Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q/A
(Amendment
No. 1)
x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the
quarterly period ended September
30,
2005
o |
TRANSACTION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
OF 1934
|
For
the
transition period from ________________ to _________________
Commission
file number 1-4668
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)
|
(850)
653-2732
(Registrant's
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (l) has filed all reports required to
be
filed by Section 13 or 15 (d) of the Securities Exchange Act of l934 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. T
Yes
¨
No
Indicate
by check mark whether the registrant is an accelerated filer (as defined in
Rule
12b-2 of the Exchange Act). ¨
Yes
T
No
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). ¨
Yes
T
No
The
number of shares outstanding of the issuer's single class of common stock as
of
October 26, 2005 was 46,211,604.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
FORM
10-Q/A
(Amendment
No. 1)
SEPTEMBER
30, 2005
Table
of Contents
PART
I - FINANCIAL INFORMATION
ITEM
1 |
Financial
Statements |
Page
|
|
|
|
|
Consolidated
balance sheets at September 30, 2005 and December 31, 2004
|
3
|
|
|
|
|
Consolidated
statements of operations for the three and nine month periods ended
September 30, 2005 and 2004 and for the period from January 31, 1953
(inception) to September 30, 2005
|
4
|
|
|
|
|
Consolidated
statements of cash flows for the nine month periods ended September
30,
2005 and 2004 and for the period from January 31, 1953 (inception)
to
September 30, 2005
|
5
|
|
|
|
|
Notes
to consolidated financial statements
|
6
|
|
|
|
ITEM
2
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
9
|
|
|
|
ITEM
3
|
Quantitative
and Qualitative Disclosure About Market Risk
|
11
|
|
|
|
ITEM
4
|
Controls
and Procedures
|
11
|
|
|
|
|
PART
II - OTHER INFORMATION
|
|
|
|
|
ITEM
5
|
Other
Information
|
12
|
|
|
|
ITEM
6
|
Exhibits
|
13
|
|
|
|
|
Signatures
|
14
|
Explanatory
Note:
Coastal
Caribbean Oils and Minerals, Ltd. (the “Company”) is hereby amending its
previously filed Quarterly Report on Form 10-Q for the quarter ended September
30, 2005 (the “Original Report”). This Amendment No. 1 is being filed in order
to amend the report to reflect the reclassification of certain payments from
the
settlement with the State of Florida. Upon a more detailed analysis of the
settlement by management, the reported gain on the settlement was reduced by
$1,390,000. The amount assigned to goodwill and the related impairment expense
was also reduced by $1,390,000. We also recorded estimated income tax liability
of $35,000, which reduced previously recorded net income. Exhibits 32.1 and
32.2
are being currently dated but are otherwise unchanged from those filed in the
Original Report. No other changes to the Original Report have been made. This
Amendment No. 1 does not reflect events occurring after the filing of the
Original Report or modify or update disclosures therein in any way other than
as
described above.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
FORM
10-Q/A
(Amendment
No. 1)
PART
I - FINANCIAL INFORMATION
ITEM
1
- Financial
Statements
CONSOLIDATED
BALANCE SHEETS
(Expressed
in U.S. dollars)
(A
Bermuda Corporation)
A
Development Stage Company
|
|
|
|
|
|
Assets
|
|
(Unaudited)
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
4,448,354
|
|
$
|
179
|
|
Prepaid
expenses and other
|
|
|
1,884
|
|
|
16,322
|
|
Total
current assets
|
|
|
4,450,238
|
|
|
16,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized
exploration costs
|
|
|
143,023
|
|
|
—
|
|
Equipment
|
|
|
1,891
|
|
|
—
|
|
Certificate
of deposit
|
|
|
10,000
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
4,605,152
|
|
$
|
16,501
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
39,786
|
|
$
|
863,127
|
|
Income
tax expense
|
|
|
35,000
|
|
|
—
|
|
Amounts
due to related parties
|
|
|
—
|
|
|
1,594,369
|
|
Total
current liabilities
|
|
|
74,786
|
|
|
2,457,496
|
|
|
|
|
|
|
|
|
|
Minority
interests (Note 3)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity (deficit)
|
|
|
|
|
|
|
|
Common
stock, par value $.12 per share:
|
|
|
|
|
|
|
|
Authorized
- 250,000,000 shares
|
|
|
|
|
|
|
|
Outstanding
