd
of
a 1/60th
overriding royalty (sold in prior year) in nonproducing leases of
Coastal
Petroleum
|
|
|
84,210
|
|
|
8,421
|
|
|
|
|
Market
value of shares issued for services rendered during the period
1954-1966
|
|
|
95,188
|
|
|
9,673
|
|
|
109,827
|
|
Net
transfers to restate the par value of common stock outstanding in
1962 and
1970 to $0.12 per share
|
|
|
|
|
|
117,314
|
|
|
(117,314
|
)
|
Increase
in Company's investment (equity) due to capital transactions of Coastal
Petroleum in 1976
|
|
|
|
|
|
|
|
|
117,025
|
|
Balance
at December 31, 1990
|
|
|
33,363,632
|
|
|
4,003,636
|
|
|
19,395,084
|
|
Sale
of subsidiary shares
|
|
|
|
|
|
|
|
|
300,000
|
|
Balance
at December 31, 1991
|
|
|
33,363,632
|
|
|
4,003,636
|
|
|
19,695,084
|
|
Sale
of subsidiary shares
|
|
|
|
|
|
|
|
|
390,000
|
|
Balance
at December 31, 1992
|
|
|
33,363,632
|
|
|
4,003,636
|
|
|
20,085,084
|
|
Sale
of subsidiary shares
|
|
|
|
|
|
|
|
|
1,080,000
|
|
Balance
at December 31, 1993
|
|
|
33,363,632
|
|
|
4,003,636
|
|
|
21,165,084
|
|
Sale
of subsidiary shares
|
|
|
|
|
|
|
|
|
630,000
|
|
Balance
at December 31, 1994
|
|
|
33,363,632
|
|
|
4,003,636
|
|
|
21,795,084
|
|
Sale
of subsidiary shares
|
|
|
|
|
|
|
|
|
600,000
|
|
Balance
at December 31, 1995
|
|
|
33,363,632
|
|
|
4,003,636
|
|
|
22,395,084
|
|
Sale
of common stock
|
|
|
6,672,726
|
|
|
800,727
|
|
|
5,555,599
|
|
Sale
of subsidiary shares
|
|
|
|
|
|
|
|
|
480,000
|
|
Exercise
of stock options
|
|
|
10,000
|
|
|
1,200
|
|
|
12,300
|
|
Balance
at December 31, 1996
|
|
|
40,046,358
|
|
|
4,805,563
|
|
|
28,442,983
|
|
Sale
of subsidiary shares
|
|
|
|
|
|
|
|
|
240,000
|
|
Exercise
of stock options
|
|
|
10,000
|
|
|
1,200
|
|
|
10,050
|
|
Balance
at December 31, 1997,1998 and 1999
|
|
|
40,056,358
|
|
|
4,806,763
|
|
|
28,693,033
|
|
Sale
of common stock
|
|
|
3,411,971
|
|
|
409,436
|
|
|
2,729,329
|
|
Compensation
recognized for stock option grant
|
|
|
|
|
|
|
|
|
75,000
|
|
Balance
at December 31, 2000 and 2001
|
|
|
43,468,329
|
|
|
5,216,199
|
|
|
31,497,362
|
|
Sale
of common stock
|
|
|
2,743,275
|
|
|
329,193
|
|
|
570,449
|
|
Balance
as of December 31, 2002
|
|
|
46,211,604
|
|
|
5,545,392
|
|
|
32,067,811
|
|
Sale
of subsidiary shares
|
|
|
|
|
|
|
|
|
70,000
|
|
Balance
as of December 31, 2003 and 2004
|
|
|
46,211,604
|
|
$
|
5,545,392
|
|
$
|
32,137,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Notes
to Consolidated Financial Statements
December
31, 2004
1. |
Summary of signifcant accounting policies
|
Consolidation
The
accompanying consolidated financial statements include the accounts of Coastal
Caribbean Oils & Minerals, Ltd., a Bermuda corporation (Coastal Caribbean)
and its majority owned subsidiary, Coastal Petroleum Company (Coastal
Petroleum), referred to collectively as the Company. The Company, which has
been
engaged in a single industry and segment, is considered to be a development
stage company since its exploration for oil, gas and minerals has not yielded
any significant revenue or reserves. All intercompany transactions have been
eliminated. Certain prior year amounts have been reclassified to conform with
the current year presentation.
Cash
and Cash Equivalents
The
Company considers all highly liquid short-term investments with maturities
of
three months or less at the date of acquisition to be cash equivalents.
Use
of
Estimates
The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. The outcome of the litigation and the ability
to develop the Company’s oil and gas properties will have a significant effect
on the Company’s financial position and results of operations. Actual results
could differ from those estimates.
Unproved
Oil, Gas and Mineral Properties
The
Company follows the full cost method of accounting for its oil and gas
properties. All costs associated with property acquisition, exploration and
development activities whether successful or unsuccessful are capitalized.
The
Company’s properties are undeveloped and nonproducing and the subject of
litigation. Prior to 2001, capitalized costs were not being amortized. Since
2001, all costs associated with oil and gas properties are deemed impaired
and
have been expensed. See Notes 3 and 4.
The
capitalized costs are subject to a ceiling test which basically limits such
costs to the aggregate of the estimated present value discounted at a 10% rate
of future net revenues from proved reserves, based on current economic and
operating conditions, plus the lower of cost or fair market value of unproved
properties.
The
Company assesses whether its unproved properties are impaired on a periodic
basis. This assessment is based upon work completed on the properties to date,
the expiration date of its leases and technical data from the properties and
adjacent areas. These properties are subject to extensive litigation with the
State of Florida.
Sale
of Subsidiary Shares
All
amounts realized from the sale of Coastal Petroleum shares have been credited
to
capital in excess of par value.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Notes
to Consolidated Financial Statements
December
31, 2004
1. |
Summary of significant accounting policies
(Cont'd)
|
Loss
Per Share
Loss
per
common share is based upon the weighted average number of common and common
equivalent shares outstanding during the period. The Company’s basic and diluted
calculations of EPS are the same because the exercise of options is not assumed
in calculating diluted EPS, as the result would be anti-dilutive (the Company
has continuing losses).
Financial
instruments
The
carrying value for cash and cash equivalents, and accounts payable approximates
fair value based on anticipated cash flows and current market
conditions.
Stock
Options
The
company follows the disclosure provisions of Statement of Financial Accounting
Standards (SFAS or Statement) No. 148, “Accounting for Stock-Based Compensation
-- Transition and Disclosure”, which amends SFAS No. 123, “Accounting for
Stock-Based Compensation”. SFAS No. 148 provides alternative methods of
transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation, which
was originally provided under SFAS No. 123.
At
December 31, 2004, the Company maintains one stock-based
employee
compensation plan (see note 6, Stock Option Plan). The Company accounts for
the
employee stock compensation plan in accordance with the intrinsic value-based
method prescribed by Accounting Principles Board Opinion
No. 25, “Accounting for Stock Issued to Employees.” No stock-based employee
compensation expense is reflected in net loss as all options granted under
the
plans have an exercise price equal to the fair market value of the underlying
common stock on the date of grant.
New
Accounting Pronouncements
The
Financial Accounting Standards Board (“FASB”) has issued several new standards
which have implementaion dates subsequent to the Company’s year end. Management
does not believe that any of these new standards will have a material impact
on
the Company’s financial position, results of operations or cash
flows.
Going
Concern
The
Company has a working capital deficiency, has a limited amount of cash, has
incurred recurring losses and has a deficit accumulated during the development
stage. We have been and continue to be involved in several legal proceedings
against the State of Florida which has limited our ability to commence
development activities on our unproven oil and gas properties or obtain
compensation for certain property rights we believe have been taken. The cost
of
that litigation has been substantial, which has required the Company to
continually obtain additional capital.
The
Company is currently in discussions with the State of Florida regarding a final
settlement of all litigation. See Note 10.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Notes
to Consolidated Financial Statements
December
31, 2004
1. |
Summary of significant accounting policies
(Cont'd)
|
The
Company has received a commitment from some of its Officers to loan the Company
funds during 2005 which management believes should be sufficient to fund the
Company’s operations through June 2005, provided that payments to the Company’s
litigation counsel and to the Company’s salaried employee are deferred and
provided further that payments to other Company counsel are also deferred.
These
loans totaled approximately $80,000 through December 31, 2004. There can be
no
assurances that management will continue to make loans to the Company or that
these loans will allow the Company to continue operations for any significant
length of time. The Company may have to suspend or cease operations and may
have
to wind up the Company or be forced into insolvent liquidation under the laws
of
Bermuda unless and until the Company can secure additional
financing.
These
situations raise substantial doubt about the Company’s ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or amounts and classification of liabilities, which
may
result from the outcome of this uncertainty.
2. |
Coastal
Petroleum Company - Minority
Interests
|
In
1992,
Coastal Caribbean granted Lykes Minerals Corp. (Lykes), a wholly owned
subsidiary of Lykes Bros. Inc., an option to acquire 78 shares of Coastal
Petroleum at $40,000 per share. Lykes exercised all of its options to purchase
Coastal Petroleum shares at a total cost of $3,120,000 and as of December 31,
2004 and 2003, held 26.35% Coastal Petroleum, respectively. See Note
10.
