UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
--------------------------------------
[ ] 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 1-4668
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COASTAL CARIBBEAN OILS & MINERALS, LTD.
................................................................................
(Exact name of registrant as specified in its charter)
BERMUDA NONE
........................... ...........................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Clarendon House, Church Street, Hamilton, Bermuda HM CX
................................................................................
(Address of principal executive offices) (Zip Code)
441-295-1422
................................................................................
(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.
|X| Yes |_| No
The number of shares outstanding of the issuer's single class of common
stock as of July 20, 2000 was 40,056,358.
COASTAL CARIBBEAN OILS & MINERALS, LTD.
FORM 10-Q
JUNE 30, 2000
Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1 Financial Statements Page
Consolidated balance sheets at June 30, 2000 and
December 31, 1999 3
Consolidated statements of operations from inception (January
31, 1953) to June 30, 2000 and for the three and six
months ended June 30, 2000 and June 30, 1999 4
Consolidated statements of cash flows from inception (January
31, 1953) to June 30, 2000 and for the three and six
months ended June 30, 2000 and June 30, 1999 5
Notes to consolidated financial statements 6
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
ITEM 3 Quantitative and Qualitative Disclosure About Market Risk 11
PART II - OTHER INFORMATION
ITEM 4 Submission of Matters to a Vote of Security Holders 12
ITEM 5 Other Information 12
ITEM 6 Exhibits and Reports on Form 8-K 12
Signatures 13
COASTAL CARIBBEAN OILS & MINERALS, LTD.
FORM 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
(A Bermuda Corporation)
A Development Stage Company
June 30, December 31,
2000 1999
ASSETS (Unaudited) (Note)
Current assets:
Cash and cash equivalents $ 496,364 $ 651,124
Accounts and interest receivable 5,399 25,583
Prepaid expenses 241,306 352,089
------------- ----------
Total current assets 743,069 1,028,796
------------- ---------
Marketable securities - 390,941
Unproved oil, gas and mineral properties (full cost method) 4,755,944 4,759,532
Other 87,848 27,445
--------------- ---------------
Total assets $ 5,586,861 $ 6,206,714
============ ============
LIABILITIES, MINORITY INTERESTS AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 65,106 $ 68,424
-------------- --------------
Minority interests - -
Shareholders' equity:
Common stock, par value $.12 per share:
Authorized - 250,000,000 shares
Outstanding - 40,056,358 shares 4,806,763 4,806,763
Capital in excess of par value 28,768,033 28,693,033
------------ ----------
33,574,796 33,499,796
Deficit accumulated during development stage (28,053,041) (27,361,506)
------------- ------------
Total shareholders' equity 5,521,755 6,138,290
------------- -------------
Total liabilities, minority interests and shareholders' equity $ 5,586,861 $ 6,206,714
============ ------------
Note: The balance sheet at December 31, 1999 has been derived from the audited
consolidated financial statements at that date.
See accompanying notes.
COASTAL CARIBBEAN OILS & MINERALS, LTD.
FORM 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. dollars)
(A Bermuda Corporation)
A Development Stage Company
(unaudited)
From inception
(Jan. 31, 1953)
Three months ended June 30, Six months ended June 30, to June 30, 2000
--------------------------- ------------------------- ----------------
2000 1999 2000 1999
---- ---- ---- ----
Interest and other income $ 9,925 $ 20,568 $ 19,472 $ 45,937 $ 3,748,051
--------- --------- --------- --------- ------------
Expenses:
Legal fees and costs 87,185 96,918 254,083 203,667 12,631,074
Administrative expenses 135,773 117,412 285,904 250,429 7,624,241
Salaries 37,950 37,950 75,900 81,650 3,144,728
Shareholder communications 61,320 48,133 88,693 75,537 3,760,473
Exploration costs 3,884 8,832 6,427 12,148 811,041
Lawsuit judgments - - - - 1,941,916
Minority interests - - - - (632,974)
Other - - - - 364,865
Contractual services - - - - 2,155,728
--------------- --------------- --------------- ---------------- ------------
326,112 309,245 711,007 623,431 31,801,092
--------- --------- --------- ---------- -----------
Net loss $(316,187) $(288,677) $(691,535) $(577,494)
========== ========== ========== ==========
Deficit accumulated during
development stage $(28,053,041)
=============
Average number of shares
Outstanding (Basic &
Diluted) 40,056,358 40,056,358 40,056,358 40,056,358
========== ========== ========== ==========
Net loss per share (Basic
& Diluted) $(.01) $(.01) $(.02) $(.01)
====== ====== ====== ======
See accompanying notes.