- 46,211,604, 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
|
|
|
(33,152,837
|
)
|
|
(40,124,198
|
)
|
Total
shareholders’ equity (deficit)
|
|
|
4,530,366
|
|
|
(2,440,995
|
)
|
Total
liabilities and shareholders’ (deficit) equity
|
|
$
|
4,605,152
|
|
$
|
16,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
FORM
10-Q/A
(Amendment
No. 1)
PART
I - FINANCIAL INFORMATION
ITEM
1
- Financial
Statements
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Expressed
in U.S. dollars)
(A
Bermuda Corporation)
A
Development Stage Company
|
|
Three
months ended September 30,
|
|
Nine
months ended September 30,
|
|
For
the period from Jan. 31, 1953 (inception) to September 30,
|
|
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal fees and costs
|
|
|
76,011
|
|
|
86,888
|
|
|
90,068
|
|
|
249,167
|
|
|
16,989,747
|
|
Administrative expenses
|
|
|
52,320
|
|
|
34,526
|
|
|
130,811
|
|
|
172,626
|
|
|
9,866,504
|
|
Personnel
|
|
|
44,291
|
|
|
24,761
|
|
|
93,810
|
|
|
74,279
|
|
|
3,849,621
|
|
Shareholder communications
|
|
|
12,524
|
|
|
6,000
|
|
|
24,584
|
|
|
18,565
|
|
|
3,997,676
|
|
Write off of unproved properties
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,560,494
|
|
Exploration costs
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
247,465
|
|
Lawsuit judgments
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,941,916
|
|
Minority interests
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(632,974
|
)
|
Other
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
364,865
|
|
Contractual services
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,155,728
|
|
|
|
|
185,146
|
|
|
152,175
|
|
|
339,273
|
|
|
514,637
|
|
|
44,341,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on settlement (Note 4)
|
|
|
8,125,900
|
|
|
—
|
|
|
8,125,900
|
|
|
—
|
|
|
8,125,900
|
|
Goodwill impairment
|
|
|
(801,923
|
)
|
|
—
|
|
|
(801,923
|
)
|
|
—
|
|
|
(801,923
|
)
|
Interest and other income
|
|
|
21,657
|
|
|
1
|
|
|
21,657
|
|
|
1
|
|
|
3,899,228
|
|
|
|
|
7,345,634
|
|
|
—
|
|
|
7,345,634
|
|
|
—
|
|
|
11,223,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
expense
|
|
|
35,000
|
|
|
—
|
|
|
35,000
|
|
|
—
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
7,125,488
|
|
$
|
(152,174
|
)
|
$
|
6,971,361
|
|
$
|
(514,636
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
accumulated during
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
the development stage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(33,152,837
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding
(basic &
diluted)
|
|
|
46,221,604
|
|
|
46,221,604
|
|
|
46,221,604
|
|
|
46,221,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share (basic & diluted)
|
|
$
|
.15
|
|
$
|
(—
|
)
|
$
|
.15
|
|
$
|
(.01
|
)
|
|
|
|
See
accompanying notes.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
FORM
10-Q/A
(Amendment
No. 1)
PART
I - FINANCIAL INFORMATION
ITEM
1
- Financial
Statements
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Expressed
in U.S. Dollars)
(A
Bermuda Corporation)
A
Development Stage Company
(Unaudited)
|
|
|
Nine
months ended September 30,
|
|
|
For
the period from Jan. 31, 1953
(inception)
to September 30,
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
Operating
activities: |
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
6,971,361
|
|
$
|
(514,636
|
)
|
$
|
(33,152,837
|
)
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
|
used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairment
|
|
|
801,923
|
|
|
—
|
|
|
801,923
|
|
Gain on settlement
|
|
|
(8,125,900
|
)
|
|
—
|
|
|
(8,125,900
|
)
|
Write off of unproved properties
|
|
|
—
|
|
|
—
|
|
|
5,619,741
|
|
Minority interest
|
|
|
—
|
|
|
—
|
|
|
(632,974
|
)
|
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
|
|
|
14,438
|
|
|
71,625
|
|
|
(1,885
|
)
|
Accounts payable and accrued liabilities
|
|
|
(2,337,420
|
)
|
|
376,525
|
|
|
39,788
|
|
Income taxes payable
|
|
|
35,000
|
|
|
—
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating activities
|
|
|
(2,640,598
|
)
|
|
(66,486
|
)
|
|
(34,970,472
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
|
|
|
|
|
Additions to oil, gas, and mineral properties
|
|
|
|
|
|
|
|
|
|
|
net
of assets acquired for common stock and reimbursements