The
Lykes
agreement provides that Lykes is entitled to exchange each Coastal Petroleum
share for 100,000 Coastal Caribbean shares, subject to adjustment for dilution
and other factors. If fully exercised, that entitlement would leave Lykes with
about 15% of Coastal Caribbean's outstanding shares. Lykes also has the right
to
exchange Coastal Petroleum shares for overriding royalty interests
in Coastal Petroleum's properties. If Lykes were to exchange its 26.35% interest
in Coastal Petroleum for a royalty interest, its overriding royalty interest
in
Coastal Petroleum's working-interest acreage would be 3.3%.
Coastal
Petroleum shares were owned as follows:
|
|
December
31,
2004
|
|
December
31,
2003
|
|
|
|
Shares
|
|
%
|
|
Shares
|
|
%
|
|
Coastal
Caribbean
|
|
|
173
|
|
|
58.45
|
|
|
173
|
|
|
58.45
|
|
Lykes
|
|
|
78
|
|
|
26.35
|
|
|
78
|
|
|
26.35
|
|
Others
|
|
|
45
|
|
|
15.20
|
|
|
45
|
|
|
15.20
|
|
|
|
|
296
|
|
|
100.0
|
|
|
296
|
|
|
100.0
|
|
Coastal
Caribbean has been funding the Florida litigation of Coastal Petroleum, its
majority owned subsidiary and paying its operating expenses. This investment
has
been eliminated in consolidation, as Coastal Caribbean is required to record
100% of the losses of Coastal Petroleum because the minority interests have
been
fully liquidated and have no further obligation to fund Coastal
Petroleum.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Notes
to Consolidated Financial Statements
December
31, 2004
3. |
Unproved
Oil, Gas and Mineral Properties
|
Coastal
Petroleum holds three unproved and nonproducing oil, gas and mineral leases
granted by the Trustees of the Internal Improvement Fund of the State of Florida
(Trustees). These leases cover submerged and unsubmerged lands, principally
along the Florida Gulf Coast, and certain inland lakes and rivers throughout
the
State.
The
two
leases bordering the Gulf Coast have been divided into three areas, each running
the entire length of the coastline from Apalachicola Bay to the Naples area.
Coastal Petroleum has certain royalty interests in the inner area, no interest
in the middle area and a 100% working interest in the outside area.
Coastal
Petroleum also has a 100% working interest in Lake Okeechobee, and a royalty
interest in other areas. Coastal Petroleum has agreed not to conduct
exploration, drilling, or mining operations on said lake, except with prior
approval of the Trustees.
The
three
leases have a term of 40 years from January 6, 1976 and require the payment
of
annual lease rentals of totaling $59,247; if oil, gas or minerals are being
produced in economically sustainable quantities at January 6, 2016, these
operations will be allowed to continue until they become uneconomic. The
drilling requirements are governed by Chapter 20680, Laws of Florida, Acts
of
1941.
Under
the 1941 Act, a lessee is required to drill at least one test well on lands
leased in each five year period under the term of the lease.
The
Company believes that it is current in fulfilling its drilling requirements.
The
working interest areas of the three leases are subject to royalties payable
to
the Trustees of 12½% on oil and gas, $.50 per long ton of sulfur and 10% on
other minerals. The leases are subject to additional overriding royalties which
aggregate 1/16th
as to
oil, gas and sulfur and 13/600ths
as to
other minerals.
Since
2001, the Company concluded that its property interests were impaired by the
actions taken by the State of Florida and therefore recorded an impairment
charge to write off its lease costs. See Note 4. Litigation. Although these
costs have been written off, the Company still has legal title to the leases.
The Company’s annual rental payments on its Florida leases for 2004 have been
extended during settlement discussion with the State of Florida (see Note
10).
Potential
Settlement Agreement with the State of Florida
The
Company has negotiated a potential settlement Agreement with the State of
Florida of all claims (see Note 10).
Florida
Litigation
Coastal
Petroleum has been involved in various lawsuits for many years. Coastal
Petroleum's current litigation now involves one basic claim: whether the State’s
offshore drilling policy and its denial of a permit constitute a taking of
Coastal Petroleum’s property. In addition, Coastal Caribbean is a party to
another action in which Coastal Caribbean claims that certain of its royalty
interests have been confiscated by the State.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Notes
to Consolidated Financial Statements
December
31, 2004
Drilling
Permit Litigation - Lease
Taking Case (Lease 224-A)
Since
1992,
Coastal Petroleum has sought a permit from the Florida Department of
Environmental Protection (the “DEP”) to drill an exploratory oil and gas well
off Apalachicola, Florida. The permit has been repeatedly denied leaving Coastal
without a permit and the alternative of seeking compensation for the taking
of
its lease.
During
the past year, Coastal Petroleum continued its litigation in an attempt to
obtain compensation for the taking of its lease. Previously, the trial court
ruled that the State’s denial of a permit to drill on Lease 224-A did not
constitute an unlawful taking of Coastal Petroleum’s property and that decision
was affirmed by the Florida First District Court of Appeal. On April 8, 2004,
Coastal Petroleum filed a Petition for Writ of Certiorari with the United States
Supreme Court asking the Court to accept jurisdiction to consider the action
taken by the trial court as affirmed by the appellate court. The State’s Answer
Brief and Coastal’s subsequent Reply Brief were filed by May 21, 2004. On June
14, 2004, the United States Supreme Court denied the Writ of Certiorari, leaving
no further avenue of appeal for this claim.
Meanwhile,
after the trial in 2002, the State filed a motion for an order by the trial
court by which the State seeks to recover $178,315 from Coastal Petroleum,
including expert witness fees, deposition costs and copying costs. Coastal
Petroleum has filed objections and responses to the State’s motion, objecting to
the costs and requesting an evidentiary hearing. On April 9, 2003, the State
agreed not to pursue its motion until after conclusion of the appeal in this
case and the motion has not been set for hearing.
Ancillary
Matters to Lease Taking Case (Lease 224-A)
In
2001,
certain holders of royalties, which aggregate approximately 4%, were allowed
to
intervene on a limited basis in the Lease 224-A takings lawsuit. Counsel
for the appealing royalty holders advised Coastal Petroleum that the royalty
holders' position is that their interest is worth substantially more than 4%
of
whatever judgment may be awarded to Coastal Petroleum in the litigation and
that
they intend to make a claim against any recovery Coastal Petroleum may obtain
in
the litigation. Coastal Petroleum informed the Circuit Court and counsel for
the
royalty holders that Coastal Petroleum was not making any claim in the
litigation on behalf of any interest the royalty holders may have.
Other
Permit Applications
In
order
to more fully permit the Apalachicola Reef Play, which includes the St. George
Island prospect, on October 29, 1998, Coastal Petroleum filed four additional
permit applications (1310-1313). The DEP requested additional data for these
applications and as
of June
2, 2005, Coastal Petroleum had not yet submitted the requested data.
Although
these applications are still pending, Coastal Petroleum does not believe the
DEP
will ever grant these permits.
Coastal
Caribbean Royalty Litigation
The
offshore areas covered by Coastal Petroleum's original leases (prior to the
1976
Settlement Agreement) are subject to certain other royalty interests held by
third parties, including Coastal Caribbean. In 1994, several of those third
parties, including Coastal Caribbean, which has approximately a 12% interest
in
any recovery for the royalty, instituted a separate lawsuit against the State
of
Florida. In that lawsuit the royalty holders claim their interests have been
confiscated as a result of the State's actions discussed above and that they
are
entitled to compensation for that taking. The royalty holders were not parties
to the 1976 Settlement Agreement, and the royalty holders contend that the
terms
of the Settlement Agreement do not protect the State from taking claims by
those
royalty holders. The case is still pending in the 2nd
Judicial
Circuit in Tallahassee, Leon County, Florida. Discovery
is proceeding and the
State
has filed a motion for summary judgment. Any recovery made in the royalty
holders’ lawsuit would be shared among the various plaintiffs in that lawsuit,
including Coastal Caribbean, but not Coastal Petroleum.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Notes
to Consolidated Financial Statements
December
31, 2004
Lease
Taking Case (Lease 224-B)
In
Coastal Petroleum’s case in the Leon County Circuit Court, Florida seeking
compensation for the State of Florida’s alleged taking of its property rights to
explore for oil and gas within its State Lease 224-B remains pending. During
the
past year the State filed a motion for summary judgment in this case seeking
to
end this case. Coastal filed a response and the motion was argued in the Second
Judicial Circuit Court for Leon County, Florida on November 10, 2004. The judge
did not rule at the hearing, but took the matter under advisement for further
consideration. To date there has been no ruling in the case. The judge may
grant
summary judgment, deny it or partially grant it. A grant of summary judgment
on
part or all of the case would be a decision by the court on those issues leaving
Coastal the option of an appeal to try to have the summary judgment reversed
and
those matters considered after the trial court receives evidence on those
issues. If summary judgment is denied, the case will proceed through discovery
and on to trial.