COASTAL CARIBBEAN OILS & MINERALS, LTD.
FORM 10-Q
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)
From inception
Six months ended (Jan. 31, 1953)
June 30, to June 30,
2000 1999 2000
Operating activities:
Net loss $(691,535) $(577,494) $(28,053,041)
Adjustments to reconcile net loss
to net cash used in operating activities:
Minority interest - - (632,974)
Exploration and other - - 755,974
Compensation recognized for stock option grants 75,000 - 75,000
Net change in:
Accounts receivable 20,184 3,758 ( 5,399)
Prepaid expenses 110,783 84,984 (241,306)
Current liabilities (3,318) (13,499) 65,106
Other (60,403) 36 411,058
----------- ------------- ---------------
Net cash used in operating activities (549,289) (502,215) (27,625,582)
---------- ---------- --------------
Investing activities:
Additions to oil, gas, and mineral properties
net of assets acquired for common stock 3,588 32,725 (4,755,944)
Reimbursement of lease rentals and other expenses - - 1,243,085
Proceeds from sale of marketable securities 390,941 1,372,676 -
Purchase of fixed assets (61,649)
---------------- ---------------- ----------------
Net cash provided by (used in) investing activities 394,529 1,405,401 (3,574,508)
----------- ---------- --------------
Financing activities:
Cash proceeds from sale of
common stock less expenses - - 26,342,205
Shares issued upon exercise of options - - 884,249
Sale of shares by subsidiary - - 750,000
Sale of subsidiary shares 3,720,000
---------------- ---------------- -------------
Net cash provided by financing activities 31,696,454
--------------- ---------------- ----------
Net increase(decrease) in cash and cash equivalents (154,760) 903,186 496,364
Cash and cash equivalents at beginning of period 651,124 52,480 -
---------- ---------- -------------
Cash and cash equivalents at end of period $ 496,364 $ 955,666 $ 496,364
========== ========== =============
See accompanying notes.
COASTAL CARIBBEAN OILS & MINERALS, LTD.
FORM 10-Q
PART I - FINANCIAL INFORMATION
June 30, 2000
ITEM 1 - Financial Statements
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
include the Company's 59.25% 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 month and six month periods ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. 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, 1999.
Note 2. Continuation as Going Concern
At June 30, 2000, Coastal Caribbean had cash and cash equivalents of
approximately $500,000. The Company has a limited amount of working capital, has
incurred recurring losses and has an accumulated deficit. Furthermore, the
Company believes the State of Florida has taken its exploration leases. Coastal
Petroleum is planning to commence an inverse condemnation action in the Circuit
Court to be compensated for the value of its properties. The cost of that
litigation will be substantial and require the Company to obtain additional
capital. There can be no assurances that funds on hand and any additional
capital which may be realized through sales of the Company's shares or otherwise
will be sufficient to allow the Company to survive until the Florida litigation
is concluded. These situations raise substantial doubt about the Company's
ability to continue as a going concern.
Note 3. Common Stock
On May 10, 2000, the Company filed a registration statement with the
Securities and Exchange Commission for a proposed offering of its common stock
to its shareholders. The Company has not yet determined the amount of additional
capital that it will seek to raise through the proposed offering. The costs
incurred relating to the preparation of the registration statement totaling $
60,150 at June 30, 2000 are included in other assets.
On March 6, 2000, five year options to purchase 312,000 shares of the
Company's common stock at $1.125 per share expired without being exercised. On
March 24, 2000, ten year options to purchase 700,000 shares of the Company's
common stock at $.91 per share were granted to directors, officers and legal
counsel of the Company. All of the options were vested and exercisable. The
Company recorded a charge to legal expense in the amount of $75,000 in
connection with such grants.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations (Cont'd)
------------------------------
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 intended to be, and are hereby identified as, "forward looking statements"
for purposes of the "Safe Harbor Statement" under the Private Securities
Litigation Reform Act of 1995. 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 uncertainty of obtaining the financing necessary to fund
the litigation against the State of Florida.