|
|
|
(143,023
|
)
|
|
—
|
|
|
(3,883,205
|
)
|
Net proceeds from settlement
|
|
|
8,125,900
|
|
|
—
|
|
|
8,125,900
|
|
Proceeds from relinquishment of surface rights
|
|
|
—
|
|
|
—
|
|
|
246,733
|
|
Purchase of certificate of deposit
|
|
|
(10,000
|
)
|
|
—
|
|
|
(10,000
|
)
|
Purchase of minority interest in CPC
|
|
|
(801,923
|
)
|
|
—
|
|
|
(801,923
|
)
|
Equipment purchases
|
|
|
(1,891
|
)
|
|
—
|
|
|
(63,540
|
)
|
Net
cash provided by (used in) investing activities
|
|
|
7,169,063
|
|
|
—
|
|
|
3,613,965
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
|
|
|
Loans from officers
|
|
|
31,500
|
|
|
63,851
|
|
|
111,790
|
|
Repayment of loans to officers
|
|
|
(111,790
|
)
|
|
—
|
|
|
(111,790
|
)
|
Sale of common stock net of expenses
|
|
|
—
|
|
|
—
|
|
|
30,380,612
|
|
Proceeds from exercise of options
|
|
|
—
|
|
|
—
|
|
|
884,249
|
|
Sale of shares by subsidiary
|
|
|
—
|
|
|
—
|
|
|
820,000
|
|
Sale of subsidiary shares
|
|
|
—
|
|
|
—
|
|
|
3,720,000
|
|
Net
cash provided by (used in) financing activities
|
|
|
(80,290
|
)
|
|
63,851
|
|
|
35,804,861
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
4,448,175
|
|
|
(2,635
|
)
|
|
4,448,354
|
|
Cash
and cash equivalents at beginning of period
|
|
|
179
|
|
|
2,875
|
|
|
—
|
|
Cash
and cash equivalents at end of period
|
|
$
|
4,448,354
|
|
$
|
240
|
|
$
|
4,448,354
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
FORM
10-Q/A
(Amendment
No. 1)
PART
I - FINANCIAL INFORMATION
ITEM
1 Financial
Statements
Note
1. Basis
of Presentation
The
accompanying unaudited consolidated financial statements include Coastal
Caribbean Oils & Minerals, Ltd. (the Company) and its wholly owned
subsidiary, Coastal Petroleum Company (Coastal Petroleum) and have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01
of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. All such adjustments
are
of a normal recurring nature. Operating results for the three and nine month
periods ended September 30, 2005 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2005. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2004.
Note
2. Going
Concern
As
of
September 30, 2005, the Company had no revenues, had recurring losses prior
to
2005 and has had an accumulated deficit during the development
stage. We, along with various other parties, recently settled
several lawsuits which were filed by the Company, our subsidiary Coastal
Petroleum Company and others against the State of Florida (See Notes 3 and
5).
All of these lawsuits were related to the State’s actions limiting oil and
gas exploration and development activities on land covered by
our subsidiary's leases and by royalties held by the Company and
others. The cost of that litigation was substantial. Management
believes its current cash position will allow the Company to move forward to
explore and develop profitable oil and gas operations, although there is no
assurance these efforts will be successful.
Note
3. Litigation
Florida
Case
In
June
2005, the
Company and others agreed to a final settlement of all claims and rights with
the State of Florida (the State) for $12.5 million (the Agreement).
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
FORM
10-Q/A
(Amendment
No. 1)
PART
I - FINANCIAL INFORMATION
ITEM
1 Financial
Statements (Cont’d)
The
State
paid out the settlement through an intermediary in July 2005. The total
settlement and the amount received by the Company was as follows:
Gross
settlement proceeds
|
|
$ |
12,500,000 |
|
|
|
|
|
|
Distribution
to other parties: |
|
|
|
|
Lykes
Mineral Corporation |
|
|
1,390,000
|
|
Outside
Royalty Holders |
|
|
2,540,000 |
|
Settlement
Consultant |
|
|
465,000 |
|
|
|
|
|
|
Gross
proceeds to Coastal |
|
|
8,105,000 |
|
|
|
|
|
|
Purchase
of other CPC shares |
|
|
802,000 |
|
Paid
to Coastal Creditors |
|
|
2,431,000 |
|
|
|
|
|
|
Net
proceeds to Company |
|
$ |
4,872,000 |
|
As
part
of the settlement, the Company acquired the remaining minority interests in
its
subsidiary, Coastal Petroleum for $802,000. As Coastal Petroleum had no tangible
or intangible assets at the time the shares were acquired, the full purchase
price was assigned to goodwill. The Company reviewed its goodwill related to
Coastal Petroleum for impairment and determined the goodwill was fully impaired.