Contingency
Fees
In
1990,
Coastal Petroleum agreed to pay an aggregate of 7.9% in contingent fees based
on
any net recovery from execution on or satisfaction of judgment or from
settlement of the Florida litigation to the following:
Holder
|
|
Relationship
to
Coastal
Petroleum
at
Date of Grant
|
|
Net
Recovery
Percentage
|
|
Reasoner,
Davis & Fox
|
|
|
Special
Counsel
|
|
|
2.00
|
|
Robert
J. Angerer
|
|
|
Litigation
Counsel
|
|
|
1.50
|
|
Benjamin
W. Heath
|
|
|
Chairman
of the Board
|
|
|
1.25
|
|
Phillip
W. Ware
|
|
|
President
|
|
|
1.25
|
|
Murtha
Cullina LLP
|
|
|
Securities
Counsel to Coastal Caribbean
|
|
|
1.00
|
|
James
R. Joyce
|
|
|
Assistant
Treasurer
|
|
|
.30
|
|
Arthur
B. O'Donnell
|
|
|
Vice
President/Treasurer
|
|
|
.30
|
|
James
J. Gaughran
|
|
|
Secretary
|
|
|
.30
|
|
Total
|
|
|
|
|
|
7.9
|
|
In
2004,
a contingency fee of 0.75% in favor of Ausley & McMullen, P.A. originally
granted in 1996 expired.
Under
the
Agreement, no contingency fees are due as described above as the past costs
and
fees for the Florida Litigation exceed the amount of funds the Company will
receive under the Agreement.
As
part
of the process undertaken in arriving at an agreement with the State to
repurchase Coastal Petroleum’s Leases, an agreement was entered between the
Company and John Aurell authorizing Mr. Aurell to represent the Company in
discussions with the State. Under the agreement with Mr. Aurell, he will be
paid
$465,000 if the agreement with the State is finalized as it is currently
structured (See Note 10)
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Notes
to Consolidated Financial Statements
December
31, 2004
Uncertainty
/ No Assurances
The
Agreement with the State is conditioned upon approval of the funding and
submission of documents. If the Agreement is not finalized, Coastal Petroleum
and/or Coastal Caribbean may not prevail on any of the issues set forth above
and may not recover compensation for any of their claims. In addition, even
if
Coastal Petroleum were to prevail on any or all of the issues to be decided,
Coastal Caribbean or Coastal Petroleum may not have sufficient financial
resources to survive until such decisions become final. In the unlikely event
that the State of Florida were to grant a permit to drill any wells for which
applications have been filed, the wells drilled may not be successful and may
not lead to production of any oil or gas in commercial quantities.
The
Company's Bye-Law No. 21 provides that any matter to be voted upon must be
approved not only by a majority of the shares voted at such meeting, but also
by
a majority in number of the shareholders present in person or by proxy and
entitled to vote thereon.
On
July
31, 2002, the Company concluded the sale of 2,743,000 shares at $.50 per share
and realized gross proceeds of approximately $1,372,000 ($900,000 after expenses
of the offering of $90,391 incurred during 2001 and $381,600 during 2002 for
an
aggregate of approximately $472,000).
On
March
10, 2003, the Company concluded the sale of two shares of Coastal Petroleum
at a
price of $25,000 per share. On October 7 and 28, 2003, the Company concluded
the
sale of two shares of Coastal Petroleum at a price of $10,000 per share. The
Company realized net proceeds of $70,000 in 2003 for these sales.
There
was
no activity in Common Stock during 2004.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Notes
to Consolidated Financial Statements
December
31, 2004
The
following represents shares issued upon sales of common stock:
|
|
Number
|
|
Common
|
|
Capital
in Excess
|
|
Year
|
|
of
Shares
|
|
Stock
|
|
of
Par Value
|
|
1953
|
|
|
300,000
|
|
$
|
30,000
|
|
$
|
654,000
|
|
1954
|
|
|
53,000
|
|
|
5,300
|
|
|
114,265
|
|
1955
|
|
|
67,000
|
|
|
6,700
|
|
|
137,937
|
|
1956
|
|
|
77,100
|
|
|
7,710
|
|
|
139,548
|
|
1957
|
|
|
95,400
|
|
|
9,540
|
|
|
152,492
|
|
1958
|
|
|
180,884
|
|
|
18,088
|
|
|
207,135
|
|
1959
|
|
|
123,011
|
|
|
12,301
|
|
|
160,751
|
|
1960
|
|
|
134,300
|
|
|
13,430
|
|
|
131,431
|
|
1961
|
|
|
127,500
|
|
|
12,750
|
|
|
94,077
|
|
1962
|
|
|
9,900
|
|
|
990
|
|
|
8,036
|
|
1963
|
|
|
168,200
|
|
|
23,548
|
|
|
12,041
|
|
1964
|
|
|
331,800
|
|
|
46,452
|
|
|
45,044
|
|
1965
|
|
|
435,200
|
|
|
60,928
|
|
|
442,391
|
|
1966
|
|
|
187,000
|
|
|
26,180
|
|
|
194,187
|
|
1967
|
|
|
193,954
|
|
|
27,153
|
|
|
249,608
|
|
1968
|
|
|
67,500
|
|
|
9,450
|
|
|
127,468
|
|
1969
|
|
|
8,200
|
|
|
1,148
|
|
|
13,532
|
|
1970
|
|
|
274,600
|
|
|
32,952
|
|
|
117,154
|
|
1971
|
|
|
299,000
|
|
|
35,880
|
|
|
99,202
|
|
1972
|
|
|
462,600
|
|
|
55,512
|
|
|
126,185
|
|
1973
|
|
|
619,800
|
|
|
74,376
|
|
|
251,202
|
|
1974
|
|
|
398,300
|
|
|
47,796
|
|
|
60,007
|
|
1975
|
|
|
|
|
|
|
|
|
(52,618
|
)
|
1976
|
|
|
|
|
|
|
|
|
(8,200
|
)
|
1977
|
|
|
850,000
|
|
|
102,000
|
|
|
1,682,706
|
|
1978
|
|
|
90,797
|
|
|
10,896
|
|
|
158,343
|
|
1979
|
|
|
1,065,943
|
|
|
127,914
|
|
|
4,124,063
|
|
1980
|
|
|
179,831
|
|
|
21,580
|
|
|
826,763
|
|
1981
|
|
|
30,600
|
|
|
3,672
|
|
|
159,360
|
|
1983
|
|
|
5,318,862
|
|
|
638,263
|
|
|
1,814,642
|
|
1985
|
|
|
–
|
|
|
|
|
|
(36,220
|
)
|
1986
|
|
|
6,228,143
|
|
|
747,378
|
|
|
2,178,471
|
|
1987
|
|
|
4,152,095
|
|
|
498,251
|
|
|
2,407,522
|
|
1990
|
|
|
4,298,966
|
|
|
515,876
|
|
|
26,319
|
|
1996
|
|
|
6,672,726
|
|
|
800,727
|
|
|
5,555,599
|
|
2000
|
|
|
3,411,971
|
|
|
409,436
|
|
|
2,729,329
|
|
2002
|
|
|
2,743,275
|
|
|
329,193
|
|
|
570,449
|
|
|
|
|
39,657,458
|
|
$
|
4,763,370
|
|
$
|
25,674,221
|
|
The
following represents shares issued upon exercise of stock options:
|
|
Number
|
|
Common
|
|
Capital
in Excess
|
|
Year
|
|
of
Shares
|
|
Stock
|
|
of
Par Value
|
|
1955
|
|
|
73,000
|
|
$
|
7,300
|
|
$
|
175,200
|
|
1978
|
|
|
7,000
|
|
|
840
|
|
|
6,160
|
|
1979
|
|
|
213,570
|
|
|
25,628
|
|
|
265,619
|
|
1980
|
|
|
76,830
|
|
|
9,219
|
|
|
125,233
|
|
1981
|
|
|
139,600
|
|
|
16,752
|
|
|
227,548
|
|
1996
|
|
|
10,000
|
|
|
1,200
|
|
|
12,300
|
|
1997
|
|
|
10,000
|
|
|
1,200
|
|
|
10,050
|
|
|
|
|
530,000
|
|
$
|
62,139
|
|
$
|
822,110
|
|
Coastal
Caribbean has reserved 7,800,000 shares which may be issued in exchange for
Coastal Petroleum shares, as described in Note 2.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Notes
to Consolidated Financial Statements
December
31, 2004
The
Company has elected to follow Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees” (APB No. 25) and related
Interpretations in accounting for its stock options because the alternative
fair
value accounting provided under FASB Statement No. 123, “Accounting for Stock
Based Compensation,” requires use of option valuation models that were not
developed for use in valuing stock options. Under APB No. 25, because the
exercise price of the Company’s stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is
recognized.
During
1995, the Company adopted a Stock Option Plan covering 1,000,000 shares of
the
Company’s common stock. The following table summarizes stock option
activity:
Options
outstanding
|
|
Number
of Shares
|
|
Exercise
Price ($)
|
|
Outstanding
and exercisable at December 31, 2002
|
|
|
925,000
|
|
|
.91
-2.625
|
|
Expired
|
|
|
(225,000
|
)
|
|
1.13-2.625
|
|
Outstanding
and exercisable at December 31, 2003 and 2004
|
|
|
700,000
|
|
|
.91
|
|
Available
for grant at December 31, 2004
|
|
|
75,000
|
|
|
|
|
|
Summary
of Options Outstanding at December 31,
2004
|
Year
Granted
|
|
Number
of Shares
|
|
Expiration
Date
|
|
Exercise
Prices ($)
|
|
|
|
|
|
|
|
|
|
Granted
2000
|
|
|
700,000
|
|
|
Mar.