The Company's principal assets are oil, gas, and mineral leases, the
costs of which total $4.8 million at June 30, 2000. The Company has a limited
amount of working capital, has incurred recurring losses and has an accumulated
deficit. The Company has been and continues to be involved in several legal
proceedings against the State of Florida which has 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 taken.
These situations raise substantial doubt about the Company's ability to continue
as a going concern. The Company's 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 this uncertainty.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations (Cont'd)
------------------------------
Short Term Liquidity
At June 30, 2000, Coastal Caribbean had cash and cash equivalents of
approximately $500,000. This amount should be sufficient to fund the Company's
operations through December 31, 2000. Effective July 1, 2000, certain officers
and legal counsel agreed to defer 50% of their salaries and fees until the
Company's financial position improves. The available funds are expected to be
used for general corporate purposes, including exploration and development and
to continue the litigation against the State of Florida.
Long Term Liquidity
The Company is currently spending approximately $400,000 annually on
the Florida Litigation. In order to continue the litigation and operate the
Company beyond the year 2000, the Company believes it will be necessary for the
Company to obtain additional capital either from Coastal Caribbean's or Coastal
Petroleum's shareholders.
Since the Company's inception, it has been financing its operations
primarily from the sale of its common stock and sales of shares of Coastal
Petroleum. On May 10, 2000, the Company filed a registration statement with the
Securities and Exchange Commission for a proposed offering of its common stock
to its shareholders. The Company has not yet determined the amount of additional
capital that it will seek to raise through the proposed offering. Although the
Company has successfully financed its operations through such offerings in the
past, there is no assurance that the proposed offering will be successful.
The Company's oil and gas properties are currently unproved and
undeveloped. The Company had applied for a drilling permit from the State of
Florida to drill an exploratory well (the St. George Island prospect) in the
waters near Apalachicola, Florida. The State of Florida resisted the issuance of
a drilling permit. On October 6, 1999, Florida's First District Court of Appeal
ruled that Florida's Department of Environmental Protection has the authority to
deny Coastal Petroleum's drilling permit for its St. George Island prospect,
provided that Coastal receives just compensation for what has been taken. The
State of Florida and certain Florida environmental groups filed on November 1,
1999 a joint motion for clarification, rehearing, or certification with respect
to that decision, asking the Court of Appeal, among other things, to clarify
that the question of
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations (Cont'd)
------------------------------
whether there has been a taking of Coastal Petroleum's leases should be
determined in the Circuit Court. . On June 26, 2000, the Court of Appeal denied
all of the State's motions but ruled that the issue of whether the denial of a
permit constituted a "taking" was not before the Court, and it declined to rule
on the merits of the issue and stated that the issue was a matter for the
Circuit Court. Coastal Petroleum is planning to commence an inverse condemnation
action in the Circuit Court to be compensated for the value of Lease 224A. The
cost of the litigation will be substantial and will require the Company to
obtain additional capital.
The Company does not currently have assets sufficient to fund
expenditures to drill an exploration well, if a permit were granted. If oil
and/or gas is discovered in commercial quantities, a production program would
require additional permitting and construction of production, storage and
delivery systems. The Company would be required to seek additional financing or
partners to fund these expenditures.
Results of Operations
- ---------------------
Three month period ended June 30, 2000 vs. June 30, 1999
- --------------------------------------------------------
The Company incurred a loss of $316,000 for the 2000 quarter, compared
to a loss of $289,000 for the comparable 1999 quarter.
Interest income and other income decreased 52% from $21,000 in the 1999
quarter to $10,000 in the 2000 quarter because less funds were available for
investment during the 2000 period.
Legal fees and costs decreased 10% to $87,000 for the 2000 quarter,
compared to $97,000 in the prior period. Legal fees and costs decreased in the
2000 period because the Company had been waiting for a decision of the Florida
Court of Appeal regarding the State of Florida's motion for a rehearing.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations (Cont'd)
------------------------------
Administrative expenses increased 16% during the 2000 quarter to
$136,000 compared to $117,000 in the 1999 quarter. During December 1999, the
Company increased its Directors and Officers liability insurance coverage from
$6.2 million to $12.2 million which increased insurance costs.