Therefore, an impairment charge of $802,000 was made during the quarter. The
Company now owns 100% of Coastal Petroleum Company.
The
Company recorded a gain on its share of the settlement of $8,125,900 after
deducting all direct settlement costs and costs to cancel various royalty rights
related to the Florida leases.
Lease
Taking Case (Lease 224-A)
This
proceeding has been dismissed as part of the Agreement with the
State.
Royalty
Taking Case
This
proceeding has been dismissed as part of the Agreement with the
State.
Lease
Taking Case (Lease 224-B)
This
proceeding has been dismissed as part of the Agreement with the
State.
Note
4. Income
(Loss) Per Share
Income
(loss) per 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 (for 2005,
the
fair value of the common stock exceeded the option price at September 30, 2005.
For 2004, the Company reported a net loss).
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
FORM
10-Q/A
(Amendment
No. 1)
PART
I - FINANCIAL INFORMATION
ITEM
1
Financial
Statements (Cont’d)
Note
5.
Oil
& Gas Development Activity
In
July
2005, Coastal Petroleum acquired the rights to drill two 6,500 foot wells to
test a Mississippian Lodgepole Reef in Valley County, in northeast Montana
for a
one time fee of $50,000 from an entity controlled by one of the Company’s
Directors. The Company is obligated to drill these test wells before the end
of
January 2006 and has the option to drill for additional prospects in the Valley
County area. The Company estimates the cost to drill each of these test wells
to
be approximately $500,000.
Also
in
July 2005, Coastal Petroleum acquired leases to the deeper rights in 25,000
acres in and near Slope County, North Dakota for a one time fee of $50,000
from
an entity controlled by one of the Company’s Directors. The Company is obligated
to drill a test well before the end of 2005 and has the option to drill the
remaining Lodgepole Reef prospects on these leases. The Company plans to partner
with other entities to share the cost of the initial 9,700 foot test well the
total estimated drilling cost of which would be approximately $1,200,000.
The
Company uses an entity controlled by one of the Company’s Directors to perform
geotechnical analysis of potential drilling sites at a cost of $500 per site
plus expenses. The Company has paid $36,341 to this entity as of September
30,
2005.
The
Company is currently assessing its oil and gas leases and identifying
prospective drilling sites.
Note
6.
Stock
Options
In
July
2005, the Company issued an option to its president to acquire 50,000 shares
of
the Company’s common stock at a price of $.15 per share under the Company’s
stock option plan. The option expires in ten years. The market value of the
stock equaled the exercise price on the date of issue, The Company determined
the fair value of the stock did not exceed the exercise price on the date of
issue.
In
July
2005, the Company also issued an option to its legal counsel to acquire 25,000
shares of the Company’s common stock at a price of $.15 per share. The option
expires in ten years. As the market value of the stock equaled the exercise
price on the date of issue, the options are noncompensatory, and no expense
was
recorded for the quarter ending September 30, 2005.
Note
7.
Income
Taxes
The
Company currently has net taxable income as the result of the gain on
settlement. The Company will be able to deduct approximately $1,600,000 in
temporary differences and offset the remaining income tax liability using
approximately $1,900,000 of its $10,700,000 net operating loss carry forward.
However, the Company estimates it will have approximately $35,000 due under
the
Alternative Minimum Tax. The Company will have approximately $8,800,000 in
net
operating losses to carry forward to 2006.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
FORM
10-Q/A
(Amendment
No. 1)
PART
I - FINANCIAL INFORMATION
ITEM
2 Management's
Discussion and Analysis of Financial Condition and Results
of Operations
Forward
Looking Statements
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. Among the risks and uncertainties are: the uncertainty of securing
additional financing through the sale of shares of Coastal Petroleum and/or
Coastal Caribbean; changes in the income tax laws relating to tax loss carry
forwards; the failure of the Company’s test wells to locate oil or gas reserves
or the failure to locate oil or gas reserves
which are economically feasible to recover; reductions in world wide oil or
gas
prices; adverse weather conditions; or mechanical failures of equipment used
to
explore the Company’s leases.