22, 2010
|
|
|
.91
|
|
Bermuda
currently imposes no taxes on corporate income or capital gains outside of
Bermuda. The Company’s subsidiary, Coastal Petroleum, has U.S. net operating
loss carry forwards for federal and state income tax purposes, which may be
used
to reduce its taxable income, if any, during future years which aggregated
approximately $10,700,000 at December 31, 2004 ($11,400,000 at December 31,
2003) and expire in varying amounts from 2004 through 2024 as follows: $550,000
in 2005, $418,000 in 2006, $549,000 in 2007, $480,000 in 2009, $571,000 in
2010,
$955,000 in 2011, $1,281,000 in 2012, $757,000 in 2018, $622,000 in 2019,
$749,000 in 2020, $1,884,000 in 2021, $1,693,000 in 2022, $132,000 in 2023
and
$51,000 in 2024. For financial reporting purposes, a valuation allowance has
been recognized to offset the deferred tax assets relating to those carry
forwards. Significant components of the Company’s deferred tax assets were as
follows:
|
|
2004
|
|
2003
|
|
Net
operating losses
|
|
$
|
4,024,000
|
|
$
|
4,284,000
|
|
Accruals
to related parties
|
|
|
268,000
|
|
|
123,000
|
|
Write
off of unproved properties
|
|
|
1,831,000
|
|
|
1,831,000
|
|
Total
deferred tax assets
|
|
|
6,123,000
|
|
|
6,238,000
|
|
Valuation
allowance
|
|
|
(6,123,000
|
)
|
|
(6,238,000
|
)
|
Net
deferred tax assets
|
|
$
|
–
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Notes
to Consolidated Financial Statements
December
31, 2004
|
8. |
Related
party transactions:
|
Loans
During
2004 and 2003, Robert Angerer Sr. and Phillip Ware loaned the Company a total
of
$89,000 and $17,000 and were owed $106,000 and $17,000 at December 31, 2004
and
2003, respectively.
Legal
Services
The
Company was billed annually $288,000, in fees by Angerer & Angerer during
2004, 2003, and 2002. Robert Angerer, Sr. was elected a director of Coastal
Caribbean and of Coastal Petroleum on January 30, 2003 and a Vice President
of
Coastal Caribbean and Coastal Petroleum on February 28, 2003. At December 31,
2004, fees of $129,000, $268,000 and $597,000 remain unpaid to G&OD, Murtha
Cullina LLP and Angerer & Angerer, respectively.
The
Company was billed approximately $43,500, and $232,000 in fees by the law firm
of Murtha Cullina LLP during 2003, and 2002, respectively. There were no fees
billed in 2004. Mr.
Timothy L. Largay, a partner of the firm of Murtha Cullina LLP, was a director
and Vice President of the Company from January 15, 2001 until his resignation
on
October 7, 2002.
Accounting
& Administrative Services
G&O'D
INC provided accounting and administrative services, office facilities and
support staff to the Company until December 2002. G&O’D INC is owned by Mr.
James R. Joyce, who was the Treasurer and Assistant Secretary, until his
retirement in December 2002. During 2002, G&O'D billed fees of $178,000.
Subsequent to this time, Mr. Daniel Sharp provided accounting and administrative
services to the Company until June 24, 2003. Effective June 24, 2003, Mr. Daniel
W. Sharp resigned as Treasurer, Chief Financial Officer, Chief Accounting
Officer and Assistant Secretary of the Company. Kenneth Michael Cornell of
Cornell & Associates, Inc. is the Chief Financial Officer of the Company.
During 2003 Mr. Sharp and Mr. Cornell billed fees of $34,000 and $16,000,
respectively. During 2004, Mr. Cornell billed fees of $18,000.
Amounts
Due to Related Parties
The
Company had the following balances due at December 31:
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Notes
to Consolidated Financial Statements
December
31, 2004
9. |
Selected
quarterly financial data (unaudited)
|
The
following is a summary (in thousands, except for per share amounts) of the
quarterly results of operations for the years ended December 31, 2004 and
2003:
2004
|
|
QTR
1
|
|
QTR
2
|
|
QTR
3
|
|
QTR
4
|
|
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
Expenses
|
|
|
(192
|
)
|
|
(171
|
)
|
|
(152
|
)
|
|
(158
|
)
|
Net
loss
|
|
|
(192
|
)
|
|
(171
|
)
|
|
(152
|
)
|
|
(158
|
)
|
Per
share (basic & diluted)
|
|
|
(.004
|
)
|
|
(.004
|
)
|
|
(.003
|
)
|
|
(.003
|
)
|
Weighted
average number of shares outstanding
|
|
|
46,212
|
|
|
46,212
|
|
|
46,212
|
|
|
46,212
|
|
2003
|
|
QTR
1
|
|
QTR
2
|
|
QTR
3
|
|
QTR
4
|
|
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
Expenses
|
|
|
(329
|
)
|
|
(217
|
)
|
|
(265
|
)
|
|
(197
|
)
|
Net
loss
|
|
|
(329
|
)
|
|
(217
|
)
|
|
(265
|
)
|
|
(197
|
)
|
Per
share (basic & diluted)
|
|
|
(.005
|
)
|
|
(.005
|
)
|
|
(.005
|
)
|
|
(.005
|
)
|
Weighted
average number of shares outstanding
|
|
|
46,212
|
|
|
46,212
|
|
|
46,212
|
|
|
46,212
|
|
|
|
2004
|
|
2003
|
|
|
|
|
|
|
|
G&O'D
|
|
|
129,000
|
|
|
129,000
|
|
Murtha
Cullina
|
|
|
268,000
|
|
|
268,000
|
|
Angerer
& Angerer
Officer
Loans
|
|
|
597,000
106,000
|
|
|
315,000
17,000
|
|
Other
|
|
|
494,000
|
|
|
325,000
|
|
Due
to Related Parties
|
|
|
1,594,000
|
|
|
1,054,000
|
|
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
Notes
to Consolidated Financial Statements
December
31, 2004
The
Company and the State of Florida have agreed to a final settlement of all claims
and rights between the parties including the Company, its subsidiary Coastal
Petroleum, and royalty holders that have intervened in Coastal Petroleum’s
recent litigation and includes the cancellation of all property lease rights
for
a lump sum payment by the State of $12.5 million.
The
royalty holders who intervened in the Coastal Petroleum litigation would receive
$2.225 million for their interests, and Lykes Minerals Corp. would tender its
Coastal Petroleum common shares and transfer any interest in the Leases to
Coastal Petroleum for $1.39 million. Under the Agreement with the State, the
Company will receive and distribute the following:
|
|
|
|
|
Agreement
with the State
|
|
$
|
12,500,000
|
|
|
|
|
|
|
To
Lykes Mineral Corporation
|
|
|
1,390,000
|
|
To
Outside Royalty Holders
|
|
|
2,225,000
|
|
|
|
|
|
|
To
the Company and its Subsidiary
|
|
|
8,885,000
|
|
|
|
|
|
|
To
Settlement Consultant
|
|
|
465,000
|
|
To
Company Creditors (as of April 30, 2005)
|
|
|
|
|
CCO
|
|
|
230,000
|
|
CPC
|
|
|
2,265,000
|
|
|
|
|
|
|
Amount
to Company and Subsidiary After payment to Creditors
|
|
$
|
5,925,000
|
|
The
other
shareholders of Coastal Petroleum have agreed to sell their shares back to
Coastal Petroleum for a total of $801,923.03 out of the remaining funds in
the
subsidiary. Coastal Caribbean would own 100% of Coastal Petroleum Company.
There
would be no contingency fees due as described in Note 4 as the past costs and
fees for the Florida Litigation exceed the amount of funds the Company will
receive under the Agreement.
The
Florida Legislature addressed the funding of this settlement Agreement in its
recent legislative session which began in March of this year. Upon approval
of
the Legislative Budget Commission and the Governor and Cabinet sitting as the
Board of Trustees of the Internal Improvement Trust Fund, the Company expects
to
receive the funds after July 1 of this year. The payment of funds is contingent
upon the exchange of proper releases and other documents from all parties as
set
out in the Agreement.
Item
9. |
Changes
in and Disagreements with Accountants on Accounting
and Financial
Disclosure
|
Previous
Independent Accountants
On
May
28, 2003, Ernst & Young LLP ("Ernst & Young") resigned as Coastal
Caribbean Oils & Minerals, Ltd.'s (the "Company") independent public
accountants. Ernst & Young's decision to resign was not recommended or
approved by the Company's Board of Directors or any committee
thereof.
Ernst
& Young's report on the Company's consolidated financial statements for the
Company's fiscal year ended December 31, 2002 did not contain an adverse opinion
or disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles.
During
the fiscal year ended December 31, 2002 and through May 28, 2003, there were
no
disagreements with Ernst & Young on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure which,
if not resolved to Ernst & Young's satisfaction, would have caused Ernst
& Young to make reference to the subject matter in connection with their
report on the Company's consolidated financial statements for such years; and
there were no reportable events as defined in Item 304(a)(1)(v) of the
Regulation S-K.