Salaries did not change between the periods and remained at $38,000.
Shareholder communications increased 27% to $61,000 in the 2000 quarter
compared to $48,000 in the 1999 quarter because of increased mailing and
printing costs.
Exploration costs decreased from $9,000 in the 1999 quarter to $4,000
in the 2000 quarter.
Six month period ended June 30, 2000 vs. June 30, 1999
The Company incurred a loss of $692,000 for 2000, compared to a loss of
$577,000 for 1999.
Interest income and other income decreased 58% from $46,000 in 1999 to
$19,000 in 2000 because less funds were available for investment during the 2000
period.
Legal fees and costs increased 25% to $254,000 in 2000, compared to
$204,000 in the prior period because the Company recorded a charge to legal
expense in the amount of $75,000 in connection with the issuance of a stock
option grant. During the 2000 period, the level of legal activity decreased. The
Company had been waiting for a decision of the Florida Court of Appeal regarding
the State of Florida's motion for a rehearing which was not rendered until June
26, 2000.
Administrative expenses increased 14% during 2000 to $286,000 compared
to $250,000 in 1999. During December 1999, the Company increased its Directors
and Officers liability insurance coverage from $6.2 million to $12.2 million
which increased insurance costs.
Salaries decreased 7% during 2000 to $76,000 compared to $82,000 in
1999. An employee who has not been replaced left the Company during the 1999
period.
Shareholder communications increased 17% during 2000 to $89,000
compared to $76,000 in 1999 because of increased mailing and printing costs.
Exploration costs decreased from $12,000 in 1999 to $6,000 in 2000.
These miscellaneous exploration expenses do not include exploration expenditures
totaling $3,600 that were capitalized in 2000 ($33,000 in 1999).
ITEM 3 - 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 June 30, 2000, the carrying value of such investments (including
those classified as cash and cash equivalents) was approximately $395,000, the
fair value was $396,000 and the face value was $400,000. Since the Company
expects to hold the investments to maturity, the maturity value should be
realized.
COASTAL CARIBBEAN OILS & MINERALS, LTD.
PART II - OTHER INFORMATION
June 30, 2000
ITEM 4 - Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
(a) On May 18, 2000, the Company held its Annual Meeting of
Shareholders.
(b) Directors Graham B. Collis and John D. Monroe were reelected for
three year terms expiring at the 2003 Annual General Meeting. The results of the
votes cast by the Company's shareholders were as follows:
Number of Shares Voted Number of Shareholders Voting
---------------------- -----------------------------
For Withheld For Withheld
--- -------- --- --------
Graham B. Collis 34,234,957 391,910 2,341 90
John D. Monroe 34,234,557 392,310 2,341 90
(c) The firm of Ernst & Young LLP was approved as the Company's
independent auditors for the fiscal year ending December 31, 2000. The results
of the votes cast by the Company's shareholders were as follows:
Number of Shares Voted Number of Shareholders Voting
---------------------- -----------------------------
For Against Abstain For Against Abstain
--- ------- ------- --- ------- -------
34,423,078 114,893 88,896 2,353 21 57
ITEM 5 - Other Information
- ------ -----------------
On June 26, 2000, Florida's First District Court of Appeal denied
motions of the State of Florida and certain environmental groups asking for a
rehearing of the Court's October 6, 1999 decision. In its two-sentence ruling,
the three-judge panel said that, because the issue of whether the State's denial
of a permit constituted a taking was not before the court, "we decline to
comment on the merits of that issue, leaving it to be resolved in the circuit
court" .
ITEM 6 - Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibits
None.
(b) Reports on Form 8-K
On June 28, 2000, the Company filed a Current Report on Form
8-K to report the ruling of the Florida First District Court of Appeal on June
26, 2000.
COASTAL CARIBBEAN OILS & MINERALS, LTD.
FORM 10-Q
June 30, 2000
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: July 20, 2000 By/s/ James R. Joyce
------------------
James R. Joyce
Treasurer and Chief Accounting and
Financial Officer