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.
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.
Liquidity and Capital Resources
The
Company has significantly improved its cash and working capital positions as
the
result of its settlement with the State of Florida. The Company has $4.45M
in
cash at September 30, 2005 compared to $90 at June 30, 2005. The Company has
paid all its past due accounts and is current with all its vendors and has
no
loans outstanding.
As
of
September 30, 2005, the Company had no revenues, had recurring losses prior
to
2005 and has had an accumulated deficit during the development
stage. We, along with others , recently settled several lawsuits
which were filed by the Company, our subsidiary Coastal Petroleum Company and
others against the State of Florida (See Notes 3 and 5). All of these
lawsuits were related to the State’s actions limiting our ability to commence
development activities through our subsidiary. The cost of that litigation
was substantial. Management believes its current cash position will allow
the Company to move forward to explore and develop profitable oil and gas
operations, although there is no assurance these efforts will be
successful.
The
Company has acquired oil and gas leasing rights for 25,000 acres in Slope County
North Dakota and for two well sites in Valley County Montana for $100,000 from
an entity controlled by one of the Company’s directors. The leases include an
option to drill for additional prospects in the Valley County area. The Company
has incurred an additional $43,000 in site analysis and other preliminary costs
in anticipation of drilling wells. The leases provide for a 25% working
interest, 20% net revenue interest in each well, on a well by well basis, to
an
entity controlled by one of the Company’s directors. The leases are also subject
to the overriding royalty interest of the landowner. The Company expects its
share of the cost to drill the three initial wells to be approximately $1.5
million over the next twelve months.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
FORM
10-Q/A
(Amendment
No. 1)
PART
I - FINANCIAL INFORMATION
ITEM
2 Management's
Discussion and Analysis of Financial Condition and Results
of Operations (Cont’d)
Results of Operations
Three
months ended September 30, 2005 vs. September 30, 2004
The
Company recorded net income of $7,200,000 for the 2005 quarter, compared to
a
net loss of $152,000 for the comparable 2004 quarter. The Company’s net income
is due to a net gain of $8,126,000 as the result of the settlement of its
lawsuits with the State of Florida.
Legal
fees and costs decreased 13%
to
$76,000 for the 2005 quarter, compared to $87,000 for the 2004 quarter. Legal
fees and costs decreased due to reduction in expenditures for legal fees and
experts related to Coastal Petroleum Company’s lawsuit against the State of
Florida. Management expects legal fees to increase from recent amounts
during
the next twelve months as operations and drilling activity
increase.
Administrative
expenses increased 51% to
$52,000 for
the
2005 quarter
compared
to $34,000 for
the
2004 quarter.
Since
the settlement with the State of Florida in June 2005, the Company began
exploration activities, which has increased its general and administrative
expenses. Management expects this trend of increased administrative expenses
to
continue during the next twelve months as operations and drilling activity
increase.
Personnel
expenses increased 79% to
$44,000 for the 2005 quarter compared to $25,000 in
the
2004 quarter.
Management increased its compensation in June 2005 in response to its new
operational focus.
Shareholder
communications increased 109%
to
$13,000 for the 2005 quarter compared to $6,000 for
the
2004 quarter.
This
increase is due to operational changes as the result of the settlement with
the
State of Florida and the beginning of exploration activities. The Company will
hold its annual meeting of shareholders in the last quarter of 2005, which
will
result in a continued increase in shareholder communication expenses for the
remainder of 2005.
Goodwill
impairment
- The
Company acquired all the minority interests in Coastal Petroleum Company, which
resulted in goodwill of $802,000. Management
determined the goodwill was impaired and recorded an impairment expense of
$802,000. There is no additional goodwill recorded on the books of the Company.
Nine
months ended September 30, 2005 vs. September 30, 2004
The
Company recorded net income of $7,000,000 for the 2005 quarter, compared to
a
net loss of $515,000 for the comparable 2004 quarter. The Company’s net income
is due to a net gain of $8,126,000 as the result of the settlement of its
lawsuits with the State of Florida.