The
Company provided Ernst & Young with a copy of the foregoing disclosures.
New
Independent Accountants
In
June,
2003 the Company retained James Moore & Co., P.L. as its independent public
accountants.
Phillip
W. Ware, the principal executive officer, and Kenneth M. Cornell, the principal
financial officer, have evaluated the Company’s disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) adopted under the
Securities Act of 1934) within the ninety (90) day period prior to the date
of
this report and have concluded:
|
1. |
That
the Company’s disclosure controls and procedures are adequately designed
to ensure that material information relating to the Company, including
its
consolidated subsidiary, is timely made known to such officers by
others
within the Company and its subsidiary, particularly during the period
in
which this annual report is being prepared;
and
|
|
2. |
That
there were no significant changes in the Company’s internal controls or in
other factors that could significantly affect these controls subsequent
to
the date of our evaluation, including any corrective actions with
regard
to significant deficiencies and material
weaknesses.
|
PART III
Item
10. |
Directors
and Executive Officers of the
Company
|
Directors
As
of
December 31, 2004, the board of directors included two members, one of whom,
Mr.
Ware, also serve as an executive officer. The board is divided into two classes,
with each class serving a term of office of three years or until such time
as
their successors are elected, qualified, and assume office. In as much as no
annual meeting of the shareholders has been held since 2001, no directors have
been elected since that time.
Name
|
|
Position
|
|
Biographical
Information
|
|
|
|
|
|
|
|
Class
2002
|
|
|
|
|
|
|
|
|
|
|
|
Robert
J. Angerer
|
|
|
Director
Vice
President
|
|
|
Mr.
Robert J. Angerer, Sr. was appointed as a director of Coastal Caribbean
and Coastal Petroleum on January 30, 2003 to fill a vacancy left
by the
retirement of Benjamin Heath. He is a principal in the law firm of
Angerer
& Angerer, Tallahassee, Florida. He has been litigation counsel to
Coastal Petroleum for more than twenty-five years. Age
fifty-eight
|
|
|
|
|
|
|
|
|
|
Phillip
W. Ware
|
|
|
Director
President
Treasurer
|
|
|
Mr.
Ware, a geologist, has been President and a director of Coastal Petroleum
since 1985. Mr. Ware has also been a director of Coastal Caribbean
since
1985. Age fifty-three.
|
|
Class
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Officers
Philip
W.
Ware has been President of Coastal Petroleum and Vice President of Coastal
Caribbean for many years and became President of Coastal Caribbean effective
March 1, 2003, and Robert J. Angerer, became a director of Coastal Caribbean
on
January 30, 2003 and Vice President of Coastal Caribbean on February 27, 2003.
Effective
June 24, 2003, Daniel W. Sharp resigned as Treasurer, Chief Financial Officer,
Chief Accounting Officer and Assistant Secretary of the Company. Kenneth Michael
Cornell of Cornell & Associates, Inc. has become the Chief Financial Officer
and Principal Accounting Officer of the Company, effective June 24, 2003. Mr.
Cornell, age 36, is a Certified Public Accountant who has served businesses
in
various financial and accounting capacities during the past seven
years.
All
of
the officers of Coastal Caribbean are elected annually by the board and report
directly to it.
Only
Mr.
Ware received direct compensation for his services as an officer of Coastal
Caribbean or Coastal Petroleum. $69,000 and $92,000 of Mr. Ware’s compensation
for his services has been deferred during 2003 and 2004, respectively.
Mr.
Ware
devotes 100% of his professional time to the business and affairs of Coastal
Caribbean and Coastal Petroleum. The
other
executive officers devote a small percentage of their professional time as
officers on behalf of the companies.
The
business experience described for each director or executive officer above
covers the past five years.
We
are
not aware of any arrangements or understandings between any of the individuals
named above and any other person by which any of the individuals named above
was
selected as a director and/or executive officer. We are not aware of any family
relationship among the officers and directors of Coastal Caribbean or its
subsidiary.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Securities Exchange Act of 1934 requires the Company's executive
officers, directors and persons who beneficially own more than 10% of the
Company's Common Stock to file initial reports of beneficial ownership and
reports of changes in beneficial ownership with the Securities and Exchange
Commission (the "SEC"). Such persons are required by the SEC regulations to
furnish the Company with copies of all Section 16(a) forms filed by such
persons. Based solely on its copies of forms received by it, or written
representations from certain reporting persons that no Form 5's were required
for those persons, the Company believes that during the just completed fiscal
year, its executive officers, directors, and greater than 10% beneficial owners
compiled with all applicable filing requirements.
The
following table sets forth certain summary information concerning the
compensation of the Company’s two most highly-paid executive officers (the
“Named Executive Officers”). No other executive officer earned compensation in
excess of $100,000 during the year 2004.
|
|
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
Annual
Compensation
|
|
Long
Term
|
|
|
|
Name
and Principal
Position
|
|
Year
|
|
Salary(1)
($)
|
|
Compensation
Award
Securities
Underlying Options/SARs (#)
|
|
All
Other
Compensation
($)
|
|
Benjamin
W. Heath, President and Chief
Executive Officer
|
|
|
2003
|
|
|
6,666
|
|
|
–
|
|
|
|
|
|
|
|
2002
|
|
|
40,000
|
|
|
|
|
|
18,075(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip
W. Ware, Vice President
|
|
|
2004
|
|
|
92,000
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
92,000
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
|
92,000
|
|
|
100,000
|
|
|
13,800(3
|
)
|
|
(1) |
Mr.
Heath was only paid $3,333 of his salary during 2002, and none in
2003.
Mr. Ware was only paid $23,000 of his salary during 2003 and none
in
2004.
|
|
(2) |
Reimbursement
for office expenses $12,075 (of which $10,025 has been deferred),
and
payments to a SEP-IRA pension plan $6,000 in 2002 (all of which has
been
deferred.
|
|
(3) |
Payment
to SEP-IRA pension plan (all of which has been deferred in
2002).
|
Mr.
Sharp
was paid an hourly fee for his services to the Company and was paid $34,000
in
fees during 2003.
Mr.
Cornell is paid an hourly fee for his services to the Company and was paid
$16,000 and $18,000 in fees during 2003 and 2004, respectively.
Compensation
of Directors
All
of
our directors except for directors who are also executive officers are entitled
to receive annual directors' fees in the amount of $22,500. For the year 2003
and 2004, all director fees have been deferred.
Stock
Options
No
Stock
Options were granted during the year ended December 31, 2004. The
following table provides information about unexercised stock options held by
the
Named Executive Officers at December 31, 2004:
|
|
Aggregated
Option/SAR Exercises in 2004 and December 31, 2004 Option/SAR
Values
|
|
|
|
Shares
Acquired
On
Exercise (#)
|
|
Value
Realized
($)
|
|
Number
of Securities Underlying Unexercised Options/SARs (#)
at
December 31, 2004
|
|
Value
of Unexercised In-The-Money
Options/SARs
at
December 31, 2004
|
|
Name
|
|
|
|
|
|
Exercisable
|
|
Unexercisable
|
|
Exercisable
|
|
Unexercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benjamin
W. Heath
Benjamin
W. Heath
|
|
|
-0-
-0-
|
|
|
-0-
-0-
|
|
|
100,000
45,000
|
|
|
–
–
|
|
|
-0-
-0-
|
|
|
–
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip
W. Ware
Phillip
W. Ware
|
|
|
-0-
-0-
|
|
|
-0-
-0-
|
|
|
100,000
72,000
|
|
|
–
–
|
|
|
-0-
-0-
|
|
|
–
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company has not adjusted or amended the exercise price of any stock options
during the year end December 31, 2004.
Compensation
Committee Interlocks and Insider Participation
The
entire board of directors constitutes the compensation committee. Phillip W.
Ware is a director and President of Coastal Caribbean and Coastal
Petroleum.
Item
12. |
Security
Ownership of Certain Beneficial Owners and
Management
|
Security
Ownership of Certain Beneficial Owners
The
following table provides information as to the number of shares of our stock
owned beneficially at December 31, 2004 by each person who is known to be the
beneficial owner of more than 5% of the outstanding shares of our common
stock.
|
|
Amount
and Nature of
|
|
|
|
|
|
Beneficial
Ownership
|
|
|
|
|
|
|
|
|
|
|
|
Name
and Address of Beneficial Owner
|
|
Directly
|
|
to
Option
|
|
Percent
of Class
|
|
|
|
|
|
|
|
|
|
Lykes
Minerals Corp.
|
|
|
–
|
|
|
7,800,000*
|
|
|
14.4**
|
|
111
East Madison Street
|
|
|
|
|
|
|
|
|
|
|
P.O.
Box 1690
|
|
|
|
|
|
|
|
|
|
|
Tampa,
FL 33601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Lykes
Minerals Corp. has purchased a total of 78 shares of Coastal Petroleum
which are convertible into 7,800,000 of our
shares.
|
|
**
|
Assumes
all outstanding options held by Lykes Mineral Corp are exercised
to
acquire our shares.
|
As
of
February 1, 2003, Mr. Robert J. Angerer, Sr. owned 2,207,487 shares , or 4.77%,
of our common stock and his son, Mr. Robert J. Angerer, Jr., owned 2,206,914
shares, or 4.76%, of our common stock. Mr. Angerer, Sr. disclaims beneficial
ownership of any shares owned by his son.
Security
Ownership of Management
The
following table sets forth information as to the number of shares of the
Company's common stock owned beneficially at March 18, 2005 by each director
of
the Company and by all directors and executive officers as a group:
|
|
Amount
and Nature of Beneficial Ownership
|
|
Name
of Individual or Group
|
|
Shares
Held
Directly
or
Indirectly
|
|
Options
|
|
Percent
of
Class
|
|
Phillip
W. Ware
|
|
|
3,791
|
|
|
172,000
|
|
|
*
|
|
Kenneth
M. Cornell
|
|
|
0
|
|
|
0
|
|
|
*
|
|
Robert
J. Angerer, Sr.
|
|
|
2,207,487
|
|
|
0
|
|
|
4.77
|
|
Directors
and executive officers as
a group (a total of 3 persons)
|
|
|
2,211,278
|
|
|
172,000
|
|
|
4.77
|
%
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
COMPENSATION PLAN INFORMATION
The
following table provides information about the Company’s common stock that may
be issued upon the exercise of options and rights under the Company’s 1995 Stock
Option Plan as of December 31, 2004.
Plan
Category
|
|
Number
of Securities to be issued upon exercise of outstanding options,
warrants
and rights
(a)
(#)
|
|
Weighted
average exercise price of outstanding options, warrants and
rights
(b)
($)
|
|
Number
of securities remaining available for issuance under equity compensation
plans (excluding securities reflected in column (a))
(c)
(#)
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Equity
compensation plans not approved by security holders (1)
|
|
|
700,000
|
|
$
|
1.33
|
|
|
75,000
|
|
Total:
|
|
|
700,000
|
|
$
|
1.33
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
1995
Stock Option Plan.
|
The
Company’s 1995 Stock
Option Plan was adopted by the Board of Directors of the Company in March 1995.
1,000,000 shares of the Company's common stock were authorized for issuance
under the terms of the plan. Options under the plan may be granted only to
directors, officers, key employees of, and consultants and consulting firms
to,
(i) the Company, (ii) subsidiary corporations of the Company from time to time
and any business entity in which the Company from time to time has a substantial
interest, who, in the sole opinion of the Committee of the Board administering
the Plan, are responsible for the management and/or growth of all or part of
the
business of the Company. The exercise price of each option to be granted under
the plan shall not be less than the fair market value of the stock subject
to
the option on the date of grant of the option.
Item
13. |
Certain
Relationships and Related
Transactions
|
Angerer
& Angerer
The
law
firm of Angerer & Angerer, Tallahassee, Florida, has been litigation counsel
to Coastal Petroleum for more than twenty-five years. Mr. Robert J. Angerer,
Sr., a member of the firm, was elected a director of Coastal Caribbean and
of
Coastal Petroleum on January 30, 2003, and a Vice President of Coastal Caribbean
and Coastal Petroleum on February 28, 2003. During 2004, Angerer & Angerer
billed Coastal Petroleum $288,000 for legal fees. At December 31, 2004, fees
owed by Coastal Petroleum to Angerer & Angerer of $597,000 remain
unpaid.
Robert
J. Angerer, Sr.
Mr.
Robert J. Angerer, Sr., a director and Vice President of both Coastal Caribbean
and Coastal Petroleum, has loaned the companies funds in the total amount of
$106,000 to enable them to continue operating during 2003 and 2004.
Royalty
Interests
The
State
of Florida oil, gas and mineral leases held by Coastal Petroleum on
approximately 3,700,000 acres of submerged lands along the Gulf Coast and
certain inland lakes and rivers are subject to certain overriding royalties
aggregating 1/16th
as to
oil, gas and sulphur, and 13/600ths
as to
minerals other than oil, gas and sulphur. Of the overriding royalties as to
oil,
gas and sulphur, a 1/90th
overriding royalty, and of the overriding royalties on minerals other than
oil,
gas and sulphur, a 1/60th
overriding royalty, is held by Johnson & Company, a Connecticut partnership
which is used as a nominee by the members of the family of the late
William F. Buckley. A trust, in which Mr. Heath has a 54.4% beneficial
interest, has a beneficial interest in such royalty interest held by Johnson
& Company. No payments have been made to Johnson & Company (or to the
beneficial owners of such royalty interests) in more than forty
years.
In
1990,
Coastal Petroleum granted to the following persons the following percentages
of
any net recovery from execution on or satisfaction of judgment or from
settlement of the lawsuit against the State of Florida as follows:
Name
|
|
Percent
of net recovery
|
|
Coastal
Petroleum Position
|
|
Benjamin
W. Heath
|
|
|
1.25
|
|
|
Chairman
of Board*
|
|
Phillip
W. Ware
|
|
|
1.25
|
|
|
President
|
|
James
R. Joyce
|
|
|
0.30
|
|
|
Treasurer**
|
|
|
|
|
|
|
|
|
|
|
(*) |
Mr.
Heath retired on February 28, 2003.
|
|
(**) |
Mr.
Joyce retired in December 2002.
|
The
costs
and fees for the years involved in the Florida litigation exceed the amount
of
the funds Coastal Petroleum will receive under the Agreement with the
State.Therefore there is no net recovery and no contingency fees due from the
contingent interests granted as discussed above. See Item 4
Litigation.
Item
14. |
Principal
Accountant Fees and
Services
|
James
Moore & Co., P.L. audited the Company’s financial statements for 2004 and
2003. Ernst & Young LLP audited the Company’s financial statements for 2002
and performed the review for the quarter ended March 31, 2003.
Fees
related to services performed by James Moore & Co., P.L. and Ernst &
Young LLP in 2004 and 2003 were as follows:
|
|
2004
|
|
2003
|
|
Audit
Fees (1)
|
|
|
22,817
|
|
|
16,500
|
|
Audit-Related
Fees
|
|
|
-0-
|
|
|
-0-
|
|
Tax
Fees (2)
|
|
|
1,200
|
|
|
750
|
|
Total
|
|
|
24,017
|
|
|
17,250
|
|
|
|
|
|
|
|
|
|
|
(1) |
Audit
fees represent fees for professional services provided in connection
with
the audit of our financial statements and review of our quarterly
financial statements. The Audit Committee must preapprove audit related
and non-audit services not prohibited by law to be performed by the
Companies independent auditors. The Audit Committee for the Company
was
made up of John D. Monroe and Graham B. Collis. The Audit Committee
preapproved all audit related and non-audit services in 2004 and
2003.
|
|
(2)
|
Tax
fees principally included tax advice, tax planning and tax return
preparation.
|
PART IV
Item
15. |
Exhibits
and Financial Statement
Schedules
|
|
(a) |
(1) Financial Statements.
|
The
financial statements listed below and included under Item 8 above are filed
as
part of this report.
|
|
Page
|
|
|
|
|
|
23-24
|
|
|
|
|
|
25
|
|
|
|
|
|
26
|
|
|
|
|
|
27
|
|
|
|
|
|
28
|
|
|
|
|
|
29-40
|
|
|
|
|
(2) |
Financial Statement Schedules.
|
All
schedules have been omitted since the required information is not present or
not
present in amounts sufficient to require submission of the schedule, or because
the information required is included in the consolidated financial statements
and the notes thereto.
The
following exhibits are filed as part of this report:
Item Number
|
2. |
Plan
of acquisition, reorganization, arrangement, liquidation or
succession
|
Not
applicable.
|
3. |
Articles
of incorporation and By-Laws.
|
|
|
(a)
|
Memorandum
of Association as amended on June 30, 1982, May 14, 1985 and
April 7,
1988 filed as Exhibit 3. (a) to Report on Form 10-K for the year
ended
December 31, 1998 (File
Number 001-04668) is incorporated herein by
reference.
|
|
|
(b)
|
Bye-laws
are incorporated by reference to Schedule 14(a) Proxy Statement filed
on
May 13, 1997 (File
Number 001-04668).
|
|
4. |
Instruments defining the rights of security holders, including
indentures.
|
Not
applicable.
|
9. |
Voting trust agreement.
|
Not
applicable.
|
|
(a)
|
Drilling
Lease No. 224-A, as modified, between the Trustees of the Internal
Improvement Fund of the State of Florida and Coastal Petroleum Company
dated February 27, 1947 filed as Exhibit 10(a) to Report on Form
10-K for
the year ended December 31, 1998 (File Number 001-04668) is incorporated
herein by reference.
|
|
|
(b)
|
Drilling
Lease No. 224-B, as modified, between the Trustees of the Internal
Improvement Fund of the State of Florida and Coastal Petroleum Company
dated February 27, 1947 filed as Exhibit 10(b) to Report on Form
10-K for
the year ended December 31, 1998 (File Number 001-04668) is incorporated
herein be reference.
|
|
|
(c)
|
Drilling
Lease No. 248, as modified, between the Trustees of the Internal
Improvement Fund of the State of Florida and Coastal Petroleum Company
dated February 27, 1947 filed as Exhibit 10(c) to Report on Form
10-K for
the year ended December 31, 1998 (File Number 001-04668) is incorporated
herein by reference.