Legal
fees and costs decreased 64%
to
$90,000 for
the
2005 quarter,
compared to $249,000 for the 2004 quarter. Legal fees and costs decreased due
to
reduction in expenditures for legal fees and experts related to Coastal
Petroleum Company’s lawsuit against the State of Florida. Management expects
legal fees to increase from recent amounts during
the next twelve months as operations and drilling activity
increase.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
FORM
10-Q/A
(Amendment
No. 1)
PART
I - FINANCIAL INFORMATION
ITEM
2 Management's
Discussion and Analysis of Financial Condition and Results
of Operations (Cont’d)
Administrative
expenses decreased 24% for
the
2005 quarter to $131,000 compared to $173,000 for
the
2004 quarter.
This
decrease is primarily related to directors’ and officers’ liability insurance
which decreased from $62,000 in the 2004 period to $-0- in the 2005 period.
The
Company did experience an increase in its administrative expenses during the
quarter ended September 30, 2005 compared to the 2004 quarter. Since the
settlement with the State of Florida in June 2005, the Company began exploration
activities, which has increased its general and administrative expenses.
Management
expects
its administrative expenses to increase during the next twelve months as
operations and drilling activity increase.
Personnel
expenses increased 26% to
$94,000 for the 2005 quarter compared to $74,000 in
the
2004 quarter.
Management
increased
its compensation in June 2005 in response to its new operational focus.
Shareholder
communications increased 32%
to
$25,000 for the 2005 quarter compared to $19,000 for
the
2004 quarter.
This
increase is due to operational changes as the result of the settlement with
the
State of Florida and the beginning of exploration activities. The Company will
hold its annual meeting of shareholders in the last quarter of 2005, which
will
result in a continued increase in shareholder communication expenses for the
remainder of 2005.
Goodwill
impairment
- The
Company acquired all the minority interests in Coastal Petroleum Company, which
resulted in goodwill of $802,000. Management
determined the goodwill was impaired and recorded an impairment expense of
$802,000. There is no additional goodwill recorded on the books of the Company.
ITEM
3 Quantitative
and Qualitative Disclosure About Market Risk
The
Company does not have any significant exposure to market risk as there were
no
investments in marketable securities at September 30, 2005.
ITEM
4 Controls
and Procedures
I,
Phillip W. Ware, the principal executive officer and 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) as of the end of the period covered
by
this report and have concluded:
1. That
the
Company’s disclosure controls and procedures are effective and 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 quarterly report is being prepared; and
2. That
there were no significant changes in the Company’s internal controls or in other
factors that could materially affect or are reasonably likely to materially
affect these controls subsequent to the date of their evaluation, including
any
corrective actions with regard to significant deficiencies and material
weaknesses.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
FORM
10-Q/A
(Amendment
No. 1)
PART
I - FINANCIAL INFORMATION
ITEM
5 - Other
Information
Coastal
Caribbean is currently a passive foreign investment company, or PFIC, for United
States federal income tax purposes, which could result in negative tax
consequences to a shareholder. If, for any taxable year, the Company’s passive
income or assets that produce passive income exceed levels provided by U.S.
law,
the Company would be a "passive foreign investment company," or PFIC, for U.S.
federal income tax purposes. For the years 1987 through 2001, Coastal
Caribbean's passive income and assets that produce passive income exceeded
those
levels and for those years Coastal Caribbean constituted a PFIC. If Coastal
Caribbean is a PFIC for any taxable year, then the Company’s 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
the Company’s common stock, would cause a U.S. holder to become liable for U.S.
federal income tax under section 1291 of the Internal Revenue Code (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.
For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004.
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
FORM
10-Q/A
(Amendment
No. 1)
PART
II - OTHER INFORMATION
September
30, 2005
ITEM
6 - Exhibits
31.1 |
Certification
pursuant to Rule 13a-14 by Phillip W.
Ware
|
32.1
|
Certification
pursuant to Section 906 by Phillip W.
Ware |
COASTAL
CARIBBEAN OILS & MINERALS, LTD.
FORM
10-Q/A
(Amendment
No. 1)
September
30, 2005
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
|
|
|
COASTAL
CARIBBEAN OILS &
MINERALS, LTD.
Registrant
|
|
|
|
|
|
|
|
|
Date: February
22, 2006 |
By: |
/s/ Phillip
W. Ware |
|
Phillip
W. Ware |
|
Chief
Executive Officer, President
and Principal Financial
Officer |