|
|
|
(d)
|
Memorandum
of Settlement dated January 6, 1976 between Coastal
Petroleum Company and the State of Florida filed as Exhibit 10(d)
to
Report on Form 10-K for the year ended December 31, 1998 (File
Number 001-04668) is
incorporated herein by reference.
|
|
|
(e)
|
Agreement
between the Company and Coastal Petroleum dated December 3, 1991
filed as
Exhibit 10(e) to Report on Form 10-K for the year ended December
31, 1998
(File
Number 001-04668) is incorporated herein by
reference
|
|
|
(f)
|
Agreement
between Lykes Minerals Corp. and Coastal Caribbean and Coastal
Petroleum
dated October 16, 1992 filed as Exhibit 10(f) to Report on Form
10-K for
the year ended December 31, 1998 (File Number 001-04668) is incorporated
herein by reference.
|
|
|
(g) |
Stock
Option Plan adopted March 7, 1995 filed as Exhibit 4A to form S-8
dated
July 28, 1995 (File
Number 001-04668) is incorporated herein by
reference.
|
|
|
(h) |
Memorandum of Settlement dated June 1, 2005 between
Coastal Petroleum Company, et al. and the State of
Florida. |
|
11. |
Statement re: computation of per share earnings.
|
None.
|
12. |
Statement re: computation of ratios.
|
Not
applicable.
|
13. |
Annual report to security holders,
Form 10-Q or quarterly report to security holders.
|
Not
applicable.
|
16. |
Letter
re: change in certifying accountant.
|
Not
applicable.
|
18. |
Letter re: change in accounting principles.
|
Not
applicable.
|
21. |
Subsidiaries of the registrant.
|
The
Company has one subsidiary, Coastal Petroleum Company, a Florida corporation
which is 58.45 % owned.
|
22. |
Published
report regarding matters submitted to vote of security holders.
|
Not
applicable.
|
23. |
Consent
of experts and counsel.
|
|
23.1 |
Consent
of Ernst & Young LLP.
|
|
23.2 |
Consent
of James, Moore &
Co., P.L.
|
Not
applicable.
|
31.1 |
Certification
of Chief Executive Officer Required by Rule 13a-14(a)-15d-14(a) under
the
Exchange Act
|
|
31.2 |
Certification
of Chief Accounting and Financial Officer Required by Rule
13a-14(a)-15d-14(a) under the Exchange
Act
|
|
32.1 |
Certificationpursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the
Sarbanes-Oxley Act of 2002 executed by Phillip W. Ware
|
|
32.2 |
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002 executed by Kenneth M.
Cornell
|
|
99.1
|
The
decision Coastal Petroleum Company v. Florida Wildlife Federation
et. al.
of the First District Court of Appeal dated October 6, 1999 (St.
George
Island permit application case), is incorporated by reference to
Exhibit
99(a) to the Company’s Current Report on Form 8-K filed on October 7, 1999
(File
Number 001-04668).
|
.
|
99.2
|
Complaint,
filed January 16, 2001 in the Leon County Circuit Court, Coastal
Petroleum
Company, Plaintiff vs. State of Florida, Department of Environmental
Protection, and Board of Trustees of the Internal Improvement Fund,
Defendants, is incorporated by reference to Exhibit 99(a) to the
Company’s
Current Report on Form 8-K filed on January 18, 2001 (File
Number 001-04668).
|
|
99.3 |
The
final judgment in
the Leon County Circuit Court, Coastal Petroleum Company, Plaintiff
vs.
State of Florida, Department of Environmental Protection, and Board
of
Trustees of the Internal Improvement Fund, Defendants, dated November
15,
2002 is incorporated by reference to Exhibit 99.1 to the Company’s Current
Report on Form 8-K filed on November 18, 2002 (File
Number 001-04668).
|
|
99.4
|
The
Appellant Decision of the First District Court of Appeal, Coastal
Petroleum Company, Appellant vs. State of Florida, Department of
Environmental Protection, and Board of Trustees of the Internal
Improvement Fund, Appellees, dated December 3,
2003.
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Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by
the undersigned, thereunto duly authorized.
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COASTAL
CARIBBEAN OILS & MINERALS, LTD. (Registrant) |
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Date: June
2, 2005 |
By: |
/s/ Phillip
W. Ware |
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Phillip
W. Ware
President
and Chief Executive Officer
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Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been
signed below by the following persons on behalf of the registrant and in the
capacities and on the date indicated.
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/s/ Phillip
W. Ware |
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/s/ Kenneth
M. Cornell |
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Phillip
W. Ware President, Treasurer, Director and Chief Executive
Officer
Dated: June 2, 2005
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Kenneth
M. Cornell Chief Financial Officer and Chief Accounting
Officer
Dated:
June 2, 2005
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/s/ Robert
J. Angerer |
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Robert
J. Angerer Director
Dated:
June 2, 2005
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Exhibit
No.
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10.(h)
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Memorandum
of Agreement by and between Coastal Petroleum Company, et al and
the State
of Florida Dated June 1, 2005.
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23.1 |
Consent
of Ernst & Young LLP
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23.2
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Consent
of James Moore & Co., P.L.
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31.1 |
Certification
pursuant to Rule 13a-14 by Phillip W. Ware
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31.2
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Certification
pursuant to Rule 13a-14 by Kenneth M. Cornell
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32.1
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Certification
pursuant to Section 906 by Phillip W. Ware
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32.2 |
Certification
pursuant to Section 906 by Kenneth M.
Cornell
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EXHIBIT
10(h)
Memorandum
of Agreement by and between Coastal Petroleum
Company,
et al and the State of Florida Dated June 1, 2005.
MEMORANDUM
OF SETTLEMENT
June
1,
2005
The
purpose of this memorandum is to set forth the essential terms of
the agreement
between and among Coastal Petroleum Company (“Coastal”), and Coastal Caribbean
Oils & Minerals, Ltd. and certain individuals who claim royalty interests
in, to and under the Coastal Leases (the “Royalty Holders”), and the State of
Florida, the State of Florida Department of Environmental Protection
and Board
of Trustees of the Internal Improvement Trust Fund of the State of
Florida
(collectively the “State”) to finally settle and resolve all claims between and
among them arising out of Coastal’s Leases Nos. 224-A, 224-B and 248 (the
“Coastal Leases”). The Royalty Holders included in this agreement are Coastal
Caribbean Oils & Minerals, Ltd. and members of two groups of individuals,
one represented by Susan W. Fox, Esquire, and the other by Robert
W. Clark, who
are obtaining individual consents. This transaction is consistent
with public
policy regarding offshore oil and gas drilling as expressed in Sections
377.06,
377.24 and 377.242, Florida Statutes.
The
closing of this settlement transaction, including payment of the
settlement
proceeds and delivery of the required settlement documents, shall
take place in
Tallahassee, Florida within 30 days after approval of the funding
of this
settlement by the Florida Legislature and such funds are made available
to the
Department of Environmental Protection, and this settlement is expressly
conditioned and contingent upon approval of the funding by the Florida
Legislature. Current annual rentals for the Coastal Leases will be
held in
abeyance pending the closing of this settlement transaction at which
time the
settlement will take effect and the rentals will no longer be due.
At
the
closing, the following payment and documents shall be delivered:
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1.
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The
State shall pay to Ausley & McMullen Escrow Account, for and on behalf
of Coastal and the Royalty Holders, the total sum of
$12,500,000.
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2.
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Coastal
and the Royalty Holders shall release and transfer to the
Board of
Trustees of the Internal Improvement Trust Fund of the
State of Florida
all of their right, title and interest in, to and under
the Coastal
Leases.
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3.
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Each
party shall dismiss with prejudice all pending litigation
brought by any
of them against the other with respect to the Coastal Leases
or their
alleged royalty interests in, to or under such leases,
each party to bear
its own costs.
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4.
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The
parties shall exchange General Releases, declarations,
certificates, legal
opinions and affidavits in form and content acceptable
to the State;
including, but not limited to, those listed on Exhibit
A attached hereto
and by this reference made a part
hereof.
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BOARD
OF TRUSTEES OF THE
INTERNAL
IMPROVEMENT TRUST FUND
OF
THE STATE OF FLORIDA
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(SEAL)
BOARD
OF TRUSTEES OF THE
INTERNAL
IMPROVEMENT
TRUST
FUND OF THE STATE
OF
FLORIDA
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/S/
Jeb Bush
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JEB
BUSH
GOVERNOR
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/S/
Charlie Crist
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CHARLIE
CRIST
ATTORNEY
GENERAL
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/S/
Tom Gallagher
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TOM
GALLAGHER
CHIEF
FINANCIAL OFFICER
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/S/
Charles H. Bronson
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CHARLES
H. BRONSON
COMMISSIONER
OF AGRICULTURE
STATE
OF FLORIDA
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STATE
OF FLORIDA DEPARTMENT OF
ENVIRONMENTAL
PROTECTION
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By:
/S/ Colleen M. Castille
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COLLEEN
M. CASTILLE, Secretary
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/S/
John K. Aurell
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JOHN
K. AURELL,
On
behalf of Coastal Petroleum Company and
The
Royalty Holders
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EXHIBIT
A
To
Memorandum of Settlement
The
boards of directors and officers of Coastal and Coastal Caribbean
Oil and
Minerals shall provide the following schedules, certifications, declarations
and
legal opinions at closing:
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1.
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A
schedule of creditors and holders of interests or grants
of Coastal and
Coastal Caribbean (the “Schedule”.)
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2.
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Certifications
that the Schedule is complete and accurate to the best
of the knowledge
and belief of the officers of the company and of the independent
auditors
of the companies, regardless of whether the claims or interests
are
contingent, disputed or liquidated.
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3.
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A
declaration by the companies to prepare and submit to the
Escrow Agent and
to the State an amendment to the schedule of creditors
to include any
creditor of the companies not appearing on previously furnished
lists upon
demand for payment by an alleged creditor or discovery
of a claim (the
“Amendment”.)
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4.
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A
declaration authorizing the State to pay the funds from
the settlement
directly to the Ausley & McMullen Escrow Account referenced in the
Memorandum of Settlement.
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5.
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Escrow
instructions for the Escrow which include an irrevocable
provision that
the escrowed funds be used first to satisfy all of the
creditors of
Coastal and Coastal Caribbean in full, whether included
on the Schedule or
subsequently discovered and added to the Amendment.
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6.
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A
certification that all of the issued and outstanding stock
of Coastal is
accounted for and represented among parties who will execute
a release and
satisfaction of interest to the State as part of this
settlement.
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7.
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A
certification that following the contemplated transfers,
Coastal will be a
wholly owned subsidiary of Coastal Caribbean.
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8.
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A
certification that all guarantors of the debts or obligations
of Coastal
and Coastal Caribbean have been disclosed and will execute
a release and
satisfaction of claim in connection with the
settlement.
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9.
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A
certification that all creditors, contingency holders of
interests or
grants, and parties who are to receive distributions from
the Escrow have
executed and delivered to the Escrow Agent releases and
satisfactions of
claims to be delivered to the State at
closing.
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10.
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Resolution
of the Board of Directors for each of the companies at
properly noticed
meetings approving the settlement transaction; specifically
finding as
follows: i) the Boards find the consideration given by
the State in
exchange for all consideration to be given by the companies
and parties to
be fair, for reasonably equivalent value and not a product
of duress,
adhesion or sharp practices; ii) the Boards have disclosed
all
compensation to be received by the officers and directors
of the companies
and all distributions to be made under the escrow agreement,
and iii) the
Boards have found that the companies will receive sufficient
compensation
from the settlement, after paying all creditors in full,
to remain solvent
thereafter.
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11.
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Resolution
from the Board of Directors of Coastal at a properly noticed
meeting
specifically authorizing its president to execute the Surrender
of Leases
and Release of Claims releasing and surrendering to the
Board of Trustees
all of Coastal’s right, title and interest in and to the Leases and any
interest it may have in the lands described in the
Leases.
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12.
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Legal
opinions of Florida and Bermuda counsel to the companies
and the State
that the settlement transaction will not result in either
an avoidable
fraudulent transfer or preferential transfer with regard
to any creditor
or guarantor under the laws of the United States or
Bermuda.
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13.
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Estoppel
certificate from Coastal in which Coastal certifies that
it has not
assigned, transferred, encumbered or hypothecated its interests
in or
under the Leases or any interest it may have in the lands
described in the
Leases.
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EXHIBIT
23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Stock Option plan of Coastal Caribbean Oils &
Minerals, Ltd. of our report dated February 12, 2003, with respect to the
consolidated financial statements of Coastal Caribbean Oils & Minerals, Ltd.
for the year ended December 31, 2002 included in the Annual Report (Form
10-K)
for the year ended December 31, 2004.
/s/
Ernst
& Young LLP
Stamford,
Connecticut
May
31,
2005
EXHIBIT
23.2
CONSENT
OF INDEPENDENT AUDITORS
We
consent to the incorporation by reference in Form 10-K of Coastal Caribbean
Oils
& Minerals, Ltd. of our report dated March 17, 2005, with respect to
the consolidated financial statements of Coastal Caribbean Oils & Minerals,
Ltd as of December 31, 2004 and 2003 and for the years ended
December 31, 2004 and 2003, and for the period from January 31,
1953
(inception) to December 31, 2004 included in this Annual Report (Form
10-K)
for the year ended December 31, 2004.
/s/
James
Moore & Co., P.L.
Gainesville,
Florida
May
31,
2005
EXHIBIT
31.1
Coastal
Caribbean Oils & Minerals, Ltd.
Rule
13a-14 Certification
I,
Phillip W. Ware, certify that:
1. I
have
reviewed this annual report on Form 10-K of Coastal Caribbean Oils &
Minerals, Ltd.
2. Based
on
my knowledge, this annual report does not contain any untrue statement of
a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made,
not
misleading with respect to the period covered by this annual report;
3. Based
on
my knowledge, the financial statements, and other financial information included
in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of,
and
for, the periods presented in this annual report;
4. The
registrant's other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange
Act
Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed
such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period
in
which this annual report is being prepared;
b) evaluated
the effectiveness of the registrant's disclosure controls and procedures
as of a
date within 90 days prior to the filing date of this annual report (the
"Evaluation Date"); and
c) presented
in this annual report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation
Date;
5. The
registrant's other certifying officers and I have disclosed, based on our
most
recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all
significant deficiencies in the design or operation of internal controls
which
could adversely affect the registrant's ability to record, process, summarize
and report financial data and have identified for the registrant's auditors
any
material weaknesses in internal controls; and
b) any
fraud, whether or not material, that involves management or other employees
who
have a significant role in the registrant's internal controls; and
6. The
registrant's other certifying officers and I have indicated in this annual
report whether or not there were significant changes in internal controls
or in
other factors that could significantly affect internal controls subsequent
to
the date of our most recent evaluation, including any corrective actions
with
regard to significant deficiencies and material weaknesses.
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Date: June
2, 2005 |
By: |
/s/ Phillip
W. Ware |
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Phillip
W. Ware
President &
Treasurer
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EXHIBIT
31.2
Coastal
Caribbean Oils & Minerals, Ltd.
Rule
13a-14 Certification
I,
Kenneth M. Cornell, certify that:
1. I
have
reviewed this annual report on Form 10-K of Coastal Caribbean Oils &
Minerals, Ltd.
2. Based
on
my knowledge, this annual report does not contain any untrue statement of
a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made,
not
misleading with respect to the period covered by this annual report;
3. Based
on
my knowledge, the financial statements, and other financial information included
in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of,
and
for, the periods presented in this annual report;
4. The
registrant's other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange
Act
Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed
such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period
in
which this annual report is being prepared;
b) evaluated
the effectiveness of the registrant's disclosure controls and procedures
as of a
date within 90 days prior to the filing date of this annual report (the
"Evaluation Date"); and
c) presented
in this annual report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation
Date;
5. The
registrant's other certifying officers and I have disclosed, based on our
most
recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all
significant deficiencies in the design or operation of internal controls
which
could adversely affect the registrant's ability to record, process, summarize
and report financial data and have identified for the registrant's auditors
any
material weaknesses in internal controls; and
b) any
fraud, whether or not material, that involves management or other employees
who
have a significant role in the registrant's internal controls; and
6. The
registrant's other certifying officers and I have indicated in this annual
report whether or not there were significant changes in internal controls
or in
other factors that could significantly affect internal controls subsequent
to
the date of our most recent evaluation, including any corrective actions
with
regard to significant deficiencies and material weaknesses.
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Date: June
2, 2005 |
By: |
/s/
Kenneth M. Cornell |
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Kenneth
M. Cornell
Chief Accounting and Financial
Officer
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EXHIBIT
32.1
CERTIFICATION
PURSUANT TO
18
U.S.C.
SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report of Coastal Caribbean Oils & Minerals, Ltd.
(the "Company") on Form 10-K for the year ended December 31, 2004 as filed
with
the Securities and Exchange Commission on the date hereof (the "Report"),
I,
Phillip W. Ware, Chief Executive Officer of the Company, certify, pursuant
to 18
U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
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(1)
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The
Report fully complies with the requirements of section 13(a) or
15(d) of
the Securities Exchange Act of 1934;
and
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(2)
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The
information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the
Company.
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Date: June
2, 2005 |
By: |
/s/ Phillip
W. Ware |
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Phillip
W. Ware
President &
Treasurer
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EXHIBIT
32.2
CERTIFICATION
PURSUANT TO
18
U.S.C.
SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report of Coastal Caribbean Oils & Minerals, Ltd.
(the "Company") on Form 10-K for the year ended December 31, 2004 as filed
with
the Securities and Exchange Commission on the date hereof (the "Report"),
I,
Kenneth M. Cornell, Chief Financial Officer of the Company, certify, pursuant
to
18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
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(1)
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The
Report fully complies with the requirements of section 13(a) or
15(d) of
the Securities Exchange Act of 1934;
and
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(2)
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The
information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the
Company.
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Date: June
2, 2005 |
By: |
/s/
Kenneth M. Cornell |
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Kenneth
M. Cornell
Chief Accounting and Financial
Officer
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